BRIDGESTONE CORPORATION (5108) Q4 2025 Earnings Call Transcript

welcome to the announcement of financial results for fiscal 2025 by Bridgestone Corporation thank you very much for taking the time out of your busy schedule to join us first i will introduce the speakers global ceo and representative executive officer Yasuhiro Morita executive vice president representative executive officer Bridgestone East CEO Nobuyuki Tamura Global CFO Global Finance Naoki Hishinuma These are the three speakers. First of all, Global CEO and Representative Executive Officer Yasuhiro Morita will give you the presentation first. I'm Morita, Global CEO. Thank you very much for taking the time to join us today despite your busy schedules. First, I will provide an overview of our full-year results for Fiscal 2025 and our business plan for Fiscal 26. Amidst a rapidly changing business environment, including the impact of U.S. tariffs, we positioned Fiscal 25 as the year of emergency and crisis management. Following the 24 MBP roadmap, we focused upon defensive activities such as business rebuilding and business cost reductions, concentrating our efforts on strengthening our fundamentals. We positioned fiscal 2026 as a crucial year for transitioning to growth with quality, building upon the foundations established thus far, and intensifying our offensive activities. We will quickly advance our progress, ensuring the reliable execution of key planned initiatives to evolve the entire group into a group-oriented organization. Our aim is to reclaim the position of World's No. 1 by our 100th anniversary in 2031. I will now explain the four-year results for Fiscal Year 2025. By swiftly responding to changes in the business environment, such as the impact of US tariffs, and focusing upon global optimization and reinforcing our business quality, consolidated global revenue reached 4,429,000,000,000 yen. With adjusted operating profit at 493.7 billion yen, this represents a year-on-year increase of 2 percent or 10.4 billion yen. Profit attributable to owners of parent reached 327.3 billion yen, an increase of 15 percent or approximately 42 billion yen year on year. This growth was driven by the increasing adjusted operating profit combined with reversal effect of uncertain tax positions. Dividend is projected to be 230 yen per share, representing an increase of 20 yen compared to the previous year. The impact of U.S. tariffs reduced profit by approximately 25 billion yen. However, through a combination of measures including optimizing supply chain management, we were largely able to minimize this effect. Business rebuilding were largely completed as planned. And business cost reduction activities also generated effects of approximately 72 billion yen in fiscal 25, contributing to improved profitability. Next, a summary by major region. First, North America. Due to sluggish demand, sales declined by 3%, but the adjusted operating profit margin improved by 1.5 percentage points year-on-year to 11%, resulting in increased profits. This was driven by rebuilding and reorganizing effects, including optimizing using truck and bus tire production basis and fixed costs, alongside steady progress in the PS multi-brand strategy and the TB tire solutions business. Next, South America. Profit declined year on year, barely achieving break-even. This was due to the expansion of low-end imports and adverse impact of lower conversion cost efficiency caused by decreased exports to North America. We will continue our efforts to improve profitability. In Europe, the adjusted operating profit margin reached 5.5%, an improvement of over 2 percentage points from the previous year. We achieved profit growth alongside strengthening our business foundations. This was driven by cost optimization through business rebuilding, primarily in the truck and bus trier segment improved profitability in the retail business and enhanced product competitiveness in passenger tires. In Asia, Oceania, India, and China, revenue decreased by 2% due to regional currency effects and the impact of sales strategies prioritizing profitability for TV tires. However, adjusted operating profit reached 11.5%, maintaining a robust business structure through a rebuilding of the Thai operations and the steady growth of the Indian business. Regarding business rebuilding, we have tackled challenges head-on and made steady progress throughout the 21st and 24th MBPs. During Stage 2 implemented in 2024 through 2025, we advanced the rebuilding of our Thai higher operations in US and Europe, diversified product business and in-house manufacturing businesses alongside streamlining our operational structure in Japan and Asia. This phase was largely completed as planned. We will now transition into a growth phase while maintaining the robust business structure strengthened through these initiatives. Next, I will explain Fiscal 2026 Business Plan. First, regarding our management policy, as I mentioned at the outset, this year marks a crucial transition from business rebuilding to a stage of growth with quality. If we rush, act hastily, or pursue unrealistic growth, we will risk undermining the blowbuster business foundation we have built. Therefore, the entire group will carefully align the pace of this transition. We will establish a solid growth foundation within this year and united as one company striving towards regaining the position of world's number one by our 100th anniversary in 2031. Our key growth priorities will center on three