Earnings Call: Q4 2018

May 8, 2018

At this point, we'd like to start the meeting. Thank you very much for being here at UBI's schedules today. We'd like to start MHI meeting for fiscal year twenty seventeen results and explanation of 2018 medium term business plan. My name is Nakamura. I'll be serving as a moderator today. First, allow me to introduce today's speakers. To your left is Miyanaga, the President and CEO. To your right is Koguchi, Executive Vice President and CFO. Allow me to explain to you the flow of today's meeting. First, our CFO, Koguchi, will explain 2017 financial results. Then our President, Yanaga, will explain the three year medium term business plan that starts this year. And then we have question and answer session. We'd like to close at 05:00. We ask for your cooperation. We'd like to invite for the explanation for the financial result for 2017. Good afternoon, ladies and gentlemen. My name is Koguchi. I'm responsible for Financial Affairs at MHI. Thank you very much for being here out of your very occupied schedules to participate in this meeting. Please refer to the materials that you have at hand, which is entitled Financial Results for Fiscal Year 2017. We have summary of financial results for fiscal year twenty seventeen. Orders received 3,875,700,000,000.0 yen compared with the previous year. There is a decrease of 400,000,000,000 yen which is due to the power and also the aviation in the space. There have been a decrease. These are the reasons for this decrease. And then during the term, there have been 4,000,000,000,000 yen the revision. So we there have been the revision in the middle of the deal list. So there has been a decrease of about 100,000,000,000 yen and then net sales was JPY 4,110 billion, which is JPY 196,000,000,000 increase, which is the slight increase compared with the revised plan. And then about the operating income yen JPY 126,500,000,000.0, which is the decrease of 24,000,000,000 compared with the previous year. And the compared with the revised version, it is the decrease of 50,000,000,000 yen and then the net income is 70,400,000,000.0 yen which is the decrease of 17,000,000,000 yen Again, compared with the revised version, it is a decrease of 10,000,000,000 yen ROE was 3.9%, EBITDA was $319,000,000,000 yen and then this shows the segment information in terms of orders received, as I explained in the area of Power and Aircraft, Defense and Space, there have been a decrease. However, in the case of Industry and Infrastructure, have been a very steady increase in orders and then about net sales for all the domains, there were increases and especially noteworthy was the sharp rise in the net sales increase in industry which was the reflection of very massive increase in orders received. And then about the operating income for Power Systems, the figure was 108,900,000,000.0 yen which is about the same as the previous terms and compared with the revision and the revised version, it is increase of 10,000,000,000 yen And then in the case of Industry and Infrastructure compared with the previous year, there was a decrease of about 9,000,000,000 yen and then there has been a sharp decrease compared to the revised plan. I'd like to explain to you later about the details about Aircraft and Defense and Space. The figure is the negative 15,100,000,000.0 yen which is a decrease 16,000,000,000 yen Again, this is related to MRJ development. So we see acceleration of development has been the decrease here. And so as a result, the operating income was the figure that I explained earlier. Next is the balance sheet overview. Please move on to the next page. We have been working on the enhancement of the efficiency of balance sheet and this has been considered to be the most important one of the most important pillars in order to have the enhancement of soundness and then total assets was 5,487,600,000,000.0 yen which is generally on a par with the previous year, but they have been the South Asian project. So if you eliminate these special issues such as South African projects and MRJ, as we will explain to you with a graph, we were able to say that there has been the compression, especially important is the inventory, which is the decrease and also including the appreciation, there has been a decrease of 100,000,000,000 yen However, as I said, we had to increase about the 100,000,000,000 yen for the indemnification asset for South Africa. And then especially for the advance payment received, we have included, we were able to see some results of the major activities we had, especially important is the production, the cost or the operating the running cost. We're now taking a look at the good balance between some factors. And then the amount the total amount of the advance payment is about JPY 1,000,000,000,000. Yen so it is much higher than the inventories. So in that respect, we can safely say that this efficiency has been improved here. So I'd like to explain this later on about the cash flow. So in terms of cash flow, there has been a major improvement. So the interest bearing debt is the $813,000,000,000 yen which is a sharp decrease by about 100,000,000,000 yen and then also the DE ratio is decreasing. And then next is the other cash flows. So we see a cash flow improvement. So we are able to say that main financial measures have been increased or improved as compared with the previous year. And the equity ratio of 