BRIDGESTONE CORPORATION (5108) Q2 2026 Earnings Call Transcript

Welcome to the announcement of the financial results for the first half of fiscal 2026 of Bridgestone Corporation.

Thank you very much for your attendance today.

First of all, I'd like to introduce the speakers for today. Member of the Board, Representative Executive Officer and Global CEO, Yasuhiro Morita. Vice President and Senior Officer, East CEO, Nobuyuki Tamura. and Vice President and Senior Officer CFO Naoki Hishinuma. So these are the three speakers for today. Now, Morita, Global CEO, will give his presentation. My name is Morita, Global CEO. Before proceeding with today's financial results briefing, I would like to express my deepest condolences to those who lost their lives in the River 8 Kumamoto earthquake. that occurred on the 28th of July. I would also like to extend my heartfelt sympathies to all those affected by the disaster. Our company operates a chemical product manufacturing plant in Kumamoto and has sales offices and dealerships in Kyushu region. Fortunately, there were no injuries to our employees and the damage to property was minor. However, production at the Kumamoto plant was suspended immediately after the earthquake, but we were gradually resuming the production, starting with those processes where safety has been confirmed. With regard to the impact on our customers, we are prioritizing safety above all else and taking the necessary measures to minimize any disruption. Furthermore, in light of the situation in the affected areas, and to support those affected as well as contribute to the restoration and reconstruction of the disaster-stricken regions, our group has decided to make a donation to Kumamoto Prefecture and the Japanese Red Cross Society. We sincerely pray for the swiftest possible restoration and reconstruction of the affected areas. Now, I will present the financial results for the first half of 2026. As we announced in February during the presentation on our full-year results for 2025, in 2026, we will build on the strong business foundations we have established to date, whilst steadily transitioning to a phase of growth with quality, establishing a solid foundation for growth and moving forward with the aim of regaining the position of the world No. 1 by 2031, the 100th anniversary of our founding. Our key priorities are centered on strengthening three areas, attractive and competitive products and manufacturing, which represent our root as a manufacturer, along with the global portfolio and brand strengths, which are the core strengths. And as we're continuing our efforts as a global one team to achieve the four-year consolidated earnings forecast announced in February, revenue of 4.5 trillion yen, adjusted operating profit of 515 million yen, and profit margin of 11.4%. Now, I would like to present our consolidated financial results for the first half of the financial year. Revenue stood at approximately 2,321,000,000,000 yen, representing a 10% increase year-on-year. Adjusted operating profit was 280.9 billion yen, up 20% year-on-year. and the profit margin improved by one percentage point year-on-year, up to 12.1%. Net profit rose by 79% year-on-year to 206.2 billion yen, partly due to a significant reduction in adjustment items following the completion of the business rebuilding we have undertaken over the past year. Despite a sluggish demand environment, we achieved sales growth and market share gains in our key markets and product categories through the relentless efforts of each business unit. Revenue increased due to higher sales volumes accompanied by improvement in selling prices and product mix, and we are steadily progressing toward a stage of growth with quality. Despite the impact of rising costs due to this situation in the Middle East and U.S. tariffs, among other factors, we were able to achieve year-on-year improvement in both profit and profit margins through defects of business rebuilding as well as ongoing cost reduction initiatives. Looking ahead to the full year, we anticipate a challenging business environment with cost increases attributable to the situation in the Middle East expected to exceed 60 billion yen in the second half alone. However, through a combination of various measures, we will continue to strive to achieve the targets set out in the plan announced in February. Next, here is a summary by major market. Aided by favorable exchange rate, all markets recorded increases in both revenue and profit. In North America, despite a challenging business environment, our multi-brand strategy for passenger car tires and our truck and bus tire solution business performed solidly. In South America, although there are many challenges, we remained in the black and have shown steady improvement compared with the previous year. In Europe, effects of business rebuilding coupled with the expansion of sales and market share for passenger car replacement tires and improvement in the retail business led to a continuous improvement in profitability and significant increase in profit. In Asia, we are strengthening our growth foundations by expanding sales of replacement tires in India and OE tires in China. In Japan, we expanded sales of passenger car tires, centered on the launch of new products such as Finis, whilst sales of auto-large tires for mining and construction machinery remained robust. Next, I would like to explain the progress made on the year's key priorities. First, regarding attractive and competitive products and manufacturing. In the passenger car tire segment, we plan to launch more than 25 new products globally this year and announced 18 products in the first half of the year. Despite sluggish demand in North America, which stood