pillars, delivering attractive and competitive products and manufacturing excellence, the strengthening our global portfolio, our core competitive advantage, and enhancing our brand power. Through this, we will achieve growth with quality. I will now outline our approach to each key challenge. First, attractive and competitive products and manufacturing. As a rubber and tire manufacturer, this is naturally our most vital element and occupies a central position in our growth strategy. Building upon our robust technological capabilities, we will achieve growth by focusing on strengthening product appeal and manufacturing prowess through continuous new product launches while also enhancing our distribution channels in fiscal year 2026 we plan to launch over 25 new passenger tire products globally approximately double the average of recent years to expand sales for truck and bus tires we will also plan to launch over 10 new products alongside the continuous development of an attractive product portfolio. Strengthening our manufacturing capabilities through productivity enhancement measures such as BCMA will be key to future growth and competitiveness. Achieving these goals necessitates further strengthening our global technological foundation. We are preparing to introduce a new executive structure effective 24th of March, whereby four of the seven executive officers will be technical specialists. Chief Innovation Officer, responsible for materials and advanced technology development. Chief Product Officer, responsible for product development. And Chief Manufacturing Officer, responsible for manufacturing. These three executive officers will report directly to the global CEO, Together with the West CTO who oversees the technology centers in Akron, USA and Rome for Europe, these four executive officers will solidify our global technological foundation. Business responsibility will remain under the dual executive structure of the East CEO and West CEO. Together with myself, all seven executives will unite to lead the Bridgestone group. Regarding resources, we plan to increase resource allocation in a disciplined manner with both R&D expenditure and capex exceeding the levels of the past two years. Next, portfolio management. In line with the direction set out in the 24 MBP, we are advancing improvements to our earnings base through portfolio strengthening. For each business, product, and segment, we will maintain this direction in the 2026 business plan as well. This chart shows the profit growth rate for the 2026 business plan, with fiscal 23 set as 100. By business, we are transforming from single product sales to solution-based business. By product portfolio, we are further strengthening our traditionally robust TB business foundation. By segment, we are making steady progress in significantly improving the profitability of our European operations and achieving solid profit growth in Asia and India, which are driving group growth. This year, we will continue to advance the strengthening of our business portfolio in line with the 24 MBP steadily executing our plans to establish a growth structure underpinned by quality. The third pillar, reinforcement of brand power, will be promoted globally with a focus on motorsports activities. in the united states an important market for our business we are continuing to strengthen our activities as the exclusive tire supplier for the firestone brand in the traditional indy car series which boasts an average audience of over 1 million viewers per race in japan we will continue to actively promote activities such as Super GT. Furthermore, from the latter half of this year, we will be returning to the FIA World Championship for the first time in 15 years since F1 and to participate in Formula E as a sole tire supplier. Based on the premise of supplying safe and reliable racing tires even under extreme conditions, We will work together with our employees, customers, and partners to develop tires with a low environmental impact and optimize our supply chain, thereby promoting sustainable racing activities and enhancing our brand power. Based upon the above, Guidance for the fiscal year 2026 projects increased revenue and profit with sales revenue of 4.5 trillion yen, adjusted operating profit of 515 billion yen, and net profit of 340 billion yen. We will focus upon growth particularly in the replacement tire segment, while steadily realizing the effects of ongoing business cost reductions, enhanced productivity improvement activities, and business rebuilding. The impact of U.S. tariffs is projected to reduce profits by approximately 55 billion yen for the full year. While some effects cannot be directly offset, we will strive to achieve the planned increase in revenue and profit through global supply chain optimization and group-wide cost reduction activities. Regarding dividends, as planned in the 24 MBP, we will increase the amount by 10 yen per share compared to fiscal 25 amounting to 125 yen per share after the stock split in fiscal 2026 we will continue to place great importance on maintaining harmony with all of our stakeholders guided by our mission of serving society with superior quality we will continue to contribute to all stakeholders, employees, shareholders, customers, partners, and suppliers, and local communities and the society through sustainable growth. I sincerely ask for your continued support throughout this year. This concludes my presentation. Thank you very much for your kind attention.

