豐田汽車 (TM) 0 Q0 法說會逐字稿

Good day, everyone.

I'm the Premier Global Services Operator.

Your line will remain muted until the question and answer session begins.

(Operator Instructions).

I would now like to turn the call over to [Idado Ukawa], who will introduce the conference.

Thank you.

Hello, everyone.

Welcome to the financial results conference call for the fiscal year 2009.

I am Idado Ukawa from the Public Affairs Division of Toyota Motor Corporation.

Today we have Mr.

Takahiko Ijichi, a Senior Managing Director of Toyota Motor Corporation, and Miss [Kako Morita], an Interpreter with us.

The agenda of today's conference call is the following.

First, Mr.

Ijichi will briefly discuss the highlights of Toyota's earnings results.

And then Miss Morita will take over the rest of the presentation.

This will take about 20 minutes.

After the presentation you are welcome to ask questions.

We expect the entire call to take about 60 minutes.

Please note that the presentation contains forward-looking statements that reflect our plans and expectations and our actual results may be materially different from these statements.

A complete cautionary statement concerning forward-looking statements is included on page two of today's presentation material.

And a complete cautionary statement concerning insider trading is included on page three.

Both of the statements can be downloaded from our Internet home page.

Now, I would like to turn the call over to Mr.

Ijichi.

Hello, everyone.

I'm Takahiko Ijichi, Senior Managing Director of Toyota Motor Corporation.

Thank you for joining us today.

I would like to start by reviewing our financial results for the year that ended on March 31, 2009.

Our consolidated vehicle sales for fiscal year 2009 fell by 1.346m vehicles year-on-year to 7.567m vehicles.

Global financial crisis triggered by subprime lending in the US escalated in the latter half of the fiscal year.

As downturn of the economy spread from the US and Europe to also reach in the emerging countries, demand for new vehicles sharply fell throughout the world.

As a result our vehicle sales decreased in all regions.

Reflecting such market environment, our consolidated financial results for the fiscal year 2009 are as shown.

Unfortunately we resulted in a net loss of JPY437b.

And now I will turn the rest of today's presentation over to Miss Morita.

Next, using slide seven, I would like to explain the decline in net income of JPY2,154.8b.

The left side of the slide shows the major factors impacting operating income.

Operating income declined by JPY2,731.3b to a loss of JPY461b.

The negative impact was a consequence of the significant deterioration in vehicle sales particularly in the United States and Europe, the rapid appreciation of the yen against the US dollar and the euro, and the sharp rise in raw material costs.

In response to such a severe business environment, we set up the Emergency Profit Improvement Committee in November 2008 to improve our earnings for fiscal years ending in March 2009 and 2010.

We have been promoting a variety of profit improvement initiatives since.

During the fiscal year 2009 we have acted swiftly to deliver as many vehicles as possible to our customers by strengthening products, including the introduction of new, special edition models that adapt to the needs of each regional market, and by expanding destinations of our exports to include small countries.

In our Emergency VA Activities, more than 14,000 proposals for cost reduction have been made with respect to 15 principal vehicle models.

Our suppliers, Design Division and manufacturing plants have worked closely together to implement such proposals.

With regard to our projects for new plants, we have made revisions including the postponement of start of operation of the Mississippi plant.

In order to normalize inventory, we have adjusted vehicle production by reducing work shifts to one.

We have also reduced labor costs by introducing company holidays and limiting overtime.

At the same time, we have strongly promoted the reduction of general and administrative expenses.

As a result, between November 2008 and March 2009, we managed to generate an earnings improvement of around JPY130b.

Next I would like to explain the consolidated operating income by region.

Toyota has pursued growth globally.

In doing so, we have steadily developed a regionally balanced earnings structure.

However, with the current recession spreading so rapidly and dramatically, our earnings suffered in all regions, despite our strength of regional diversification.

In Asia, Central and South America, Oceania and Africa, we managed to secure an operating income of close to JPY300b, owing to factors such as the favorable sales of the fully remodeled Corolla.

Next, I would like to discuss our operating income for the financial services.

For the fiscal year ended March 2009, operating income excluding interest rate swap evaluation losses, declined by JPY146.3b to JPY8.2b.

The increase in the outstanding loan balance and improvement in the lending margin contributed to our earnings.

However, our earnings were reduced significantly overall due to an increase in allowance for credit and residual value losses, mainly in the United States.

While we anticipate continued difficulties of our business environment for the time being, we aim to improve earnings from financial services by applying adequate risk control.