at 92% of the previous year's level, we achieved a rise in market share through our attractive products, resulting in global sales volumes reaching 102% of the previous year. In North America, we offer a wide range of products under both the Bridgestone and Firestone brands, whilst in Japan, we offer the Potenza sports tire range, the new Finesa brand, and the new Blizzark Ice Peak statless tire, amongst others. Furthermore, in our diversified product business, we will continue to launch attractive new products such as Optify, hydrogen refilling hose, and B-forged golf irons. Moving forward, we will continue to drive growth across the entire company globally, centering our efforts on new products and product strengths. Next, portfolio management. This slide shows the year-on-year growth rate of adjusted operating profit. In the first half of the year, we were able to strengthen profitability across all the areas. By business segment, the solutions business grew, whilst the tire business and the diversified product businesses also recorded increased profits. By product category, TB and specialties which are linked to the solution business performed robustly, while the PS business is also showing steadily improvement. By segment region, the European business has improved significantly, whilst Japan, the Americas, and Asia-Pacific are also steadily enhancing their profitability. As I mentioned at the outset, the business environment is expected to become more challenging in the second half of the year. However, we intend to strengthen our initiatives aimed at growth and maintain our growth trajectory. Third pillar, reinforcement of brand power, involves enhancing our motorsports activities and expanding our corporate advertising to raise awareness of our company amongst a wider audience. Through Bridgestone motor sports activities, we support tires to events such as the Suzuka 8-hour endurance race and Super GT. By working one team towards these races, we are also contributing to the creation of dynamic organization. And we are expanding opportunities for a wider audience to become familiar with Bridgestone and promoting initiatives. And Firestone Brand supports the IndyCar Series, a traditional American racing series. The Indy 500 held in May served as a key touchpoint with a large number of customers and the spectators and provided the foundation for what was an exciting race that was decided by the narrowest margin in history. And furthermore, we started rolling out the commemorative activities to mark the 120th anniversary of Firestone brand since last year. And from the second half of the year, our participation in Formula E World Championship will finally commence, and we are focusing our efforts on further strengthening our brand power. This concludes our overview of the consolidated financial results and status of our initiatives addressing key challenges. Next, our CFO, Hishinuma, will provide a detailed explanation of our financial performance.

Vice President and Senior Officer, CFO, Hishinuma, will cover the details of the financial performance. I am Hishinuma serving as a CFO. I will mainly focus on the financial figures. The consolidated results for the first half of fiscal 2026 showed increases in both revenue and profit year-on-year. The adjusted operating profit margin improved by one percentage point from the previous year, finishing at 12.1%. Profit attributable to owners of parent was 206.2 billion yen. In addition to growth in adjusted operating profit, the business rebuilding efforts have been mostly completed and the related expenses recognized declined significantly year-on-year. As a result, the profit for the period increased substantially compared with the previous year. Next, I will explain the year-on-year variance factors for adjusted operating profit. In the first half, raw materials provided a tailwind. Together with an improved sales mix from expanded sales of high-rim diameter tires and growth in sales volume, a transition to growth with quality is progressing steadily. In addition, the continuation of steady global business cost reduction activities and the strengthening of our business structure through the business rebuilding efforts underpinned earnings while steadily deploying resources for growth. And despite higher operating expenses from the inflation and other factors, U.S. tariffs, and the impact of the Middle East tuition, we still ended the first half with an year-on-year profit increase, even excluding the foreign exchange effects, turning to results by segment. As our CEO explained earlier, aided by the tailwind of the weekly yen, all segments recorded increases in both revenue and profit. In the Asia-Pacific, India, and China segment, excluding the effect of a one-off items in the previous year, the profit margin also improved year-on-year. In terms of the profitability, we achieved improvement in substantially all the segments. Next, results by product category. All product categories achieved higher revenue, higher profit, and improved profitability. In passenger tires and light truck tires, expanded sales of high rim diameter tires and the rise in their share of the mix continued. In North America, despite decelerating demand for the replacement tires, we gained share and improved profitability in the retail business also contributed, resulting in higher revenue, higher profit, and improved profitability year on year. In truck and bus tires, second quarter sales exceeded the previous year in both original equipment and replacement. In addition to growth in the commercial B2B solutions business, the effects of business rebuilding in the Americas and Europe contributed, delivering higher revenue, higher profit, and improved