Next, Global CFO, the person in charge of global finance, Naoki Hishinuma. we'll talk about the business and the results of the FI25 and financial guidance in FI26 as well as in the capital allocation. I am Hishinuma in charge of finance. I will mainly explain the financial figures. FI25 full year consolidated results and revenue $4429.5 billion adjusted adjusted OP 493.7 billion and profit outrebutable to owners of the parent 327.3 billion. Excluding FX impact, revenue and profit increase in year-on-year and adjusted OPM improved by 0.4 points to 11.1%. Against November plan, we achieved increase in both revenue and profit and met our targets. ROIC improved by 0.2 points year-on-year to 8.3%. In addition to the increase in adjusted OP, improvement in the cash conversion cycle through leaner product inventory also contributed to ROIC improvement. I will explain the breakdown of adjustment items later. Announces of adjusted OP versus previous year. We offset profit declines from higher raw material costs and unrealized inventory through price and mix improvements and largely offset U.S. tariff impacts through various measures. Through business rebuilding and global business cost reduction, we strengthened our business quality and delivered year-on-year profit growth despite yen appreciation headwinds. Results by segment All segments achieved higher profit and profitability. In Japan, revenue increased due to expanded replacement tire sales domestically and steady performance of ultra-large OR. With higher sales volume and improvements in price and mix, the profit increases and profitability improved by 0.4 points. Americas. In North America, through expanded replacement TB, tires, sales, and improvement in business quality through business rebuilding, profit increased year-on-year with better margin. In Latin America, the segment finished in the black overall. In Brazil, although performance improved year-on-year in the second half, through rebuilding and operational improvements, the business environment remains tough. In EMEA, performance continued to improve, driven by expanded sales of premium tyres, mainly HRD, in the replacement PS market in Europe, along with steady progress in business rebuilding. Results by product. For PS and LT tires, though expansion of premium tires such as HRD and product mix improvement continued throughout year, profit declined year on year due to the cyber incident in North America and the struggles in Latin America. For TB tires, replacement tire sales in North America remained steady. The effects of production-based reorganization, mainly in North America and Europe, materialized in resulting in year-on-year profits and big margin improvements. In specialties, while the sales of ultra-large OR remained steady and B2B solutions expanded, profit declined due to lower AG sales and timing impacts from raw material index price adjustments for OR. We continue to secure high profitability exceeding 20%, supporting overall consolidated performance. In the diversified product business, we continued steady improvements. Although this year included a one-time gain from asset sales and a profit increases year-on-year and even excluding this effect, next results by business portfolio. Given a tough situation, an entire business secured an adjusted OPM of slightly less than 13%. The solution business, which is a growth business, achieved an increase in revenue profit and profitability. In particular, commercial B2B solutions achieved a profit margin exceeding 11%. Adjustment items. For the full year, adjustment items resulted in a loss of $112.5 billion. Key breakdown is as shown. We have recorded business rebuilding-related expenses mainly in Europe, North America, and Latin America and have largely completed business rebuilding as planned. B.S. and cash flow status Total assets increased slightly from the end of the previous year to $5747.7 billion, partly due to FX impact. Inventories of goods and finished products decreased from the previous year-end through continued and thorough lean inventory management. Free cash flow was an inflow of $435.5 billion. While executing growth investments, we improved operating cash flow through tighter working capital management, delivering $141.7 billion year-on-year increase in cash inflow. Regarding the capital policy announced in February, we completed the planned share buyback and debt financing as scheduled. All of the acquired shares have been fully cancelled. Next, FY26 guidance. For FY26 guidance, revenue $4.5 trillion up 2% year-on-year, and adjusted OP $515 billion up 4% year-on-year. We expect the adjusted OPM to improve by 0.3 points year-on-year to 11.4%. While continuing to strengthen our business quality, we will shift toward growth with quality. Next, I will explain the analysis of adjusted OP for FY26 versus previous year. We expect year-on-year profit growth by offsetting inflation and U.S. tariff cost increase through improved raw material price and mix spreads, business rebuilding returns in the business cost reduction, and growth with quality. Regarding operating expenses, beyond inflation-driven cost increases, we will strategically allocate resources including for brand enhancement to accelerate growth from FI27 onward. Next, guidance by segment. We aim for higher revenue, profit and profitability across all segments. In our second home market, EPIC, we plan higher revenue and profit through expanded replacement tire sales in Thailand, Indonesia, and India. In the Americas segment, we will accelerate replacement tire growth, deliver year-on-year revenue and profit growth, and lift the margin by 0.6 points to the 10% range. In the EMEA segment, we plan continued profit and margin improvement following last year by steadily capturing business rebuilding effects in Europe and continuing to strengthen business quality and expanding replacement, PS, tires, sales, and mix. We plan a two-point margin improvement. While we plan increases in revenue and profit for FI26, I will also explain the comparison with FI26 targets in the 24 MBP. Revenue was shortened due to environmental changes such as reduced demand and increased low-end imports. 