豐田汽車 (TM) 2011 Q3 法說會逐字稿

Good day, everyone.

I am Premier Global Services' operator.

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

(Operator Instructions).

I would like to remind all participants that this conference is being recorded at the request of the hosting company.

I would now like to turn the call over to Miss.

Tomita from Toyota who will introduce the conference.

Hello, everyone.

Welcome to the third-quarter financial results conference call for the fiscal-year 2011.

I'm Amiko Tomita from the Public Affairs division of Toyota Motor Corporation.

Today we have Mr.

Takuo Sasaki, Managing Officer of Toyota Motor Corporation and Miss.

Morita, an interpreter with us.

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

First, Mr.

Sasaki 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 15 to 20 minutes.

After the presentation you are welcome to ask questions.

We expect the entire conference call to last 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.

Complete cautionary statements concerning forward-looking statements and insider trading are included on pages two and three of today's presentation material.

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

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

Sasaki.

Hello, everyone.

My name is Takuo Sasaki, Managing Officer with Toyota Motor Corporation.

Thank you for joining us today.

I would like to discuss Toyota's financial results for the third quarter of the fiscal year to March 2011.

Our consolidated vehicle sales for the third quarter was 1,802,000 vehicles, a decrease of 263,000 vehicles year on year.

This reflects the expiration of eco car subsidies in Japan and the high level of sales in North America in the same period last fiscal year.

Conversely, for the nine-month period to December 2010 vehicle sales increased by 322,000 vehicles year on year, to 5,517,000 vehicles.

This was mainly thanks to continued strong sales in Asia, driven by IMV sales in Thailand and Indonesia in particular.

In other regions sales grew steadily in Central and South America and Africa.

Our consolidated financial performance for the third quarter resulted in net revenue of JPY4,673.1b, operating income of JPY99b, pre-tax income of JPY129.6b and net income of JPY93.6b.

Now I'd like to hand the rest of today's presentation over to Miss.

Morita, our interpreter.

(Interpreted).

Next, using slide seven, I would like to explain the major factors affecting net income.

By comparison to last year net income decreased by JPY59.6b, to JPY93.6b.

The left side of this slide shows the major factors that impacted operating income.

There was a negative impact from rapid yen appreciation, totaling JPY100b, as well as a decrease in Japanese vehicle sales following the end of eco car subsidies.

However, we managed to offset the latter with marketing efforts and minimized the decline in operating income through continuing cost-reduction efforts such as Company-wide VA activities.

As a result we were able to secure net income of JPY93.6b in the third quarter alone, significantly exceeding net income forecast of JPY60.9b for the second half, announced earlier.

Slide eight shows our consolidated financial results for the nine months to December 2010.

We resulted in net revenues of JPY14,351.6b, operating income of JPY422.1b, pre-tax income of JPY521.7b and net income of JPY382.7b.

As you can see, revenue and income improved on last year.

Please see slide nine for the major factors influencing our net income for the nine months to December 2010.

Net income increased by JPY285.5b, to JPY382.7b, and operating income increased by JPY369.9b, a significant improvement over last year.

This was thanks to a large increase in vehicle sales in emerging markets and continued cost reduction, including Company-wide VA activities, despite the negative impact of rapid yen appreciation.

With the next slide I would to explain our consolidated operating income for the third quarter by region.

In Japan operating income decreased significantly due to the expiration of eco car subsidies and declining export profit as a result of the yen's radical appreciation.

However, operating income improved in all the other regions.

In North America operating income improved, thanks to the contribution from Financial Services.

In Asia we continued to have strong sales of IMV, especially in Thailand.

In the other regions, namely Central and South America, Oceania and Africa, thanks to strong sales, especially in South Africa, we continued to post a high level of operating income.

The regional breakdown of our consolidated operating income for the nine months to December 2010 is as shown on slide 11.

As you can see, operating income improved in every region, especially emerging markets such as Asia, Central and South America and Africa, where we have been seeing strong sales, continued to post a high level of earnings.

These regions are now increasingly representing one of the pillars supporting Toyota's earnings.

Next, let me discuss our operating income for the Financial Services.

For the third quarter operating income excluding swap valuation gains and losses increased by JPY22.7b, to JPY91.9b.

As you can see, operating income was also high for the nine-month period.

This was thanks to a significant decrease in our loan loss- and residual loss-related expenses as well as an increase in our lending balance following the enforcement of our financing program, mainly in North America.