33.3% and interest bearing debt, the $813,000,000,000 yen and the ratio of 38% and cash flows in terms of operating activities, there we see a compression of balance sheet, it is 345,100,000,000 which is a major improvement as compared with the previous year. And then next is the segment information by segments. This chart shows the orders received, orange part, this is par in the systems, the turbine and conventional, the cycles has been good good shape. And then for the industries, there has been some increase in the metal machinery and turbochargers. So for the mass manufacturing equipment, there has been an increase. However, on the other hand, if you take a look at the Aircraft and Defense and Spaces, there was a major order received last year, but this year it hasn't gone back to normal. So it is like this. So and then the orders order backlog yen 916,900,000,000.0, which is a sharp decline excuse me, the 6,000,000,000,000 yen 111,000,000,000, which is a sharp decline compared with the previous year. But please note that many of them are very much related to the orders for MRJ. So well, it is better to eliminate the MRJ impact in order to understand the actual status. So that's the major difference here. And then compared with the orders received, as was mentioned, we are now receiving more orders. So maybe because of that, we now have the decrease for the JPY 200,000,000,000, so apple to apple there has been a decrease like this. And then this is the net sales industry and the infrastructure, it is very good. So this is a major trend that we are able to report to you. Next is the item, the operating income by segment, the Power was about the same. And then Industry and Infrastructure, there has been a slight decrease. I'll explain to you later on about the details, but compared to see future risk, there have been some the items to be streamlined for the closing, so we had to see the decrease here in the area of Aircraft and Defense and Space. This also has decreased. This is mainly because of the peak expenditure for development for MRJ. Next page, we see net sales by geographic areas and segment. We'd like you to take a look at it. So I'd like to omit the explanation. Then page 12, page 15. Please take a look at page 13. This is the last year's analysis of cash flow trend and I would like to take you through this. We are trying to improve the balance sheet situation that is necessary for our future business. As a result, excluding the special factors such as no return cash out such as cruise ship, MRJ, South African business, if we exclude those factors, the cash flow is about 200,000,000,000 to $250,000,000,000 yen in the past. But this time, as I mentioned earlier, the balance sheet has been improving and we made a further improvement on this. So there was a significant improvement in cash flow. On the other hand, for the special factors for the cruise ship factor is already over and for the South Africa in the year, which has just ended, we have completed most of it. In that sense, the extraordinary factors impact is being reduced at the same time. So even with in total, we have $2.00 7 and 9,000,000,000 yen even including the special factors in cash flow. In terms of the asset management, we have been working on this on a steady basis. Excluding this, the investment is being kept at a certain level. And including this, during the midterm business plan 2015, we have gained some cash flow. And for your reference, this shows how we spent it, $820,000,000,000 in three years. Out of that, yen $520,000,000,000 was for the new business investment as well as the risk management. And for the balance sheet improvement, we have spent 160,000,000,000 yen and 140,000,000,000 yen is for shareholder return. Next, I'd like to show you the comparison with the guidance numbers and mentioning some of the factors, specific factors as I mentioned earlier. In terms of the operating income and cash flow, you can see the both numbers at the same time on this page. For the operating income, yen 180,000,000,000 was the forecast and the actual number was 126,500,000,000.0 yen So there was a downward revision of $555,000,000,000 yen By domain the Power Systems was up about 1,000,000,000 yen 10,000,000,000 yen but in the Industries Infrastructure there was a negative 40,000,000,000 yen This is because in the Engineering division for the future construction work, when we looked at the progress, there were some risks regarding the progress of the construction work and we have decided that to take this into consideration within the fiscal year. That's why we have put aside some of the provision. This is 25,000,000,000 yen for the medium lot manufactured machinery. Wherever there was a risk, we decided to put aside a provision that is accounting to 15,000,000,000 yen For this on the cash flow, for the future or past items, we have done some of the accounting, but for this year's cash flow there was no impact. For the Aircraft, Defense and Space, there was a deterioration of 25,000,000,000 yen and 20,000,000,000 yen is because of the peak period of the MRJ development activities because we are conducting a lot of testing including flight test. Because of that there was 20,000,000,000 yen outlay. And for the accounting reason for the risk factors or the reappraisal of the assets on the balance sheet, we have done some of the write down of 50,000,000,000 yen 5,000,000,000 yen but