13% adjusted OPM and 10% ROIC targets were not met due to internal and external factors, including U.S. tariffs, inflation, Latin America, and deterioration in a diversified product business. Even under such circumstances, we continue to thoroughly implement business cost reduction and business rebuilding to strengthen our business quality. Regarding shareholder returns, we expect to implement dividends as planned in line with the target level of 250 yen per share. In response to changes in the business environment and revision to our initial CAPEX plan to achieve our desired mid-term BS, we will execute new share buyback flexibly, $150 billion in FI26 and $450 billion in total over the three-year period from FI24. Finally, the financial strategy and shareholder returns. Capital Allocation Overview As sources of capital allocation, in addition to cash influence from strength and earning power, we will utilize cash reserves and borrowings, planning approximately $2.4 trillion over the three-year period from 24 to 26 under the 24 MBP. Regarding allocation, while prioritizing sustainable growth and corporate value enhancement through growth investments, there is no change to our capital allocation policy of maintaining an appropriate financial strength and enhancing the shareholder returns. Although the 24 MBP initially assumed $1.4 trillion in growth investments, we have disciplined our investment selection in response to changes in the business environment. As a result, surplus cash has been allocated to shareholder returns and capital policy in accordance with our capital allocation policy. There is no change to our target cash reserves of approximately 1.5 months of monthly sales. This is the capital policy supporting sustainable corporate value enhancement. We believe in expanding the ROIC work and the spread, and the equity spread through balance sheet management enhances corporate value, and we will therefore improve our capital structure to achieve both soundness and efficiency, centered on what is Bridgestone-like. There is no change to our policy of setting our desired mid-term equity ratio at around 55% and steadily and gradually moving toward it. While maintaining steady capital efficiency improvement and considering further growth investment opportunities, we have decided on $150 billion share buyback and disciplined debt financing. We will steadily and gradually move toward our desired peers. Finally, regarding dividends, there is no change to our policy of targeting a consolidated dividend payout ratio of around 50% and pursuing stable and continuous dividend increases to enhance shareholder returns and maintain appropriate capital levels. The annual dividend for FY25 is to 30 yen per share, as announced last November, an increase of 20 yen year-on-year. For FY26, 125 yen per share, an increase of 10 yen year-on-year on a post-stock split basis, on a pre-split basis to 50 yen per share, an increase of 20 yen year-on-year, in line with the FY26 plan in the 24 MBP, we will continue striving for stable and continuous dividend increase and further enhance shareholder returns. that concludes my explanation thank you very much for your kind attention that was a presentation made by morita and his number about the performance of fiscal 2025 as well as uh

the plan for 2026 now we'd like to start a qa session as for qa session first of all yeah we We nominated certain analysts from a securities company, so we would like to receive questions from them first, and then we will open the floor for the questions from media. Now, from City Group Securities, Yoshida-san, Mr. Yoshida, over to you. Thank you very much. This is Yoshida from City Group Securities. One question is related to your growth strategy. So, to become the number one, a world's number one, to regain the position of a world's number one, what would you like to do? In 2026, you mentioned that you are going to increase the number of new products. I understood that. Firestone revitalization, India. What is your idea for these fronts? The share buyback amount has been reduced. So, meaning that you are going to allocate more to the growth strategy. So, towards the growth. you're going to so see some more for the growth expansion what would you like to do for the future going forward so this is my question thank you very much for your question as for our growth strategy at the core well we are manufacturer so product and manufacturing are our focus when it comes to manufacturing excellence it has many different assets but to produce a good products at the lower cost that is the gist of what we do as for products we have the Dantotsu technology and we would like to deliver the higher and quality products to the consumers and we have a technological capability to enable that and we are going to enhance our technologies going forward but when it comes to manufacturing capabilities recently including firestone multi-brand is our approach from a premium to the lower end of the the product lineup we are encompassing all these layers and the and without these approaches we are not able to achieve our growth so cost competitiveness is the key in our focus in augmenting our product lineup when it comes to cost competitiveness area our technological response and the renewed the management structure focusing upon technology materials and development and production manufacturing so these are our three focus points we need to work on them all otherwise we are not able to achieve growth and the covering all the three areas as one all the materials development and the production of course even today we are working across all these areas but we need to enhance this collaboration so the materials and the product development and the manufacturing