profitability year on year. In specialties, sales of ultra-large off-the-road tires for mining increased year-near, supported by favorable raw material costs and FX effects, both revenue and profit increased. We continue to secure high-level profitability exceeding 20%, contributing to consolidated results overall. In the diversified products business, we continued making steady improvements, achieving higher revenue and profit year-on-year, along with an improved margin. Next, I will explain results by business portfolio. In the tire business, in addition to expanded sales and mixed improvement of high-rim diameter tires for passenger cars and light trucks, mainly in Europe and Japan, the effects of business rebuilding, focusing mainly TBR in Europe and Americas, materialized, resulting in higher revenue and profit, and adjusted operating profit margin recovered to the 14% range. In the solutions business, which is a growth business, the retail service business posted higher revenue and profit with improved profitability. In addition to growth in the Americas, the European retail business also improved its profitability through the business rebuilding. Commercial B2B solutions achieved higher revenue and profit, supported by growth in the retreat business and other factors, reaching a margin of more than 13%. Next on the balance sheet and the cash flow highlights. Total assets stood at 5,903,000,000 yen, an increase of 155.2 billion yen from the end of the previous year, For finished goods, we thoroughly continued lean inventory management, resulting in a decrease year-on-year, excluding foreign exchange effects. The cash conversion cycle likewise improved year-on-year, excluding foreign exchange effects. Free cash flow was an inflow of 221.5 billion yen, driven by improved operating cash flow on the back of higher profit before tax and a reduction in working capital. the free cash flow increased by 63.3 billion yen year-on-year. As for the capital policy which we announced in February, 150 billion yen of the fundraising was already completed in the first half, and the share buyback of up to 150 billion yen has been progressing steadily, reaching approximately 87% as of the end of July. Last but not least, on the four-year guidance. While the first half results exceeded the plan, for the second half, the impact of the raw materials and other cost increases associated with the Middle East situation is expected to materialize. Furthermore, since we anticipate the time lapse in reflecting these costs in selling prices under the index-linked pricing contracts, we assume a more challenging business environment. Yet, we are committed to achieving the guidance which we announced in February by taking various countermeasures. That concludes my explanation. Thank you very much for your attention.

So that was the presentation made on the financial results for the first half of fiscal 2026, consolidated financial results, as well as outlook for the full-year forecast by CEO Morita and CFO Hishinuma. So now we'd like to open the question and start the Q&A. First of all, from Mizuho Securities, Sakaguchi-san, please. This is Sakaguchi from Mizuho Securities. Thank you very much. Thank you. I have two questions. Thank you very much. My first question is, in the second quarter and the first half results, I'd like to give me a more detailed explanation. So you outperformed the plan, but adjusted operating profit-wise and how much is the overperformance. In terms of sales, you remain solid about the sales in the market. So how you feel about the market. The market condition was not so good, but how your sales strategy contributed. And the product mix, how did it perform to contribute to the plan? And looking at the gap analysis of the profit, in April through June, the other factors, for example, unrealized on the effect of some of the factors were also included. So the outperformance in the first half, what is the background? And were there any one-time factors? Could you please give me more detailed explanation about these numbers? Thank you. So I would like to respond to your question in the first half of the year, the outline of the first half, and then as for other factors in the detailed part, Hishinuma will respond to that part of the question. So when we started this year, and back in February, when we made explanation about the plan, I mentioned this. But the volume, this year, we would like to focus upon the volume of the business. That is one point in management. So the increase in volume and the setting price and the product mix, well, these have to be coordinated. So the selling price and the product mix and the volume were positive. And that was beyond the plan. And we were able to achieve the targets in these three areas in the first half of the year. So this result was quite encouraging to us. Volume, for example. Well, according to the plan, we expected more of the upswing compared to the volume. However, in North America, replacement demand was 92 and 88 for TB year-on-year. So the market dropped in North America. But by increasing our market share, we were able to make a positive contribution of $6 billion here for the volume. However, we wanted to achieve more. But this much share increase was not included in the plan originally, so that means this was a very good result. And the factors or the reasons for this, it is not because we had a one-time factor, but because we introduced, launched new products and put them on the right channel, and we were able to manage that according to the plan. products and channel and the pricing, the mix or combination of these three factors worked positively. So the volume increased because of these factors, and that led to the selling