Going forward we plan to improve earnings from Financial Services while applying adequate risk control.

For the third quarter equity in earnings of affiliated companies was JPY46.9b, down JPY11.5b from the same period last year.

In the absence of eco car subsidies, earnings of affiliated companies in Japan slightly decreased.

For the nine-month period a substantially improved high level of earnings, of JPY180.7b, was driven by the contribution from affiliated companies in Japan and China.

Slide 14 summarizes our unconsolidated financial results for the third quarter.

We resulted in net revenues of JPY2,039.2b, operating loss of JPY134.1b, ordinary loss of JPY77.4b and net loss of JPY38b.

Slide 15 summarizes our unconsolidated financial results for the nine months to December 2010.

We resulted in net revenues of JPY6,395.6b, operating loss of JPY283.5b, ordinary income of JPY113.4b and net income of JPY163b.

Next, I would like to discuss our outlook for the full fiscal year ending March 2011.

We raised our consolidated vehicle sales plan to 7.48m vehicles, up 70,000 vehicles, from 7.41m vehicles which we announced in November.

This basically reflects improved sales in Japan and emerging markets, such as in Asia and Russia.

In terms of regional breakdown Japan is facing a difficult environment following the expiration of eco car subsidies.

However, we plan to enhance sales opportunities with the launch of attractive new models, such as the Ractis in November 2010, the Vitz in December 2010 and the Lexus CT200h in January 2011.

Furthermore, in Asia we expect an improvement of sales due to the continuing popularity of IMV and the launch of the highly-acclaimed Etios in India.

With regard to our consolidated revenue and earnings forecast, we adopt the assumption of JPY86 to the dollar and JPY112 to the euro on average for the full year.

Based on these assumptions we revise our forecast as follows; net revenues of JPY19,200b; operating income of JPY550b; pre-tax income of JPY660b; and net income of JPY490b.

Please see slide 19, summarizing the main factors behind our revision of consolidated operating income forecast.

In addition to an improving vehicle sales outlook in Japan, Asia and Russia, the progress of our Company-wide profit improvement activities, such as further reduction of variable costs and control over fixed costs, have exceeded our earlier expectations.

We therefore revise our full-year forecast for operating income to JPY550b, up JPY170b from our earlier forecast.

For your information, please refer to slide 20 for the comparison between our revised operating income forecast and the previous-year's result.

We have been promoting various profit improvement initiatives across the Company, such as marketing efforts, further cost-reduction efforts and depreciation through efficient improvement.

Thanks to these activities we now expect to overcome the significant yen appreciation and achieve a substantial increase in operating income compared to last year.

Our operating income is, therefore, firmly in recovery trend.

With regard to our full-year forecast for CapEx, depreciation and R&D expenses, please look at slide 21.

We will continue to invest in essential areas, such as emerging markets, which we prioritize, and environmental technologies, which are essential for our future growth and advanced technologies, including safety technologies.

With further efficiency improvement our full-year forecasts are revised as shown.

This concludes my presentation and thank you very much for your kind attention.

(Interpreted).

Before beginning the Q&A session allow me to make some supplementary remarks with respect to the consolidated sales volume.

The sales volume for the third quarter of the current fiscal year stood at JPY1.8m (sic - see presentation) and this level of 1.8m vehicles itself is within our expectations or assumptions.

However, compared with the same period last year, that is to say between October and December of 2009, this represents a decrease of 263,000 units.

Especially in North America we saw a significant decrease by 135,000 units in sales volume.

However, if one looks at the sales situation in North America at the Retail level in the same period, the decrease -- the margin of decrease was only 39,000 units.

And if I may break down this 39,000-unit decrease between the United States and countries other than the United States, the decrease in sales volume in the United States was 21,000 and Canada and other regions outside of Japan saw a decrease by 18,000 units, totaling the overall decrease by 39,000 units.

Let me explain the difference between the decrease by 135,000 units and 39,000 units.

Actually, in the first quarter of 2009, that is, April through June, there has been significant reduction in the volume of production we conducted in North America.

In the second quarter, that is, between July and September, there were various government incentives offered in the United States, including Cash for Clunkers incentive, which resulted in substantial increase in the Retail sales volume in North America.

And that caused the Retail inventory to come down to an extremely low level.

And bearing that in mind, in the third quarter of 2009, that is, between October and December, in order to replenish the Retail level inventories we added significantly to the Wholesale base consolidated sales volume in the United States.