there was no impact on the FCF. So OP is down 55,000,000,000 yen but on the cash flow there was not so much impact. Therefore because of the increase in the improvement of the balance sheet, we were able to record higher cash flow despite the lower operating income. Next page please. I'd like to talk about net sales and operating income by business portfolios on the next page. In our company, we have been conducting a strategic review of the businesses. For each SBBU, we have been doing the reappraisal. And for the high rated growth potential businesses, yen 2,700,000,000,000.0 is the sales amount and OP was $210,000,000,000 yen This is 8% of the total. On the other hand, for the lower rated businesses such as reform and downscale businesses, out of those 800,000,000,000 yen in sales is for reform and downside business. However, they have 30,000,000,000 yen operating income. Altogether, we have 3,500,000,000,000.0 yen and $240,000,000,000 yen in OP or 7% in OP margin. As I said earlier, there were I and I and made to order products and there were some risks in the future, which was taken into account in fiscal year twenty seventeen. Therefore, I and I made to order products such as steel related and ship related businesses. There was 600,000,000,000 yen in sales. For this portion, the OP was negative 40,000,000,000 yen Furthermore, for the new business investments such as for MRJ, we had about 70,000,000,000 yen negative impact. Therefore, for the main businesses you can see that profitability of the main businesses has been kept at a certain level and the light blue portion for this portion next year onward we are expecting some improvement in this area as well. That is our plan at the moment. In terms of the improvement of balance sheet and strengthening of the financial position, our company has made certain commitment to this task and in terms of the strategy and tactics, we have segregated into three phases, step one, two and three. We have explained this to you earlier and I want to share with you the achievements. First of all, in terms of the controlling of unnecessary cash outflow, the cash conversion cycle inventory has been improved from one hundred and twenty four days to one hundred and eight days. And in terms of the improvement of production efficiency, such as the asset efficiency and facility efficiency, we are able to improve the fixed asset turnover from 1.99 to 2.122. And realization of potential value of assets and we are trying to improve the clarification of the clarity or transparency of the assets that we have and we are making a steady progress on this and we are trying to reallocate the investment into the assets with relevance with main businesses. For example, we have sold off the MMC shares and we invested into French nuclear power company and these activities led to the improvement in the cash flow and balance sheet. Next, I'd like to move on to the MRJ related accounting. Earlier, I have been explaining for the new fiscal year from the 2018, we are going to address IFRS instead of the Japanese GAAP. Because of the change in the accounting standards, the MRJ related assets treatment has been changed drastically. Going to the conclusion, wherever there is MRJ investment, the investment recovery is accounted from time to time. But in terms of the recoverability, there is no change to the recoverability of the investment into MRJ, but recovery is expected to be for the long term basis for this. Therefore in the long timeframe how to evaluate the risk is going to be somewhat conservative going forward. That was the change because of the conservative accounting of MRJ related assets. In the first year of the adoption of IFRS, we have booked 400,000,000,000 yen MRJ related assets to be depreciated and written off in the whole as a whole. Therefore, the asset related to this is going to be zero in the New Year. Therefore, the total asset was reduced from $550,000,000,000 yen 5,500 billion yen to 5,100 yen and this accounting change was equivalent to fiscal year twenty thirteen. Because of this change, the balance sheet risk that we have has been dramatically improved. We have cleared all of these risks. In terms of the cash flow that we are using, as I said earlier, all of the free cash flow has been already used to cover this. So for the cash flow and the balance sheet for MRJ, we were able to clear up all of the MRJ related assets once and for all. Based on this in terms of the balance sheet, we have been significantly improving our cash position and the balance sheet position, especially when it comes to the cash position without the extraordinary items. The peak was 2014 and then it's been going down and in 2017 it was 5,400,000,000,000 In the next medium term business plan, there are new indicators we have adopted and in terms of that balance sheet position is 1.1 times, which is a great improvement, which is also reflected into equity ratio and DE ratio, they are also improving dramatically. On the next page you can see more details for each financial indicators, but please look at them later at your leisure. Finally, I'd like to give you the forecast for fiscal year twenty eighteen. Based on the financial results for fiscal year twenty seventeen and the forecast for our prospect for fiscal year twenty eighteen, we have put together the forecast for fiscal year twenty eighteen as shown on page 21. With the IFRS to be adopted in