price. Looking at the raw material cost, when raw material cost goes up, then the market will go down, particularly in replacement market. But we were able to maintain the selling price at the right level. And the product mix, Firestone and multi-brand included, Tier 2 and even Tier 3, well, rather than them leaving, but rather losing, but rather, well, we were able to maintain the business in the market. And after that, well, the mix contribution of 11, and it was achieved. So this is quite satisfactory in the first half of the year. If demand turned out to be more positive in the North American market, this could have been even better. But even with this level of achievement, this is quite satisfactory. And I believe that the company is on the right track. And including other part, Hishinuma will give you more detailed explanation. Yes, so I, Hishinuma, would like to respond to your question. In the second, looking at the second quarter and other factors that are positive, as you mentioned, unrealized factors of the inventory that turned out to be positive. In the second quarter, through the second quarter, raw material cost rose, then in terms of gross profit will be squeezed as a result, and because of that impact, well, the unrealized and the factors of the inventory became the positive or the increased. And there are other factors. One of them is, among the other factors, this includes North American retail, the business, And the service income is included in this part. In North America, at the retailers, well, some portion of the business is the service revenue which contributed, which was positive in this item. and another point is as you see the so the local the so the us europe and asia the local foreign exchange factors are also included and on the consolidated basis the subsidiaries and the currency appreciated and that under a made a positive contribution so by budding all these These are the factors together, and these factors are contributed positively in the second quarter. Did I answer your question? Thank you very much. So the adjusted operating profit of the 288 billion, how does this compare to your original And I cannot go into details, but the upside is the double-digit billion in size. Thank you very much. Well, the second question is more from a longer perspective. Starting from this year, you started to take the direction towards growth with quality and looking at the results in the first half, sales and sales strategy. strategy, I believe that you had very good results in this area. That's what I felt from the CEO of Morita's comment. And going forward, excluding Middle Eastern factor, well, the market condition is not so positive, but this positive momentum in the first half, do you think, will continue? And from next year, the term for the new mid-term business plan will start. So the more growth is to be captured so that you will be number one. That is what you would like to achieve. So Mr. Morita, what is the direction that you would like to take? What is the strategy? And how do you feel about these directions? As much as possible, could you please share your view? Thank you. So towards the second half of this year, first of all, in the first half of this year, it was a very good and a positive year with good results. This was too good to be true, to be honest. But because of the shortage of the volume, and also there was the cold front in North America, and we realized that these are the challenges we need to take positively. However, we were able to respond to them in the favorable way in the first half of this year, which was good. Well, the material cost will rise, which is 60 billion years negative, in the second half. Even if we can increase the market share in the second half, well, that means other players will lose their business, meaning that the competition will become more intense. So it is not rosy everywhere, but rather we have to be more determined and more prepared with the humble attitude we would like to continue working hard in the second half. Volume will increase in the second half, and that will happen with the product mix improvement and selling price increase, and that will reduce the unicost reduction, and that will lead to more capex. So that's the good cycle that we were able to achieve in the first half, and we would like to keep this momentum in second half while being quite ready and prepared for the risk factors. On the production volume, I would like to make additional comment about the production volume. Going forward in the next midterm plan, this is a relevant factor. In the first half of this year, for the first time in four years, production volume increased year on year for the first time in four years. If volume increases, then the productivity enhancement is achieved, and that is what we'd like to achieve. And the rebuilding efforts in the past and the years, why did we do that? Because we'd like to be ready to achieve more growth. So the production has become positive, and so we'd like to keep this momentum going. Now for mid-end plan, now we are working on formulating the mid-end plan. This year, we have two directions that we are considering. Number one is looking at the current status of the company, and we would like to move from rebuilding to growth with quality, and starting from next year to become number one in the next mid-end plan. So these are two directions we are working on right now. Talking about these two directions, well, we need to change ourselves so that we'll be ready to grow further. Without such efforts, even with a new mid-term plan, we were not able to achieve the target. So 70 percent, 80 percent right now, well, including Middle Eastern situation, well, we see all these