Equity in earnings of affiliated companies was JPY42.7b, down JPY227.4b from last year.

This was largely due to decreased earnings of Japanese affiliated companies.

For your reference, slide 12 shows our unconsolidated financial results.

Slide 13 summarizes the main factors which reduced our unconsolidated net income from last fiscal year.

Now I would like to discuss our outlook of the fiscal year ending in March 2010.

First, our forecast of consolidated vehicle sales is 6.5m vehicles, down 1.067m vehicles from fiscal year 2009.

We have started to see signs of recovery in a few countries such as China and India.

However, it appears to take some more time before the financial markets in the United States and Europe normalize and the global economy recovers.

We therefore have to brace ourselves for the continuance of the current severe market environment for the time being.

In this situation, although we look forward to favorable effects of demand stimulating policies such as scrapping incentives to be implemented by each government including Japan, there is difficulty in assuming the level of recovery these policies would actually bring.

Therefore these methods are not included in our forecast of vehicle sales for fiscal year 2010.

Based on this assumption we expect that our consolidated financial results for fiscal year 2010 will be net revenues of JPY16.5 trillion and operating loss of JPY850b.

Slide 17 summarizes the main factors impacting our forecast of operating income for fiscal year 2010 compared to fiscal year 2009.

As I will explain later, we'll accelerate our efforts under the Emergency Profit Improvement Initiatives and to realize JPY800b of reduction of variable and fixed cost.

Let me explain what measures we plan to take for emergency profit improvement for fiscal year 2010.

While we expect significant loss of earnings due to sliding vehicle sales worldwide, we'll continue to take measures to deliver as many vehicles as possible that are desired by our customers.

First, we plan to take full advantage of our extensive line-up of environmentally friendly vehicles.

Recently, scrapping incentives have been launched in Europe to encourage purchasing of eco-friendly vehicles.

In Japan, while a preferential tax program on eco-friendly vehicles started in April, launches of scrapping incentives and subsidies for new car purchases are also being considered.

On our part, Toyota will launch four new hybrid models in Japan and three overseas during this fiscal year, including the new Prius this month and the Lexus HS 250h in July.

While utilizing the favorable government policy, we will shift allocation of our resources to these eco-friendly vehicles to increase production and sales.

In addition, we plan to continue to increase special edition models and export destinations in order to stimulate demand by responding to the needs of our regionally diverse customers more thoroughly.

In the area of cost reduction, our Emergency VA Activities are expected to reach a full scale to cover 50 models in our lineup.

Through additional cost reduction at the manufacturing plants and by maximizing the benefit of VI activities at each new model launch, we aim to achieve cost reduction of JPY340b, including the impact of raw material price reduction.

By taking these measures, we plan to steadily reduce our variable costs.

With regard to fixed cost reductions, we will accelerate our efforts this fiscal year.

We plan to cut CapEx by around 40% from JPY1,302.5b in last fiscal year to around JPY830b by either postponing or freezing projects involving properties and buildings, and by maximizing the use of unemployed and idle facilities.

As a result, our CapEx for fiscal year 2010 will be significantly less than depreciation costs.

We will maintain a high level of R&D expenditure in the areas that are indispensable to our future growth, namely advanced and cutting edge technologies related to environment, energy and safety.

This way, we'll strive to provide our customers with attractive products speedily.

On the other hand, we plan to promote efficiency improvements through joint all-in R&D activities with suppliers and other initiatives to reduce overall R&D expenditure.

With regards to general and administrative expenses and sales expenses, we aim at significant reduction from last year by improving efficiency of sales expenses, traveling expenses and other expenses.

Further plans to reduce labor costs significantly as well by combining employment security and labor cost efficiency through measures such as implementation of work sharing at our overseas operations.

In the course of the fiscal year ending in March 2010, further plans to implement all these action plans for emergency profit improvement.

Next I would like to move on to discuss our medium term plan.

We are currently taking steps to give concrete form to our revival efforts, which include putting in place a new management structure at the end of June.

What Toyota needs to do first is to turn to our principle of customer first.

That is to say, identifying on site in each country and region what exactly our customers require and how their needs will be changing over time and reflecting such findings onto our product development.

We believe that the world's automotive market will recover eventually.

As it recovers, we expect that the center of growth will shift towards so-called environmentally friendly vehicles, such as compact and hybrid vehicles in terms of products, and towards resource-rich and emerging countries in terms of regions.

Based on these expectations, we will respond to the robust Chinese market with the launch of the RAV4 in March, and Highlander in May through local production as we announced at the recent Shanghai Motor Show.