the new year, we have indicated both of the figures for J GAAP and IFRS. The orders received 4,100,000,000,000 net sales 4,200,000,000,000.0 yen and operating income under Japanese GAAP 175,000,000,000 yen EBIT 160,000,000,000 yen and ordinary income 170,000,000,000 yen and profit attributable to the parent owner of the parent 80,000,000,000 yen and including all the extraordinary profit 160,000,000,000 yen is the EBIT. So in terms of the orders received and net sales, there are no changes. In terms of the equity MRJ asset was reduced therefore, so ROE is 6%, EBITDA $320,000,000,000 yen and free cash flow 50,000,000,000 yen So overall, we are expecting increase in sales and profit, but for free cash flow because of the earlier improvement in balance sheet for the next year, we are setting the free cash flow at 50,000,000,000 yen which is relatively low. Of course, we are improving the competitiveness. In terms of the dividend, we are expecting 10 yen increase in the dividend payout next year to make the total dividend payment 130 yen And assume the exchange rate is 110 yen to the dollar and 130 yen to the euro and you can see the more details by segment on the next page. This concludes my explanation on the financial results and forecast. Thank you. My name is Nyanaga. I'd like to explain to you what we have in mind for the 2018 medium term business plan. Moving on to the next pages. First, I'd like to go back to the 2015 medium term business plan, Page four. I'd like to speak about the financial standing for the major KPIs. And we have to say that there have been the sluggishness in the expansion of the services size and the also major underachievement of the operating income goals. And there have been the sharp decline of the power market and also oil and gas and the steel structures. There have been a major decline and we try to be agile in dealing with them, but during the term of the 2015 medium term business plan, we were not able to recover this with the speed. So we were not too prepared for that. So in thinking about the future, we decided that we should be prepared and try to come up with a measure, the countermeasures for the unexpected. And then there have been a big delay in MRJ and unexpected amount of expenditures have been incurred, which was the driving force behind the sluggish operating income. As has been explained by our CFO, in some areas such as the free cash flow and others, for which we were able to exercise our control, we were able to have a major improvement, but the extraordinary loss of the cruise ship and also operating income decline. The operating income and achievement, we were not able to achieve our goals, although we had the exerted our best effort and we were not able to reach our goal of 180 yen dividend, we had to remain in the level of 120 yen So this is a summary for the 2015 medium term business plan. Then next page, we try to work on the asset management in the framework of cash flow management and we were able to achieve the major goals and we made major progresses. And then for the 2015 medium term plan, actually in terms of the changes and the reforms for the structure of organization and the systems, we have been working on this from the 2010 business plan and we were able to complete everything related to this. And then we were able to complete the corporate governance reforms, which have been started from the 2012 medium term business plan. We were able to complete these two. However, we try to work on the risk management because of the many issues that appeared in this period. And then moving on, we were able to work on the business process improvement. We were able to streamline some of the systems and the strategies and the principles. So in the future, we will make sure that all the achievements would maintain its momentum and we have to have the development of global management personnel and also we have to expand the outcome of the improvement and also we have to create new businesses as well. Decidation is another area. And then about the risk management, I will not explain this in details, but we have done various things and some of them were effective and the one such success was the remedy for the songs and then the well, we try to do our best, but we were not able to save them and we had to suffer a major loss. And then with this, we had learned a great deal and we realized that it is important to be prepared. And then with that in mind, we were able to deal with the crisis, the risks related to MRJ and it is important to have the high capability for analysis and at the same time we have to work on the soundness improvement for the corporate culture. So we decided to introduce the system for SBU, strategic business units. So we have been working on the enhancement of education. Then moving on, the 2015 medium term business plan was very much centered around reforms and the countermeasures for crisis. And then all in all, as was mentioned, including this issue related to MRJ, we have been able to solve many of the major problems and then some of them are remaining. But still, we can say that the 2018 medium term business plan is therefore is meant for the first step to the trajectory for sustainable growth. Certainly, we have to work on reforms and certainly as I just said, it is important to have the deep penetration of the reforms effort, but please refer to the green areas. It is important to