developments day by day, and we need to take action day by day and take into consideration all these day-to-day factors while working on mid-term plan. global number one, to regain the position of number one globally. So that's the aspiration and ambition that we would like to achieve. And we have said that ambition. It is not just the idea or just the slogan, but the direction to achieve number one, try to aim at being number one, will enhance the strength and the structure of the company so that we will be stronger. So this is going to be a policy to allow us to become even stronger, and there are many hypotheses to back this. Well, when I started talking about this, now Bridgestone, you'd like to go after more volume, what's going to happen to your position in the market. That was a concern that I heard. However, in order for us to become strong, I started talking about becoming number one. And there are many theories and hypotheses in the first half up until last week. Well, I visited 10, 11 countries, including three countries in Africa. I visited these countries. And we had a town hall session with 3,000 people on the face-to-face as well as remote meetings. I had a conversation with them. And about 600 people with a group of 10, I also met the people face-to-face with smaller, much smaller settings. And I talked with them, and I felt that my hypothesis has been proven through this dialogue. Well, with suppliers, these are the people who are looking at us from outside, as well as institutional investors. And I heard various expectations from them, which were embedded into our mid-term plan. So we are learning a lot through these channels. We have a big structure right now, framework. So the volume will grow, value will enhance, and the price will go up. And the expenses that we are going to make, well, including investment, will lead to a better cycle, a virtuous cycle. So how to continue this good cycle towards 2031? And that is where our final goal is, which is to regain the number one position. It is not that we are going to use something very unique or special or different. It is not our intention to do so. So this doesn't sound very exciting, but to launch new and attractive products at the globally competitive cost and pricing, so that is what we like to do step by step. Well, sorry for the long answer, but did I answer your question? Yes, thank you very much. Very strong ambition, I felt, from your comment. Thank you very much.

Thank you very much, Sakaguchi-san. next SNBC NICO Securities Maki-san please go ahead from SNBC NICO Securities this is Maki speaking thank you and thank you for today I have two questions as well my first question it could be a similar question but the tire business this time I'm exceeding 15% a significant increase is the impression earlier you mentioned you went through the rebuilding and you launched new products to the right channels that's how you've been expanding as a result of that you are reaching to where you are but it's a rather dramatic change so what you have been saying the channel expansion is now starting to their fruit or now that since you became a CEO the way the volume is looking may be changing a little bit so is there anything that you've changed leading to the results including some cases examples if you can share with us on that that's my first question thank you so for the first half it was almost too good for us but we were able to launch new products leading to these results and we are quite happy with that now after i became ceo for the volume seeing some movement it just happened so that it was a coincidence the timing it that's how i see it and from the second half of last year actually well last year when the year started in the beginning the beginning of 2025 From the second half of last year, gradually we would be shifting to the growth with quality. That's what we've been saying. So it's not that it was all of a sudden from the first half this year, but rather the trend was from the second half of last year, and now it's more visible. And we're launching new products one after the other. But from a few years ago, the R&D was underway going through the prototypes and testing. So the seeds that we planted are now sort of flourishing flowers. So it's not that since I became a CEO in January this year, it's not that something changed, but rather we were able to complete this business rebuilding. And to complete that, we've been planting seeds as part of the business rebuilding. And the efforts that we've been working until last year are starting to bear fruit in the first half. Did that answer your question? Thank you. My second question, you mentioned that you visited 11 countries globally, so Bridgestone organizational issues or opportunities for improvement. I think you were able to fill them with your own eyes. Is there any impression that you got through your visit? So, and what are you thinking towards the next mission plan? if you can give us a heads up so what do we mean what do you mean by number one it's not clear to us honestly speaking what you mean by becoming number one again so what will you focus going forward are you going to focus on sales or the share or the profit or the employee engagement i think there are different factors so where will you prioritize in running a business if you can also elaborate with us on that as well. Thank you. So from January, I've been visiting different places and through the dialogues and looking at, again, by the front lines as well. But also this is about the internal thing, but the anxiety for the future, concerns for the future. I think in the beginning I was hearing all these voices of the concerns, but this ambition of regaining number one, encourage