And the comparison is being made to that very high level of sales volume in the third quarter of 2009, that is, October and December.

And because of that the reduction compared with the last year's third quarter appears to be very substantial, of -- at 135,000 units.

Moving onto the right-hand side of page five, or slide five, which gives the nine-month figure through the end of December 2010, you see an increase in sales volume in North America by 1,000 units.

This is on the Wholesale basis, whereas, if you look at the figures in terms of the Retail sales there was reduction by 73,000 units on the Retail level.

And this 73,000-unit reduction can be broken down into 33,000 units in the North America -- the United States and 41,000 units in non-US areas.

So much for my additional explanations on the sales volume.

I receive, very frequently, the questions relating to our outlook for the next fiscal year and also the expenses related to quality-related issues.

And, therefore, before moving into the Q&A session I would like to make some comments with respect to these two very often-asked questions as well.

Let me start with the outlook for the next fiscal year, which is now under our consideration and being worked out internally within the Company.

And we intend to report to you the specific numbers when we make our announcement of financial results in May of this year.

Having said that, concerning our plan for the sales volume for the current year, with respect to the calendar year of this year, I would like to say the following.

We are planning to sell 7.7m units during the current calendar year, compared against 7.53m units sold last year.

This is the combined aggregate volume of Toyota and Lexus brands.

Including Hino and Daihatsu the total sales volume of the three brands combined was 8.42m units last year and we intend to sell 8.61m units this year.

This represents our plan to increase the sales by close to 200,000 units during the current calendar year.

The background of this planned increased sales volume relate to -- are the factors, such as very strong sales that continues in Asia, which certainly would underpin our plan for strong sales.

And also we assumed the North American market to be around 12.5m units.

So in line with that, and expecting some recovery in the market compared with last year, we foresaw some increase in sales volume.

And on that basis, and considering that, we are planning to increase the sales volume, as I mentioned earlier.

With this increase in sales volume and continued efforts to strengthen our corporate structure, including cost-reduction improvement efforts and efforts to contain fixed expenses, absence of further appreciation of the Japanese yen we are going to make strenuous efforts to achieve both top-line and bottom-line increases.

Now, moving on to the expenses related to quality issues, since the early part of last year we have caused some concerns and worries in the minds of all of you because of the quality-related issues.

And against that we are now implementing the following countermeasures.

First of all, we are reinforcing activities to capture customers' voices in various parts of the world.

And in addition to that we are making Company-wide efforts in unison to achieve early detection and early resolution of any issues that is identified more than in the past.

Furthermore, in the process of vehicle development itself we have been ascertaining and confirming our customers' requirements from their own perspectives through increased items for consideration and examination.

And we are conducting very rigorous tests and evaluation examinations assuming all sorts of usages that customers may put their vehicles into.

And through those efforts we are trying to upgrade the safety of our own products even further, strengthening the early prevention activities.

And, furthermore, in addition to all that we're implementing very proactively the quick field-fix activities from the viewpoint of assuring greater safety and peace of mind from the customers' viewpoint.

And, so, since we're implementing those very quick field-action activities this means we are saving costs in this regard.

And, therefore, for the nine months ending December 2010 the quality-related expenses would show an increase by over JPY100b compared with the same period last year.

However, since during the fourth quarter of 2009 we provisioned against those quality-related expenses in the reserves, on the full-year basis the quality-related expenses for the current fiscal year is expected to be around the level of last year.

And this is what we are expecting to see for the current fiscal year in terms of the quality-related expenses.

So we are engaged in those activities and, therefore, for the time being we may incur some costs for that reason.

However, through those activities the customers will gain further trust and confidence that riding in and driving Toyota vehicles would be quite safe, offering them peace of mind.

As the result of those efforts we are confident that those activities would result in earnings to be achieved in the medium and long term.

Thank you.

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

Further questions might be possible later if time allows.

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

Thank you, Miss.

Tomita.

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

(Operator Instructions).

Our first question will come from Kurt Sanger with Deutsche Bank.

Good evening.

Thank you, Sasaki San, for the call.

Two questions from me.

The first question is on you tax rate.

Third quarter again was in the -- around 51% or so.

How do you see the tax rate through the end of the year?

And, more specifically, as we look to the tax rate in Japan, potentially falling from 40% to 35%, are there any necessary adjustments to deferred tax assets or -- that need to be adjusted in your accounts at Toyota?

(Interpreted).