work on the efficiency improvement and the focus on the income and then we have to make sure we do this with earnest and then our growth strategy should be in line with the changes of the time. So it is important to have the resilience against uncertainty and we try to be as effective as possible. Everything should have the result as soon as possible. So it is the important the most important is to have the reform for thermal power generation. And then moving on to the next page, what we have in mind for the what we have in mind is in 2015 medium term business plan, we aim at the 5,000,000,000,000 yen but we were not able to reset at all. So again, in 2018 medium term business plan, we try to aim high again 5,000,000,000,000 yen and also ROE of 11%. This is our goal And certainly, the path towards that would be very thorny, but we would like to recover our market cap and then we try to have the next goal of 01/2011. And the basis here would be the establishment of the business structure reform, domain systems and the risk management structures. And also as was mentioned, it is important to continue working on this. So again, we have to reemphasize the domain system in we have to again restructure the domains in the 2018 business plan and then if it is possible for to drive the changes within the entire organization, then we will have a higher efficiency that will be conducive to the realization of 111 goal. So long term visions and the growth strategies are very much based on all these. And then about 111 proportion concept, as can be seen here, what we are trying to do as MHI it should be based on our history and our strength and our total asset structures. Everything should be driven by this. So this way, we decided that the most appropriate proportion of the net sales total asset and market cap should be one:one:one. However, there should be some changes based on the changes of the times, but still at this moment, we'd like to have this 111 proportion and the business size or the corporate size of the sales would be 5,000,000,000,000 yen So based on our experiences, yen 5,000,000,000,000 is a very good goal. And then about the details, in order to the it is important to have the total asset size and then we have to adjust ourselves for our demands and requirements of our customers. So we have to change ourselves continuously so that it is possible to maintain this, so that it is possible to have the high efficiency in quality and quantity and then total asset would be most effective. So based on this, it is important to have the maintenance of the sound and consolidated financial standing and that's what we have as a triple one proportion TOP. Moving on to the next page, MHI future stream, this has not been a part of our DNA in the past, but this is the kind of concept we have. The management and also corporates should aim for that. And in the past, we have been thinking that what we had to do was to have good products and then this way we are able to have dominance in the Japanese market and we were it would be possible to have dominance in the markets outside of Japan, but now things are changing. The social structures and the industrial structures are changing rapidly. So we have to try to understand what kind of current we are in, what kind of situation we are in and try to come up with the viable long term vision. So we have to work on the evolution of this with the elaboration of what we have to consider. And then this is on the left hand side, we have our technologies and then in the near future, we grow them into something viable and then in the distant future, we have something that is needed in the future. And so this is a timeframe and the kind of goals we have for everything we do. I talked about 2018. And so as the 2018 figure has been already explained, so I will not speak about this, but about the 2020 goal, as I said, the orders received should be the figure should be 5,000,000,000,000 yen and then there could be some constant figures, but again 4,000,000,000,000 plus JPY 4,000,000,000,000 to 5,000,000,000,000 and also we have the turbochargers and forklift trucks and some of them are able to maintain its goal. So that means that I think it is possible to have the JPY $44,000,000,000,000,600,000,000,000.0 and then we have more allocation for the growth and maintenance areas. So including this, then we added the JPY400 billion and then about the income, the figure is the JPY34 billion and then this is conservative. Again, the margin is something we have to consider. The peak B to 2018, there have been increase of the expenditures from 2016, 2017 and 2018. This will remain at high level till the year 2020. So we have to be conservative here. Next page. So this is for the 2018 to 2020. In 2018, if you take a closer look at it, we have the figure here is the net income of 170,000,000,000 yen Therefore, this is the so again, with the change of the IFRS, the introduction of IFRS, we have to have a different approach. So for the 02/1930, we have we have been working on the programs in which the investment recovery should be done until 02/1930. But the things have not changed at all. So the activities have been progressed. We see the profit. So we have no change in the projection for the long term recovery of investment for a long time. However, with introduction of IFRS, it is important to understand the bottom line. So for the 2018, the