For China and other promising markets, we will place a particular priority in allocating resources to ensure delivery of attractive products.

In order to provide our customers with high quality, affordable and effective products in response to the changing demand structure, we are determined to reduce the cost bases of compact and hybrid vehicles.

In our compact vehicles specific cost reduction activities, we set up the AEQ Committee and have been working on the next generation Corolla, initially for Japan and now for North America and Europe.

The fruit of AEQ Committee initiatives will be transferred to all other models eventually.

As for cost reduction of our hybrid system, the results of our efforts in reducing the size and weight have resulted in around 30% of cost reduction for the third generation Prius compared to the second generation.

Toyota is committed in (inaudible) cost reduction efforts for its hybrid system for the maintenance and further enhancement of our superior cost competitiveness.

Further, we plan to accelerate our measures for early commercialization of next generation technologies in the areas of the environment, energy and safety.

In the area of environment, which is one of the top priority managerial issues, we will take advantage of the important assets that we have accumulated in pioneering hybrid and other environmental technologies.

We plan to accelerate commercialization of the plug-in hybrid vehicle, which is rechargeable at household electric outlets, mass production of small electric vehicles and the development of next generation batteries and alternative energy sources such as biofuels and fuel cell vehicles.

In addition we are developing a more efficient system of development, production and sales that can respond to changes in business environments.

In order to deliver the right product at the right timing to our customers, we will work to further reduce the lead time involved in the process from development through marketing.

In the area of production, we plan to go ahead with our current approach of shortened lines and simplifying and slimming facilities to create lines which are suitable for small volume production.

Such lines will enable us to adapt more flexibly to changes in volume and model size.

This summarizes our medium term approach towards revival.

Finally, I'd like to discuss our shareholder returns.

Despite the net loss result of the fiscal year 2009, we wish to propose a dividend of JPY35 per share, down JPY40 from last year, for the latter half of the year at the General Shareholders' Meeting in June.

The dividend for the full year 2009 will be JPY100 combined with the interim dividend of JPY65 that has been already paid.

The outlook of dividend payment for the current fiscal year is even more challenging, as we expect a net loss for the second year.

We will consider the adequate level of dividends after thoroughly examining our financial performance and the level of liquidity.

In concluding this presentation, I wish to stress that in making a new start, the most important thing is to ensure the foundation of Toyota's growth, namely customer first, Genchi Genbutsu, that is go and see, and continuous improvement more than ever.

We believe that Toyota has grown as a company only because customers who drive our vehicles are satisfied and choose to buy Toyota vehicles again.

We'll continue to solidify our foundation of quality, cost and human resources.

We plan to implement all the Emergency Profit Improvement measures that were discussed earlier.

In addition, we will continue to listen to our customers, share ideas with suppliers and dealers, and work together to deliver products that are attractive and meet changing customer requirements.

This way, we will steadily create tomorrow's Toyota.

Thank you very much for your kind attention.

(technical difficulty) now we gladly take your questions.

Thank you, we will gladly take your questions, but only two questions per person, please.

Further questions may be possible later if time allows.

Now our conference call Operator will explain how to connect your line.

Thank you, Mr.

Yukawa.

Today's question and answer session will be conducted electronically.

(Operator Instructions).

Your first question today comes from Kurt Sanger with Deutsche Bank.

Good evening again, and thank you.

I have two questions, I guess.

The first one is on your volume and mix impact estimate of minus JPY800b.

Can you give us an idea of how much that is assumed on volume and how much of that is assumed on mix?

I'm just wondering what -- particularly on the mix, if you see that deteriorating further year-on-year.

(Interpreted) Thank you very much.

I would like to answer by referring to the specifics of the impact on operating income, of negative JPY800b.

We are expecting decrease by 1.06m units of vehicle sales, that is volume.

And therefore the volume impact is expected to be around minus JPY760b and the impact of mix minus JPY100b.

However, at the same time in the financial services business, we are expecting reduction in loan loss credit cost and also the residual value losses, totaling around JPY70b to JPY80b.

And those will be positive impact --factors.

And therefore combining those the negative impact will be negative JPY800b.

Okay, great, thanks.

My second question is on your cash position.

If I look at your finance and non-finance breakdown for the balance sheet, you have an unusual amount of cash in the finance business currently.

How should I view this abnormality?

You have about JPY796b in cash in the finance business.

Is this you've concluded a transaction and it's ready for disbursement?

Can you please explain this line item?