people, and going forward, let's work together, let's grow together, I think the motivation actually shifted. So far, from the end of business rebuilding to move towards a growth with quality last year and also the year before that in the midterm management plan, we were talking about that but the people the employees were still rather anxious so me visiting directly having a dialogue including the town hall meetings the employees were able to feel that when the company will move ahead like that i think people are able to feel the confidence and if necessary tier two tier three with that the overall premium of strategy will remain unchanged but in order to achieve the premium strategy, necessary tools will be included, and the company will provide those tools we can, and those will be launched to generate the purchase cycle. The prices will go up and the volume will go up as part of the good cycle. So, gradually, the aspiration of really going for number one, I think it's changing among our staff as well. So be confident, to have more confidence and have a trust to the company. We feel that. And this is number one. What do we mean by regaining number one? After January this year, many indicators which became from what to what. In a comprehensive way, we've been looking at the very big numbers. So for us to become number one, what do we mean by that? How do we define that? but we're already number one in different ways already and we're not number one in many different ways either but from the society when it comes to tire it should be Bridgestone it's a very qualitative expression but that's what we aim for the share, the size, the scale of course we will go for that, we will pursue clearly we want to be the company making the largest number of tires using rubber, and that's where we would like to work on without escaping from that. But that should also enhance the values at the same time. And as a result of that, we will pursue the profit and also pursue the returns to the shareholders and the stakeholders and also return to the site as well. So, becoming number one And as I'm discussing with everyone internally as well, it's not like we would focus on one side, but in a harmonized way, among all the different stakeholders, we want to be number But what is at the core, the biggest company means that is what we would like to go for. Did that answer your question? So you're going to increase the potential. So I look forward to that.

Mr. Maki, thank you very much. now we'd like to limit the questions on the e to one question per person no b of a securities sakamaki san please go ahead thank you this is sakamaki can you hear me yes thank you very much this was a very impressive the financial results and sustainability of this results is my question. Well, the price or volume, well, the Michelin often talked about the fact that they can get either price or volume. So in North America, specialty business particularly, why did you work and your results are so good? For example, did you manage the business well at the directly operated stores in North America, while others were not able to do that, well, the 9% was the growth rate of your business there. So including that, what worked so well to get the share, and from whom did you get this business and the market share? Well, the inventory may be increasing as a result, and that is a concern. So including some of the data, could you please explain more in detail? Yes, as for North American market, mainly I would like to talk about North America. As for other companies, I'm not able to talk on behalf of other companies. But for the auto tire, we have two strong brands, Bridgestone and Firestone, which is our strength. And also, 2200 directly operated on the outlets. We have a big network of 2200, so multi-brand, and we have a network of directly operated stores. And Firestone, including Indy, for many years in the U.S. market, it has remained as a very strong brand in North America. So because of this combination of strengths, we have been able to do business effectively. Since last year, multi-brand strategy incorporated and introducing the Firestone more strongly since last year. So in the market with a shrinking trend, we are working quite effectively because of this factor. So in this way, in other words, multi-brand and directly operated source. So these are the basis of our business there. We can increase the business partners, car dealers to work with. So by the combination of these activities, we can achieve this, and I believe this is sustainable. As for truck tires, I think this trend is more noticeable. Of course, we should proceed with the business with a humble attitude, and this is a comment with that assumption. But the Bridgestone and the Firestone, well, the North American TBR business was created based upon these brands, which is quite strong. As for last year, well, the market share gained was highest. And by using Retreat and staying close with the customers, we visit the fleas and check tires at the depot, and the best way to use tires, manage tires effectively, and Azuga is the name, fleet management. And last month I visited them, and Azuga's know-how is also introduced to our business model, which is a unique business model. So that is what is functioning well in North America. And another aspect, well, the PSR is the area where I often talked about the multibrand. But the multibrand is also done in the truck and bus. Well, Bridgestone, the main business is the fleet solution business model. And Firestone model, well, the two dealers, it is offered to the fleets. So that is the way we manage the business. And Firestone has two lines. So meaning that we have virtually three lines of businesses to fully