expenditures, so the in some of the things which is very much toward the asset, I think it is important to have the some the decline here for the long term. So in 2020, this part would come back. So that's the reason why we have these three years. We see I first say this would look better compared with 2018. Moving on to the next page. Let's go to the next page. As I said earlier, the financial position or balance sheet has been strengthened to the level that we are happy with. Therefore in the next medium term, we'd like to think about the earnings contribution because in the past we were inclined towards the long term investment or at least the medium term investment, the CapEx and as well as the alliances, M and A's, all these activities were focused on the long term benefit. But recently for the medium lot manufacturer machinery and the UniCareer, we are making more quick win investments and mergers and acquisitions. These are the kind of investments that we will increase. Therefore, the new investments in MRJ, we are allocating more funds for this aspect. On the next page please. I earlier mentioned some of the mega trends and future stream as well And among them was climate change and digitalization. There were several different keywords, which are most relevant for our company. Thinking about these as context, each domain is formulating the business plan and how they are growing their business going forward. These are the keywords. For the Power Systems business, they are going into the transition period in energy, in the industry infrastructure, they have to think about logistics, environment and so forth. And aircraft defense and space, they have to think about the new area development and new cyber security type of businesses going forward. So these are included in the medium term business plan. On the next page, full onward by each domain, we have put together some of the key points, which segment and which entity is working on what activities are shown here. I will not go into the details, but basically we are focusing on the stability in the next business term and we are segregating what we have to do today and we have to do in the future, so that we can focus on the short term tasks, which are essential for the future business. And for the domain by domain explanation meeting, each domain head is going to take you through the details. Therefore I will not go into the details here, but I'd like to move on to the MRK explanation in January year. We have given you some detailed explanation and in November 2016 because of the difficult situation I took charge of this business and the gray area is something that we have already explained to you. But after that, the things are getting better since then and the recent E project has been showing steady progress in summer this year in Farmborough, there will be a demonstration flight this year in the summer. So demo flight is being scheduled and for the type certification approval in order to get the final confirmation, we will have the latest electrical wiring testing and model for that is being constructed so that next year we can start the testing. And also we will get the TC approval and in the 2020, we should have a delivery of the medium lot machinery, the first lot products to ANA. Next page, up until last year FY 2017, the MRG investment amounts for development and start up and MAC start up for all of the things that we were able to write off, we have already done that, but for the long term investments we had not written off yet, but this year at the end of fiscal year twenty seventeen, 400,000,000,000 has been already written down as well. Therefore the rest we have is in terms of Mitsubishi aircraft operation. We will start with whatever is already finished. Therefore we have a very clean slate to start with. The only thing that is left is the excess liability of the company otherwise we have to clear this otherwise it will be difficult. Therefore this year we like to increase the equity of this company and we have to negotiate in different fronts from now, so we can't tell you the details. Within this fiscal year, we would like to resolve all of the excess liability, so that from spring of next year, we will have a new structure and we'll start working on new businesses. For example, the fusion with the Tier one business and new organization structure, so that we can have a drastic review of the structure of the business and make a new start. And after 'ninety, we will launch MRJ seventy and we would like to swiftly do this as well. On the next page, you can see the power business situation. In fact, especially for the thermal power business, fossil power business, there are gas based and coal based power business. But as you can see on this graph, last year I said it would take another two or three years, but from now on for the next two years, we will not have a quick growth. However, we can grow the service business in 2021 onwards, the gas market is likely to recover little by little and furthermore after 2021, we are expecting a decline in coal business, but we have some pipeline and for the coal we are not losing everything because some of the businesses will be still remaining. Therefore, for the decline portion, we can cover up for that with the gas business for the coal. Therefore, in terms of the OP, we thought that two years ago we had already seen the bottoming out of the OP and from