we assigned the executive officers or the officers in charge of these three and place them directly under me so that they will be able to produce something good at the lower cost at the speedy fashion so that is the intention of our review of the executive structure. So good products have to be produced at the number one cost of competitiveness. We still have room for further improvement and when it comes to investment, R&D, capex. How to produce good products at the lower cost? We would like to focus upon that point more so that we can enhance our competitiveness. And as a result, thanks to that, the markets that we have not been able to enter into will be opened up for us, and we hope to enter into those markets as well. As for regions, North America will be the core and center of growth going forward. From the midterm perspective, India and Global South region. gradually we would like to enter into these markets a roadmap on the through 2031 we are working on creating such roadmap and in that exercise market and segments are to be identified for us to compete in the competitive fashion and execute our plans so that is the idea behind the our efforts to create the plan well the follow-up question revitalization of a firestone so the from the middle of last year you started working on that and what is the achievement so far yes particularly since the second half of last year revitalization of a firestone in north america has been our focus and we have been able to grow the business I refrain from giving you the specific numbers but their growth over last year particularly it has been visible since the latter half of last year and the next year but we would like to keep this going and the premium growth for Firestone is the core focus and likewise for Firestone we hope to grow the business. So, what we did last year has actually generated results in the second half, which will be continuing in this fiscal year as well. Thank you very much. Mr. Yoshida, thank you very much.

Next, Morgan Stanley MEFG Securities, Mr. Kakiuchi, please. Morgan Stanley, I'm Kakiuchi, thank you. this year's guidance difference referring to the slide number 26 this year's plan operating expense negative 71 in your explanation inflation and resource allocation towards net 20 FY27. So, having an intention to achieve in the growth, and I can understand that, but at the same time, with building and cost reductions, despite those and efforts, but then you will have the operating expenses and the increase. So, could you give me the breakdown of the $71 billion? Thank you. This year's plan, I will explain more in details, and Mr. Hishinoma will explain about operational expenses. For $497 to $515 billion is a targeted profit increase. As a single item, the biggest one is a volume of $35 billion. Volume growth, production volume to be increased. That's the center of our growth, so that's incorporated in our plan. And price and mix combined $36 billion, while the price is increased and the volume not to be increased as well, so the growth with quality. Given the situation of having the shifting toward a favorable situation, we try to increase both the price and the volume so we have the strong will to attain that is the given target necessary the sales expenses are incorporated as well of course we have to factor in the inflation but with the strong will no we it came up with the plan that's the grant policy Mr. Hishinuma could you explain about the details of the operating expenses As pointed out, operating expense now toward next year and 71, negative. As Morita said, for growth, strategic expenses are largely included. I hope you can understand this. And as for the substance, brand enhancement, IT, for productivity improvement, it's a necessary investment to be made. That's included as well. So, in addition to that, the volume is expected to increase, so the variables to be increased as well. In addition, in FI25, we disposed asset partially, and we've got a reversal to some extent that causes the operating expense increase. But the biggest factor is in inflation, so the rebuilding that will be the major and contributor and for offsetting the increase. So, the volume increase lead the variable cost increase and we allocate a higher resource for the future growth. I hope this answers to your question. And as to your guidance, Mr. Hishinuma has been in a position consistently, but Mr. Morita, as a CEO, you are, for you, it's the first time for you to come up with the plans. Is there any difference in the structuring, the guidance? Thank you. As for the guidance, I discussed with my predecessor, Mr. Ishibashi, and by the summer last year, we formulated the basic plan. So, due to the change of leadership, that does not cause the change of the plan. In MVP, we will shift towards the phase of the growth of the quality, so we will make sure to achieve and the growth in volume as well as on the price and mix but having said that the operating expenses we've got a rebuilding activities so we intended to squeeze a bit but in order for us to attain a volume growth and brand enhancement there are necessary resources not to be allocated. An additional follow-up as for the processing and fees as the works negatively for even though we see some I run the positive effect out of in rebuilding excuse me the question this is a plan then the conventional on the material and the product in the development the simple the volume and the growth will not be helpful for the processing and the fee that decrease because we are under inflationary environment and unless we increase in investment and we can't produce a high quality product so under the new organizational structure material development manufacturing, each technology level to be increased, and those three are combined to make an overall design. That's the finding on our side. So, based on the finding, we launched a new organizational structure effective for March this year. Thank you very much.