respond to the needs of the market. So our TV business model that we have today is very strong and sustainable. Of course, we shouldn't be too complacent. We need to make improvement continuously. Otherwise, other companies will catch up. So we need to defend the current business while make the necessary offensive towards the future. That was the next meet and plan period. Did I answer your question? I lost your audio. So right product through right channel and market share and prices are to be maintained through family channel and vis-a-vis the direct channel compared to last year and this year. So what do you mean by right product, right channel? Yes, from a network of direct outlet, sell out from them. Well, its ratio moving up and down, there is no such major changes. What I mentioned is that to the auto manufacturers, when we supply the tire to them, then there is the first round of replacement and the second round, and 10 years, 15 years after that, well, the automotives and the cars will be scrapped. So if we consider that cycle, first, second, and the third replacement, the owner may be the same, but there could be different owners because of the cars may come to the used car market. So the top line, the product adopted by OE manufacturers, the customers doesn't always ask for the same level of a product. At the second round of replacement, and if it is a used car, the customers, if we offer top line, the product to such market, we are able to make a right reach to those customer base. So through our channels and our direct stores and our partners, well, they have their own customers, and depending upon the customer type, we need to align our product offering to better suit to those customers. So the matching between product and the selling price is what this means. and that worked quite effectively in the first half of the year and going forward we need to remain sensitive sensitivity in the actual field is important and when there is a change then we need to change flexibly accordingly so that is what we intend to do. Did I answer your question?

Yes, thank you very much Sakamaki-san, thank you very much from now we would like to take questions from the members of the press if you have a question please click raise hand button at the bottom of the screen due to time constraints please limit one question per person I ask for your understanding I will call up your name if your name is called please unmute yourself and if possible turn on the camera and show us your face and ask a question. Now from Toyo Keizai, Hata-san, please go ahead. From Toyo Keizai, I'm Hata. Can you hear my voice? Yes, we can hear you. I have one question. So in today's announcements, the stock price actually has reached the record high from the beginning. So how do you view the corporate value? and what is your impression about the stock price? Now you're moving into the stage of the growth with quality. Do you think you can still enhance the corporate value going forward? Thank you. As for the stock price, of course, there are different factors to form the stock price, so we shouldn't be too much impacted by the stock price, of course. For the stock price to go up will lead to the part of the returns, So we will have to pay attention, but we should not be too impacted by whether the stock price goes up or down. Now, enhancement of the corporate value, to enhance the corporate value, us becoming bigger and with the higher profitability, with higher value, if there are two separate things, then rather than focusing on one or the other, but the direction that we have is to make sure to work on both together. and in that sense we have to make sure to grow the top line by so doing all the items in a balance sheet will also improve but if it's just becoming bigger then that would actually be more inefficient so with the ROIC and ROE we have to make sure to improve those indices as well so in both on both size dimensions. Well, you may wonder, can we do it? But we will be bigger and become more beautiful, bigger bridges and more beautiful bridges. We will go for both. So that's what we are working on right now. So we don't want them to be the pie in the sky. And the first half, we are able to achieve a good result. So like to further strengthen that as a result of that, that will lead to higher corporate value, that will lead to higher stock price. I think that will be the order or the sequence. We are, of course, concerned about the stock price, but we don't want to be too impacted by how the stock price changes. But we have to make sure to enhance the corporate value, and our mission is to contribute to society. So with that, if we can do that, then I think the results will follow our essence of serving society with a superior quality. So becoming number one, the capital efficiency, you talked about, the ROIC and ROE. Do you think you can set the targets for those indices in the next midterm plan? Yes, I think those indices will be necessary. So ROIC and ROE are necessary for us to look at, and also EPS and different indices. There are different indices, so we are scrutinizing different items as we speak. But at this point in time, for instance, as one of the most important items, equity ratio aiming for 55 percent. So I don't think we need to change that for the dividend as well. High pay ratio of 50 percent at that level is what we've been working on in the current midterm plan. and at this point in time, we have no plan to make any dramatic changes to that either. So either way, in a harmonized way to all the stakeholders so that we can manage the company and so that will be convincing to all the stakeholders we want to scrutinize to come up with the next mission plan. Thank you very much.