last year onward, because of the PMI and so forth, we are already in the recovery track. So in the next three years, we have to make sure that we will prepare for the reduction of the thermal coal based thermal power business and because we are expecting low carbon or carbon free society, so we have to further enhance our gas turbine in preparation for that and utilizing gas turbine and using AI software, we would like to find new business opportunities. And in terms of the human resources allocation in Europe, we have already started the review and the rest will be also done. Up until 2021, we'll be busy, but after 2021, we should be able to do many new initiatives. That's why we are preparing the human resources for that. Basically, are some attrition and we are reducing some of the people and but otherwise we will be reallocating the existing people to different areas that's for domestic business and for the international business, the boiler and steam turbine business will have to be improved. Next page please. As I said, for the hardware, we will be continuously evolving what we already have in terms of the gas and distributed power source and steam turbine and CO2 recovery equipment, we will continue to evolve these hardware business and at the same time, we will increase the lineup of services businesses to support these hardware, while increasing the capability with the software side. So this is something that we like to move on to quickly and this the details available in the attachment, so please refer to that later. And also in the upcoming seminar of each domain, the head of each domain should give you more details. Next, I'd to talk about the global management. When we think about global management, our focus used to be Japanese business in the past, but as we try to achieve 5,000,000,000,000 yen business, we can tell that Japanese market is already matured. Therefore, there will be some defocusing from the Japanese market. And in terms of the R and D, there will be some increase in the investments. So in terms of the balance, we think that the Japanese business is already saturated. Areas where we see potential is North America as well as Asia Pacific regions. So in those two regions, we like to focus as well as on other international businesses. Next page please. In order to promote what I have just explained, we need to improve the global management structure and organizations. We have to make many changes for the global headquarters. We are preparing for this. In the first half of this fiscal year in November or so at the upcoming analyst meeting for the first half, we will give you the global management presentation, including the human resources aspects, how we are enhancing the capabilities of the enhanced human resources. But in terms of the concept, we will have a clear roles and responsibilities between global and Japan and so forth. Next page please. Earlier I talked about the future stream as we promote this initiative because of the drastic changes in society and the markets, we have to have a shared technology pool so that we can maximize the utilization of supply chain technology and other capabilities of the organization as much as possible. And we should be efficient in utilizing these latest technologies such as the market sensing capability, which we are focusing on right now, but that alone is not sufficient. We cannot do everything only in house. We have to have our external resources, insights and technologies to be incorporated into our business more proactively. Therefore, we have innovation, promotion, research institute as well as different countries, institutions and startup companies. We were to collaborate with them so that we can get more effect from those technological developments and this is a cycle that we like to achieve in terms of the utilization of different resources internal and external. Next page shows the culture and human resources development after the structure reform, what we have to focus on is this. From 2010, we have been focusing on the transformation and there were so many changes and we clarified what we have to do already. However, going forward, what we have to do is based on the long term vision, we have to make sure that the younger resources and medium level managers will be engaged and motivated, so that we can have a better organizational capabilities that is the driver for future growth. And at the same time, I often say that we have to become a global company although the origin is still in Japan. In order to achieve this vision, we have to tap into more diverse human resources and enhance global talents and then we also have to have the regional headquarter management talents who can become the leaders of the international businesses and we will make more efforts to secure and nurture these talents going forward. And the status of these initiatives will be shared with you at the analyst meeting at the end of the first half of this fiscal year and we will start wherever we can and try to promote this as much as possible. So all in all with the medium term business plan that we have, we believe that we can go into the growth trajectory. MTBP-fifteen, we did whatever we could do, but with MTBP-eighteen, we would like to make a clear path to the growth trajectory. In terms of the earnings forecast, we are being conservative for MTBP 2018. So this concludes my remarks. Thank you very much.