With respect to your question of the tax rate, which stood at around 50.7% in the third quarter, this represents a very, very technical aspect of the accounting.

You're asking about this 50.7% compared against the statutory tax rate of 40% and this primarily relates to the affiliated companies that are accounted for under equity method.

And vis a vis those undistributed earnings of those companies -- affiliated companies accounted under equity method, we book the deferred tax liabilities and, because of this there has been some increase in the effective tax rate applied there.

And the other question related to the taxation system reform but, actually, the Bill to reform the tax system in Japan has not yet been passed in the Japanese Diet and, therefore, any potential impact stemming from that is not factored into the outlook for the financial results for the current fiscal year.

However, if the Bill to reform the taxation system is passed in the Japanese Diet by the end of March this year, as you correctly pointed out, in response to or equivalent to 5% difference in the previous tax rate to the reformed rate, we will have some draw-down in DTA.

And this means on the consolidated basis that we would have to book tax expenses of around JPY25b.

Extremely clear, thank you.

The second area is just on Asia.

We did see some deterioration in the operating profit margin for the quarter.

I assume it's related to start-up costs in India and Thailand, but could you comment on that trend, please?

(Interpreted).

With respect to Asia, I think what we have in mind is that, despite an increase in sales volume, the earnings during the third quarter have not shown a commensurate increase.

And the reason behind that relates to the change in the model mix rather than the start-up costs you mentioned.

That is to say, there has been some increase in Corolla volume, while there has been some decrease in Camry.

And in terms of different destinations for exports, the larger volume was destined to the Middle and near East.

And so these are some changes related to model mix overall.

And, furthermore, there has been some increase in sales expenses in Thailand and for those reasons the earnings for the third quarter remain more or less on par with that last year.

And the start-up cost impact of our Indian operation that Mr.

Sanger mentioned was not such a major factor behind this.

Very clear.

Thank you very much, Sasaki San.

Thank you.

Next, please.

Our next question comes from Steve Usher with JI Asia.

Good evening.

Thank you very much for the call and thank you very much for the supplemental explanation on volume and quality expenses.

Two questions for you.

First of all, equity method income in the third quarter declined and I understand that that's, in part, due to the Japanese affiliates, but could you give us a bit more color there in terms of the China operations and the China operation contribution, if possible, a breakdown there?

And then, secondly, marketing efforts in Q3 were plus/minus zero, but again can you give us a bit of a breakdown there in terms of volume and mix, incentives and other factors?

And then I note, as part of that question, for Q4 you're actually looking for a negative yen contribution from marketing efforts and could you give a bit more color on that expectation as well?

Thank you very much.

(Interpreted).

First, the equity method income, the breakdown of JPY46.9b is as follows; Japan and its related regions around JPY25b; China operation around JPY17b; and other areas around JPY5b.

And, furthermore, the breakdown of marketing efforts' contribution which was posted to be zero, the Automotive business negative JPY30b and the Financial Services business positive JPY30b, netting out to zero.

And the breakdown of negative JPY30b contribution from Automotive business is as follows; the impact of a decrease in volume minus JPY80b; increase in sales expenses negative JPY20b; price changes a positive JPY30b; improvement in model mixes positive JPY10b; and sales contribution from parts and others a positive JPY30b; resulting in the net contribution of negative JPY30b.

And the next question of yours was related to the fourth quarter.

And, first of all, allow me to confirm your question.

Referring to the actual level of the fourth quarter last year and the outlook that we have for the current fiscal year, you have surmised that the sales efforts would result in the contribution of negative JPY30b and you are asking for the breakdown of that negative JPY30b, is that right?

That's correct.

(Interpreted).

The breakdown of negative JPY30b contribution from the marketing efforts is as follows.

The volume impact, which shows the decrease by 70,000 units, results in a negative contribution of JPY35b.

And the price revision model mix, marketing expenses and incentives all combined, shows a negative JPY25b contribution.

Financial business is contributing a positive JPY30b.

And that results in the net contribution by marketing efforts of JPY30b -- negative JPY30b.

(Interpreted).

Did I answer your question, sir?

Yes, thank you very much, but just a quick follow up.

Do you have a full-year forecast for equity method income?

(Interpreted).

Please give me a minute to look into those numbers.

Thank you.

(Interpreted).

On the full-year basis the equity method earnings is expected to be JPY220b.

Great, thank you very much.

Next, please.

Our next question comes from Ben Moyer with BlackRock.