Thank you very much, Mr. Kakiuchi. Next, from mizuho securities mr sakaguchi over to you thank you this is sakaguchi from mizuho securities thank you very much and i'd like to ask you one question well capital and the policy in your explanation well you strike balance with the growth strategy and i'd like to make one confirmation dividend will be 250 m before a stock split meaning that you are going to achieve the the MVP target but when it comes to payout ratio 46% which is lower than 50% target and the 150 billion yen of share buyback but with the mid-term the equity ratio of 55% so I know that this has a longer time horizon but the to look at the lending and thinking about the profitability and you could do more and the until the 31st of august that is the time you set for share by back so the additional activities is also the possibilities i you're mainly talking about the growth strategy and the investment but are they going to make some difference when it comes to capital allocation could you please explain more on this point yes a Hishinema will respond so 150 billion yen over share buyback program that will be conducted and by striking balance with the growth strategy and 55 percent equity ratio for midterm perspective that is the target we have not changed but by maintaining this trend oh yeah we are going to keep the balance with the growth investment and with that in mind we set these numbers and as I explained last year when it comes to the liquidity the we are going to manage and keep it for the 1.5 and the month equivalent so that is the way we are going to manage the cash and liquidity so the by allocating the resources to the growth investment if we have the excess cash and liquidity then the the additionally we may consider the increasing the return to the shareholders or the use it for the share buyback and the 31st of august due date so the the buyback will be completed and we are going to cancel the shares we do not have any particular specific plan by then but as i mentioned earlier we are going to make investment for the growth and the gross investment and still that gives us a remainder of the cash and liquidity then we are going to return it to the shareholders that is a basic stance thank you very much and when it comes to dividend 50 percent is just the indicator and so until then you are going to continuously increase the dividend payout amount am i correct yes and as you mentioned this time and this is a 46 percent lower than our target but last year and fiscal 25 26 the 450 billion yen total there has been used for share buyback programs and basically we regard it as investment not just the return to the shareholders but the investment to enhance corporate value by enhancing eps which is beneficial for the shareholders as well so that's our thinking and looking at the total last year well the total on the shareholder return and it's not something that we focus upon but the it was 138 and therefore this year is going to be 90 for the total shareholder return so we need to look at that as compared to the gross investment and we try to maintain the

good balance and this is the idea for the capital policy and dividend payout so no major and change to your policy i understood thank you very much mr sakaguchi thank you very much now the we would like to entertain question from the press nikki shinbun takahashi-san please i'm takahashi from nikki shinbun yes we can hear you thank you slide 14 2026 u.s tariff impact 55 billion previous year it's been significantly increased so based on the assumption of having a whole impact on a full year basis is that the the how i should read it and business and cost reduction you will not try to mitigate and impact now to what extent is it is it not possible so could you give me a sense of the magnitude U.S. tariff as you correctly understand next year there will be a period double so rather than having a higher on the lower tariff level but the duration will be longer and business cost reduction there are the various initiatives included it. So, I would like to refrain from talking about the impact by each item. The key is productivity improvement, cost reduction, and digital IT utilized productivity improvement as well as an improvement in efficiency. Through that, we aim at achieving cost reduction. And And as for business rebuilding, there will be additional benefit generated. So one benchmark is 25 billion. So this year and next year, additional effect is estimated at 25 billion. So through our corporate effort, we are trying to offset as much as we can. Thank you very much.