(Interpreted) You are quite right in pointing out the fact that cash position has increased in the financial business.

Since September last year the funding or financing market has been in great turbulence and turmoil.

And including the funding through CP issuance, the funding itself has proven to be very difficult.

And that condition continues.

At that point in time [GSF] especially TMC in United States found itself in a very difficult funding position, that is a fact.

And currently we see some settlement or calmness having restored in the financing market.

However, the future remains very uncertain as yet.

And therefore we wanted to be pre-emptive in having a very strong and solid cash position in hand.

And with that view in mind we accumulated an increased cash position.

And that is what you see at the fiscal year-end in the form of accumulated cash there still remaining.

Okay.

So Ijichi-san, what should I assume your comfortable cash position is for the auto business?

Or shouldn't I be looking at them separately?

Should I just look at them together?

(Interpreted) First of all, with respect to the cash for automotive business and the financial business, our fundamental principal approach is that those two different cash positions need to be managed and administered separately.

And for the financial business the funding from the outside forces would carry cost.

And at what rate we are going to lend those money would represent our sales, so to speak.

And after all, for the capital finance business, it is a business of earning the spread between these two figures.

For the automotive business, if we made funds available to the financial business would cause the financial business not to be conscious enough about its funding costs.

And therefore we believe that we need to make clear distinction between financial business and automotive business in terms of their respective cash positions.

And now with respect to your position of what would be the appropriate or comfortable cash position for automobile business, as of the end of March the consolidated gross available funds stood at JPY3.3 trillion.

From the viewpoint of a financial soundness, I believe with the available cash at this level would mean that we have been able to have secured adequately the liquidity on hand.

Of course it is very difficult going forward to determine exactly what will be the most appropriate level of cash in hand.

But we would like to make every effort so that we can maintain the cash position or the available fund position that we see currently.

Okay.

Thank you very much.

Thank you, Mr.

Sanger.

Next, please?

Our next question comes from John Buckland, MF Global.

Good afternoon.

Can you hear me?

Yes, we can, thank you very much.

Great.

You -- in part of your medium term plan, you're focusing on even more on smaller vehicles, compact vehicles and hybrids, and changing [that's] the emphasis of which regions you're going to focus on.

But I just wondered what this means for the mix of sales and the future profitability that's implied by perhaps selling more smaller cars.

I wonder if you could perhaps describe some assumptions about changes in average value of vehicles, margins, and perhaps if there's big differences [going forward] by region.

And then just on the -- on Japan, where there you're also going to potentially introduce scrapping incentives there, mini car sales have already had a big sustained increase in penetration.

What's the assumption going forward about mini car penetration with -- perhaps encouraged by scrapping incentives?

(Interpreted) First of all, regarding your question of us shifting our focus more greatly to the compact vehicles or hybrid strategy, and emphasizing those two elements overall, we believe that going forward the market globally is likely to shift more and more toward smaller vehicles or environmentally friendly vehicles.

And in conjunction with that, we also believe that we have no future unless we can solidly capture that market.

As you already know the compact vehicles and hybrid vehicles, and especially compact vehicles, in terms of its positioning in the overall total profitability of Toyota, represents that it is positioned below average value, so to speak.

And the continued increase of that segment would cause the deterioration of our vehicle mix, to make it more unfavorable.

And, therefore, unless we take any specific measures to counter that, the relative weight of compact vehicles will continue to increase, thus deteriorating the model mix.

And, therefore, to address that what we are trying to do currently was explained in my presentation.

That is to say by targeting at next generation compact Corolla, we are now engaged in activities under, what we call, [AEQ Committee] initiatives, to reduce the cost of those compact vehicles dramatically.

And, of course, our efforts to drastically reduce the cost of compact vehicles will not end with achievements through the Corolla.

We will apply technology, techniques and findings we will establish through this AEQ activities, targeting Corolla to all the compact vehicles, so that we can reduce drastically the cost of all the compact [process build up].

And furthermore with respect to hybrid system installed in hybrid vehicles, compared with the current models we have already achieved 30% reduction in the cost of hybrid system for the new Prius.

And compared with the very first generation Prius, the new Prius will have hybrid systems whose cost will be one-third of the hybrid system cost of the first generation Prius.

And through those measures, by reducing cost of both compact vehicles, hybrid vehicles and thus enhancing profitability we'll be able to pave the way for enhancing the average vehicle profitability of overall Toyota cars.