Yes.

I have two questions, and the first one regards your Financial Service operation.

You have been experiencing, along with most companies in the industry, a strong profit growth because of better residuals and lower credit costs and expanded volume of credit.

It's very difficult for us outside the Company to understand what the outlook is, how these factors will be changing and when these tailwinds might be winding down.

And I wonder if you could provide some guidance on that point.

Thank you.

That's the first question.

(Interpreted).

The full-year forecast for the current fiscal year is around JPY340b, but this figure includes, significantly, some gains stemming from the reversal of provisions or reserves already established in the past.

For the current fiscal year, for TFS overall, the loan-loss reserve reversal generated some JPY72b in gains.

So, assuming that that reversal-related gain is eliminated totally, so, by simply subtracting figure from the expected full-figure -- full-year figure, you'll get JPY270b, so that may give you one yardstick to consider.

At any rate, the loan loss itself, that is to say the loan-loss level, remains very low because of the fact that we have been reinforcing our activities to recover those losses, as well as tightening the lending and credit-screening standards.

And those efforts continue to produce results, meaning those activities and the results I have just mentioned are well sustainable.

In addition to that we have seen significant increase in prices of used cars.

That caused the loss after recovering those vehicles to be quite small.

And the next year's earnings, in this regard, would significantly rely on the evolution of those factors, how they would move on going forward, especially the latter factor, that is, the price of used cars.

So the earnings level for the next fiscal year would be significantly affected by what sort of assumptions we have for those used-car prices.

But, at any rate, probably the figure that we are likely to see would be the earlier-mentioned figure, plus or minus a few tens of billions of yen.

Okay, thank you.

And my other question I might be a little bit off-base, but in one of your pages you had the parent profit and, if I recall, the operating profit was a loss.

You had a operating loss, but you had a large pre-tax profit.

And I wonder if you could just explain what was going on there between the operating loss and the pre-tax profit, just some basic items.

(Interpreted).

Naturally, this clearly relates to significant earnings in the non-operating income level.

The largest factor therein is the dividend received from subsidiaries and affiliated companies.

And with the significant dividend coming from those companies resulting in significant increase in non-operating profit pushed pre-tax income to be significantly high.

And for the current fiscal year the dividend received, included here, totals around JPY330b.

Is that number changed much from the previous year?

(Interpreted).

This reflects an increase by some JPY90b from the previous fiscal year.

Okay.

Can you say just whether those are more from overseas or domestic affiliates?

(Interpreted).

It includes both the domestic affiliated companies and overseas.

And probably the rough breakdown between them would be three to one between dividends received from overseas subsidiaries and affiliated companies and domestic ones.

Okay, and just one -- are those dividends taxed by the Japanese government?

(Interpreted).

Basically, they are taxed overseas and in Japan it is treated as gains not taxed and, therefore, it is not taxed in Japan.

Okay, thanks very much.

Next, please.

(Operator Instructions).

We'll take our next question from James Irwin with Moon Capital.

Hi, thanks for doing the call.

Just one quick follow-up question, then a new question.

The follow-up question is, you gave us the breakdown on the equity income line for Steve's question, but can you give me the year-ago comparison numbers?

That was the profit from China versus the profit from your Japan affiliates.

(Interpreted).

Yes, a year ago the equity income from Japan was around JPY29b, China JPY23.5b and the remainder came from other regions.

Okay, that's what I was curious about, because can you explain to me, given what your JV partners are doing on volume, FAW in Guangzhou, I don't quite understand why your profitability is deteriorating in China.

Can you elaborate a little bit more on what's going on, specifically in China?

(Interpreted).

Okay, the comparison with the previous year and, in the case of China, this refers to July through September period and the entities covered by Guangzhou and Tianjin.

And in Tienjin plant the volume decreased somewhat, whereas, the volume either remained the same or increased slightly in Guangzhou plant.

Now in terms of Tianjin plant, in the fourth quarter, that is October through December, the volume actually increased by 18,500, whereas, in the third quarter, that's July through September, there was a reduction in volume by 14,000 units.

So, specifically about Tianjin, there was some impact stemming from decreased volume; that's one of the factors.

And we reduced pricing on Corolla EX; the impact of that is another factor included here.

And, furthermore, there has been a sharp increase in prices of raw materials, especially steel prices.

And so these three factors combined caused some reduction in earnings coming from -- accounted for by equity method in the third quarter, that is, July through September.