Hato-san, thank you very much. Taya Shinpo, Kimoto-san, please. Taya News Agency, Himoto-san, please. Can you hear me? So the key focus area and brand enhancement. You talked about the motor sports and as keywords, well, the team to generate the enthusiasm or the, which is a very encouraging phrase, which is, and it can be used for various organizations. So when you talk about this phrase, what kind of encouragement would you like to create a sense of encouragement generated by this phrase in a team? Yes, motor sports is my favorite, personally favorite, sports, and well, the centering around motorsports. As a tire company, we are a tire-centered company, so if we can generate the sense of the enthusiasm centering around motorsports, that's going to be nice. So my idea is that the motorsports, you know who is the first or second, and there is a deadline for the delivery. Well, tires have to be delivered on the day before the competition. Otherwise, it doesn't work. So we have the sense of the delivery, the deadline. And when you see the result of the competition, that is not the end. If it is Indy 500, it is once every year, Super GT and other competitions, you have other opportunities. And that leads to PDCA cycle. You may win once or lose once, and that is not the only opportunity you have. So you see the result of the competition and you see the ranking of your team. And then based upon that, you can continue making efforts. Well, the suppliers, business partners, well, the customers and the fans of the sports, we can share this experience. And if we are not able to win, then, of course, we can get the lesson out of that. So as one team, including the external stakeholders, we can invite them in to our efforts as one team. And then Bridgestone itself will become more active and enthusiastic. And the companies who will be willing to work with Bridgestone or the people who want to join and work for Bridgestone may increase. So centering around the motor sports, we would like to make this a vibrant place to work and a vibrant company. And I appreciate your question. So together with all the people, well, let's make something exciting and we'd like to make Bridgestone an exciting company. Did I answer your question? Yes, thank you very much. And that makes me quite encouraging. Thank you very much.

Thank you very much, Kimoto-san. Next, from Japan Rubber Weekly, Sasaki-san, please go ahead. Sasaki from Japan Rubber Weekly, can you hear me? Yes, we can hear you. Thank you for your presentation. I would also like to ask a question about the key initiatives. With attractive product and manufacturing, you mentioned you launched 18 products, many rich tire products so optify in the diversified products the new host product I think it's been a while since you last launched a new brand in the hosting product now that you're launching a new brand here so Morita-san now where do you expect what is the expected role and what is expected development in this area. As for the diversified products in our business, what's the positioning, both in terms of the profit and also within our company, what's significant will it bring in? Well, this is to support the social infrastructure. So when it comes to rubber, we are professionals in rubber, and with that professionalism, how can we support the society with that? In that sense, this diversified business is extremely important for diversification for instance this sports iron this is going to be a new product and the balls and this excitement and the joy of your life the colors of your life i think we can make a great contribution to that and to support the social infrastructure that part of the diversified product for instance there was a tragic earthquake So our seismic rubber with this rubber, we hope to mitigate the damage from the earthquake. Then that would bring the social values that can be achieved through the rubber and this optify. I touched it myself. And the high pressure, even if you put some high pressure ones, you can still maintain a good function, yet still very soft. You can bend it a little bit. so vis-a-vis the society or vis-a-vis the clients the value will be delivered to support the social infrastructure with this base isolation rubber so in our company the diversified business is a very important very valuable business and i would like to continue to strengthen this business as well going forward thank you very much Sasaki-san thank you very much for your question now it's time to To conclude the Q&A session with this we would like to finish the announcement of the financial

results for the first half of fiscal 2026 by Bridgestone Corporation.