Regarding the impact of scrapping incentives on mini vehicles, and after the introduction or termination of scrapping incentives, since there is difference in the subsidies per vehicle between mini vehicles and registered passenger cars, we do not expect the mini vehicles alone will continue to increase as a result of introduction of scrapping incentives.

Did I answer your question?

Do you have a percentage penetration rate for mini vehicles in Japan looking forward to 2011, 12 perhaps?

And just on the -- this mix deterioration, is there -- can you quantify in some form the assumptions about the change in average revenue per vehicle, either by region or globally?

And I was also wondering about the -- what the future lies for Lexus in this new world going forward.

(Interpreted).

I am sorry I do not have any concrete image that could describe penetration of mini vehicles in Japan up until maybe 2012.

But what I can say is that to us manufacturers specializing in registered vehicles, for the past four to five years we have seen our market share deprived or taken away by mini vehicles.

Going forward, as I have described earlier, by thoroughly reducing cost of compact vehicles we are going to address the situation where customer needs may move and shift increasingly to compact or smaller cars.

By targeting at mini vehicles we intend to use our lower cost compact vehicles to fight against those mini vehicles in the market.

We intend to use fully our compact vehicles with much stronger product capabilities and product features, introducing them to the market, so that we can fight against those mini vehicles.

So what we are doing in terms of thoroughly reducing cost of compact vehicles would represent our declaration of determination to do exactly that.

So what we are trying to do currently will be to prevent the market share of the mini vehicles to increase further beyond what we see currently by 2012.

And your question regarding some quantified information regarding the level of revenue per vehicle, I am sorry I cannot give you that specific quantified or specific figure in that regard.

With respect to your next question regarding the future of Lexus, as is well known, the high-end vehicles, the luxurious vehicles are facing a very tough environment globally.

Lexus is not alone in that regard.

All the other makes are having a difficult uphill battle.

But at the same time we do not believe that that market segment will completely disappear in the future.

Once the market calms down and we see some upturn in the market is observed, I think we can count on this market segment, represented by Lexus, to be revived and recover.

So when that takes place in the market our trump card would be to introduce aggressively the new models, especially the hybrid vehicle type new models in this segment, so that we'll be blessed with the opportunity of further enhancing our market share in the luxury segment of the market.

And, therefore, we are currently working on establishing [a] mechanism as well as implementing various initiatives to establish our Lexus brand.

What we envision in terms of the products that we launch as the Lexus brand going forward would include smaller class hybrid only, Lexus brand models.

And by introducing this sort of vehicle as a Lexus brand model I am sure we will find a customer segment who are very enthusiastically accepting those vehicles.

And with that in mind we are now working on those initiatives.

Great, thank you.

Thank you, Mr.

Buckland.

Next, please.

Thank you.

Our next question comes from James Erwin, Moon Capital.

Hi, good evening.

Thanks very much for doing the call.

Two questions for you.

First, if I look at your forecast for this March 2010 I am trying to get a sense of your thinking on the first half versus the second half.

Because, with coming in on this fourth quarter results, if I did the quick math right, you lost about JPY680b operating profits with a negative 20% margin.

Your full year forecast is JPY850b operating loss, about a 5% negative margin.

Maybe you can share with me your thinking on the first half versus the second half, because it looks like your first half is going to be extremely difficult, but you are going to actually be in a profit situation in the second half at the operating level.

Could you share your thoughts on that please?

(Interpreted) Let me start by describing our thoughts regarding the sales volumes.

For the fiscal year ending in March 2010 we are planning to sell 6.5b units.

During the first half our plan envisages the sale of 2.95m units and the second half 3.55m units.

And if I give you the split between first and second half of the operating loss projected at JPY850b, JPY600b is expected loss for the first half and JPY250b is the loss expected for the second half.

If I make here with you the rough image of the total year outlook of those performances, in the fiscal year just ended for the fourth quarter we recorded the operating loss of around JPY680b.

And in the first half of the current fiscal year on the quarterly basis we are expecting the -- some improvement in profitability or earnings against the first quarter.

And, therefore, we are expecting (technical difficulty) decrease in (technical difficulty) quarter after quarter in the fiscal year that we are running currently.

And therefore, more specifically about your question that company may be turning to be profitable.

From the third quarter towards -- as we shift from the third quarter to the fourth quarter, unfortunately as of today we are still below the surface.

But by increasing the volume as well as reducing costs, fixed costs substantially, we would like to make every effort so that we can emerge above the surface from the third quarter to the fourth quarter, and we will make every effort to that effect.

That's very helpful, thank you.

And the second question is on your cost reduction, JPY340b of cost reductions, variable cost, what is the assumption on raw material in that number?