Ms. Takahashi, thank you very much. next from a toyo keizai mr hatha please thank you very much this is a hatha from a toyo keizai can you hear me yes thank you very much on page 11 about the capex i'd like to ask you so 410 billion yen for this year so the you're going to spend more for capex and specifically study where would you like to spend this money and where would you like to invest in and going forward do you intend to keep this a high level of capex considering their cost of competitiveness enhancement are you going to invest more yes i'd like to give you the big picture direction and hishinuma will give you details as for this amount production capacity increase is not our intention But rather than that, we would like to increase the type of products that will give us more premium and higher performance or something that's going to be difficult to produce and that requires the renewal of the production facility or the equipment. and so these are capex items are included and for the rebuilding direction we spend money on retail business and therefore in order to grow them we included some the investment in this category here are the factory productivity and the enhancement of the premiumness of the products and the retail business enhancement so these are the ideas included in the capex items if you have any additional comments yes as a global ceo mentioned well main items included here are for example highly profitable well the mining we call this master core but they are also large sized tires for mining applications well the capex for such a production is the main point of a capex increase and in the u.s mainly over the retail the stores and the store investment store enhancement and another item is hrd high rim diameter and the conversion investment so to speak to introduce more high rim diameter products is on the another focus and it investment is also included as an ee big portion of this amount so these are the breakdown of a capex amount thank you very much and the originally are there any focus region you mentioned about the retail stores in us is that the focus yes and the half of the profit is generated in the u.s so relatively the resource allocation well the is also spend on the a proportionally a larger in the u.s and for master core and the a items investment in japan accounts for larger portion understood clearly thank you very much hatha-san thank you very much next diamond mr yamamoto please i'm yamamoto from diamond can you hear me yes we can hear you thank you on the 24th of March yeah

effective new executive structure that's my question the three technology CIO CPL and CMO will be assigned I was able to understand the logic but the vice President and the Managing and Executive Officer position will be abolished. I think that's the reflection of the new CEO's idea. So the decision-making issue so far, migrating into the new organizational structure, what is the aim and purpose? Thank you. VP or the Managing Executive Officer positions will be abolished. But the major idea is within the global companies, chief officer should lead the business. GXGO, the global executive committee, is the highest decision-making body. Key members are chief officers. there are the area that there are the difference in the responsibility assigned but the the title difference now does not make the difference so that is the reason why we assigned the chief officers the responsibility will not change significantly but not for the easier to understand manner we renamed it as in the chief offices and business matrix is CEO Mr. Tamura and CEO Scott will have strong business responsibility and horizontally and we have more detailed the breakdowns in terms of the function CAO CSO within the function I was overseeing the business activities. At the bottom left, CLO and the CSO, those will be my direct report. So the three pillars of the technology, inclusive of a portfolio management, business management, four pillars combined so actually the seven pillars in total we've got more the flattish organizations for prompt the decision making that's the intent of the organizational design thank you thank you very much in my understanding the former the Ichibashi is CEO the leadership it was a very strong leadership exercise by him but with the new president or ceo the leadership style is there any change of what sort of leadership style would you plan to demonstrate if there's any clear direction in mind please share with me thank you the due to the rebuilding and activities and that we passed through the painful phase and and now we are stepping into the growth phase so from ishibashi to morita rather than the change of the leadership but due to the change of the corporate phases leadership style should be changed accordingly globally for the the better the business and we can adapt in the bottom-up approach but then at the same time there are some struggling business for those areas that strong leadership may be required so within the company no major change but then depending on the phase of the company i myself will change the style of that leadership as well as uh and all the chief officers and they will unite together in proceeding in that direction and thank you very much for adding a clarity thank you very much mr yamamoto next mr sasaki from japan rubber weekly please go ahead thank

you very much this is sasaki from japan rubbery rubber weekly can you hear me yes thank you very much for the presentation i'd like to ask you the uh adjusted operating profit ups and downs the e for fiscal 25 26 page 26 well the 3 34.0 for the material but the 2025 looking at the absent dance well the minus 26 and a billion for the materials so this is quite different from the previous year so significant increase in the uh could you please explain about this on the item pushing up the adjusted operating profit yes Mr. Hishinema will respond so the the changes of the raw materials and its impact on the operating profit in 2025 mainly natural rubber compared to the previous year natural rubber prices were higher in the market so natural rubber and there was a negative factor for the business results back then but in fiscal 2026 well the market has done and the prices have stabilized and it is turning positive to our business so that is the major difference between 25 through 2026 understood thank you and as for eu dr it was postponed and are there any impact of the postponement of eu dr on your business well in that sense the uh at the base of this major change is the changes of the pricing in the market and partly it is because of eu dr but the majority of the impact is because of the price changes in the market understood thank you very much mr sasaki thank you very much now the time is up so we would like to conclude the q a session with this the bridge down at fi

25 this the earnings result briefing concluded thank you very much for your kind participation The meeting is adjourned.