That's very helpful, thank you.

And then my second question; could you elaborate in a little bit more detail on your cost-reduction efforts?

It looks like from your guidance you're accelerating your cost-reduction efforts.

I think it was JPY30b higher than what you put out three months ago.

And just looking at the JPY170b year to date of cost reduction that you provided in the presentation, you now have a full-year target that's about -- I think, about JPY50b in the fourth quarter.

Could you elaborate a little bit more on what you're doing specifically in terms of headcount, facility rationalization?

And from a geographic standpoint are you taking a little bit harder look at Japan domestic operations where, obviously, you had a very big operating loss in the third quarter?

Thank you.

(Interpreted).

In terms of the cost-reduction efforts, we made public that we have generated net savings of JPY170b through cost-reduction efforts net savings, meaning by after netting out the sharp increases in the raw materials, among others, the net savings, as I said, was JPY170b.

On the gross basis, excluding those other raw materials, among others, we still have achieved over JPY300b in cost savings during the current fiscal year as well.

More specifically, some of the cost-reduction efforts include Company-wide VA activities.

That is to say to the -- within the range that allows us to retain high quality as well as high performance, we have switched over to alternative materials that may be somewhat more -- less costly, or reduce the actual usage of those materials.

And at the same time we have been saving logistics-related expenses by changing the packaging materials used.

So it is the composite results of all those activities we have been pursuing continuously.

In addition, for the purpose of containing fixed expenses, we made an announcement in May 2010 that we are going to restructure the domestic production capacities, shifting from the structure maintaining the ability to produce 3.9m units to 3.2m units to be achieved over just a five-year period.

And following this plan we are steadfastly reducing the production capacity in Japan at the moment.

Now, about having this 3.9m-unit capacity, last year we actually stopped two production lines, which brought the capacity to 3.65m units.

And this year we consolidated production lines number one and number two in Tahara plant, resulting in the production capacity reduction down to 3.4m units to be achieved by the end of the current fiscal year.

So these are some of the things we are doing in Japan.

And in addition to that we are engaged in very assiduous activities to improve productivity in plant operations.

And as a result of preserving those productivity improvement activities in plants we have been able to operate without increasing any headcounts of contract-based workers, which means lower personnel expenses.

So it's really the composite results and combination of all those various activities we are engaged in.

That's extremely helpful, thank you, and then just a quick follow-up on that.

On slide 19, where you broke out versus your last guidance, you bumped up your cost-reduction efforts JPY30b.

And over the last three months we have seen nothing but steady pressure on higher raw material costs.

And that is a net number, so it's pretty impressive, the JPY30b lift in your cost-reduction target.

I am just trying to tie that JPY30b geographically.

You just gave us that specific example for Japan capacity being reduced to 3.4m units based on your actions.

Are you taking a little bit more aggressive, faster approach to restructuring Japan, or is it really just across the board, that incremental JPY30b of higher cost-reduction efforts?

And that's it.

Thank you.

(Interpreted).

This JPY30b is broken down between unconsolidated Japan operation of JPY20b and subsidiaries of JPY10b and, therefore, this standalone contribution from Japan is really significant.

I earlier said that we are bringing down domestic production capacity to 3.4m units and if you received the impression that, by doing so, we are likely to see substantial reduction in cost, the reduction in cost is not like that.

And I hope you would understand that, because we already have the system in terms of human working structures to produce 3.2m units.

And, therefore, the other cost reduction or cost savings that can be achieved by reduced production capacity in Japan would only come through some reduction in energy expenses stemming from the actual rate of operations, or reduction in repair expenses or service expenses, or some depreciation of expense equipment and facilities.

And, therefore, even if a single production line is stopped, that does not result in several tens of billions of yen in savings.

Having said that, even if the actual savings achieved could be quite small, what matters is accumulation of those small bits and pieces of savings and, therefore, we are earnestly engaged in those assiduous cost-improvement efforts.

Now, in terms of the unconsolidated parent company operation, during the current fiscal year we still operate at the operating loss situation.

And because of that we are engaged in very earnest efforts to improve the profitability on the unconsolidated basis so that we can achieve the elimination of operating loss as early as possible.

Okay, thank you very much.

Unfortunately, we are out of time and we won't be able to take any more questions, so this concludes today's conference call.

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

Thank you very much for joining us today and goodbye.

Thank you.

Bye bye.

That does conclude today's call.

Thank you all 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.