I know it's net of raw material.

And also when we think about that JPY340b cost is that permanent variable cost reduction or is there quite a bit of one-time savings that come back (technical difficulty)?

Thank you.

(Interpreted) First of all, unfortunately I will not be able to share with you specific details of the figure JPY340b.

But please interpret it in the following manner.

Thus far in reducing our costs effort [Toyota] Corporation, before inflation really took hold we achieved JPY250b or close to JPY300b cost reductions every year, and that's before (inaudible).

And regarding [March] expense 2010 there have been some reduction in raw material cost of prices, including precious metals, and we intend to capture fully the benefits stemming from those lower prices of raw materials.

And in addition to that we will continue with our cost reduction efforts on new products as well as a cost reduction and expense reduction at manufacturing plants.

So combining all those we are planning to achieve the cost savings of around JPY300b.

And the very rough (inaudible) items included in those cost savings would be the lower price of raw materials, including precious metals, the continued efforts made through VA activities, and at the plant expense and cost reduction.

And also lower prices of raw materials then.

Further on we expect the (technical difficulty) of lower price of raw materials to increase [somewhat].

Whether the advantage or benefits of those activities will be permanent or not was the other part of your question.

Toyota has capability of shaving costs to the tune of around JPY300b every year on (technical difficulty) barring any further price increase in raw materials.

We intend to save and reduce costs of around JPY300b (technical difficulty).

Thank you very much.

(Technical difficulty) time is running out, but we'll take the last question, so please.

And that last question will come from Jean-Francois Coste with Tocqueville Asset Management.

Yes, hi, how are you doing?

I have two quick questions.

One is on the FX sensitivity, I just wondered about the expense from the, I believe, [35.5] that you last gave as a guidance.

And the other question is the cost reduction forecast, the JPY340b and the JPY460b.

Could you maybe give us an idea of what the fixed cost base was and the variable cost base was by the end of the year?

And what kind of percentage of the total cost base that represents?

And also I think you were targeting JPY500b by the year-end, so I am wondering if that actually was achieved or not.

(Interpreted) First, with respect to the sensitivity we just had a very quick review of that.

As of from March [2008], at which time the business still continued to expand, the JPY1 shift in the value of the currency represented JPY40b vis-a-vis the dollar and JPY6b in euro.

In the fiscal year just ended in March 2009 the sensitivity vis-a-vis the dollar has come down to just below JPY75b and in the case of euro around (inaudible).

Then in the March (technical difficulty) will come down to below JPY30b and euro to around JPY4b.

Regarding -- it's true that we did say that we are planning to reduce fixed costs by JPY500b.

Today the figure I cited was JPY460b.

And that figure represents those items for which we do have a clear measure that can be implemented to reduce costs, for which the specific activities or activities have already been inaugurated in the first five month period [also].

And as I explained in my presentation earlier we still have one full year to go.

And in that one year period we intend to continue reducing fixed costs further.

So we have set our eyesight very high when it comes to the reduction of fixed costs.

Going forward, including those items for which we still have not still identified the measures of achieving cost reduction, we are going to reduce overall the JPY500b in fixed costs.

And in terms of a relative percentage of debt in the overall cost structure, I would prefer not to mention that specific breakdown.

But we are confident that we will be able to reduce the fixed costs by at least 10%, around 10%.

Did I answer your question?

Yes.

I mean I thought the fixed cost base was roughly JPY7 trillion so that would be less than the 10% targeted.

That's where I am a little confused.

Does that include the JPY300b that he mentioned targeting year after year?

(Interpreted) We are saying that we are going to reduce by JPY500b.

Right.

(Interpreted) This JPY7 trillion you calculated as a fixed cost base would, of course, vary depending upon what sort of FX assumption you use.

And the fixed cost level I have cited earlier assumes JPY90 to the dollar and JPY125 to the euro.

And therefore I guess this will bring our fixed costs to substantially below JPY7 trillion, maybe in the lower JPY6 trillion range.

Got it.

Thank you very much.

Maybe one last question if I have time, if there is --?

No (multiple speakers) the time is running out.

Okay, got it.

So thank you for your cooperation.

Well, so this concludes this conference call.

If you require further information please contact our IR representative in New York or London.

Thank you very much for joining us today, and goodbye.

And that does conclude our conference.

Thank you for your participation.

Portions of this transcript that are noted "interpreted" were interpreted on the conference call by an Interpreter present on the live call.

The interpreter was provided by the Company sponsoring this Event.