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Executives

Toyoaki Nakamura - Executive Vice President and General Manager of Finance & Accounting Group

Hitachi (OTCPK:HTHIY) Q3 2013 Earnings Call February 4, 2013 3:15 AM ET

Operator

Let us now start Hitachi, Ltd. Fiscal 2012 Third Quarter Financial Results Briefing. Let me introduce to you the speakers: Executive Vice President and Executive Officer, Toyoaki Nakamura; Senior Vice President and Executive Officer, Toshiaki Kuzuoka; General Manager of Finance and Accounting Department, Yoshihito Kitamatsu.

Mr. Nakamura will take you through the overview of the financial results.

Toyoaki Nakamura

Without further ado, let us take a look at the news release of the financial results for the third quarter results. Please take a look at Page 2. Now consolidated results for the third quarter, let me give you the summary. On the left-hand side, you see the 3 months results in the third quarter, and on the right-hand side, these are 9 months cumulative numbers. First of all, 3 months from October to December, revenues were JPY 2,113,100,000,000, which was 93% year-on-year. Operating income was JPY 68.3 billion, which was 72% year-on-year. So there was a drop in profits. The bottom line, net income attributable to Hitachi stockholders was JPY 20.2 billion, which was 59% year-on-year.

Last year, hard disk drive and display business revenues were still included. They were sold in the fourth quarter, and therefore, in order to make an apple-to-apple comparison with the third quarter numbers, revenues would be 1% up year-on-year, and operating income would be 85% year-on-year. And the bottom line is 82% year-on-year. So therefore, operating income and the bottom line were down year-on-year.

Now JPY 20.2 billion represents a 13 quarter consecutive profits since the third quarter of 2009, when we were making losses. We used to be making losses up to the third quarter and make it into the black in the fourth quarter. But now we are able to generate profits for 13 quarters in a row.

Now in this third quarter, you might already know that at Hitachi Metals, with price declines of rare earths, we took a write-off of inventory. And as for our loan to Renesas, there is a partial debt waiver planned, and therefore, we have made loan-loss provisions. And these are onetime losses that we incurred. And at Hitachi High-Technologies, with market deterioration, revenues were down. But still we now can manage to generate earnings. We spent 3 years to emerge out of a loss-making structure. That is how we had been working on this 2012 mid-term management plan. And in this fiscal 2012, we feel that this goal is now being achieved.

Now to the right, there are 9 months cumulative number provided. Revenues, JPY 6,468,700,000,000. Excluding gains from sales of businesses, this would be 102% year-on-year. Operating income, JPY 231.9 billion, which is 96% year-on-year. The bottom line is JPY 50.3 billion, which is 73% year-on-year. So on an effective basis, revenues were up and profits were down year-on-year. This is because in net other deductions, equity and losses of affiliates was rather large.

Now let me give you some highlights by segment. First, Information & Telecommunication Systems, and then Power Systems and Social Infrastructure & Industrial Systems. These are what we call Social Infrastructure segments. Basically, through the year, both revenues and profits are higher in Information & Telecommunication Systems. As we have been saying in our competitor replacement projects, there were cost overruns, and we have been trying to make up for it. But unfortunately, we couldn't fully cover them. And therefore, in the third quarter, as well as 9 months cumulative, it was down year-on-year. On a full year basis, we are projecting higher revenues and higher profits year-on-year.

For Power Systems, thermal power generation system revenues are growing. And last year, materials performance counter measures were taken in Europe, but there are no longer these additional expenses. And therefore, in the third quarter, operating income was JPY 18.4 billion higher year-on-year, and 9 months to December, it was JPY 25.2 billion up year-on-year. So there were higher revenues and higher profits year-on-year.

In Social Infrastructure & Industrial Systems. In China, elevator and escalator business is quite strong. So operating income was up JPY 3.4 billion year-on-year. And on a cumulative basis, it is up JPY 300 million year-on-year. So this segment has higher revenues and higher profits year-on-year.

Next page. Our segments with mass production businesses mainly covered by our listed group companies. First, in Electronic Systems & Equipment at Hitachi High-Technologies, for medical analysis systems, there was inventory adjustment by customers. And for display-related production equipment, customers restrained investment, and the business stagnated and there were major declines. And therefore, in this segment, including 9 months cumulative, there were lower revenues and lower profits year-on-year.

In Construction Machinery, the Americas sales are growing, but in China, demand is weakening. And hydraulic excavators sales are lower. And therefore, revenues were down 6% year-on-year and operating income was also down by JPY 3.9 billion year-on-year. Nine months cumulative operating income was down by JPY 6.9 billion year-on-year. So this negative impact of China is strongly being felt.

High Functional Materials & Components. In operating income, as was announced by Hitachi Metals the other day, in order to fulfill stable supply responsibilities, the company built-up strategic inventory of rare earths, but this backfired and dispersion and other rare earth's price declines had a major impact. We have to post a large write-off. And therefore, it was down JPY 14.9 billion year-on-year. And on a cumulative 9 months basis, it was down by JPY 10.5 billion year-on-year. Because of market fluctuations, the segment was lower in revenues as well as in profits.

Next is Automotive Systems. This segment is relatively strong, but domestic auto production is down, and this had an impact through the third quarter. And therefore, profits were down year-on-year.

In Digital Media & Consumer Products, flat-panel TVs restructuring is almost over. So there are no longer impact coming from that, neither from Thai [ph] flood impact being felt. And therefore, in the 3 months from October to December, there are higher revenues and higher profits albeit by a small margin, it is in the black. And on a 9 months cumulative basis, there are still some deficit remaining, so minus -- it is minus JPY 2.3 billion.

Let us go to the financial position. Let me let me take you through this page. Total assets as of December -- because it is in December, Information & Telecommunication Systems toward the end of the year tends to build up inventory. And there are also higher inventory in Construction Machinery, and therefore, assets have increased to -- by about JPY 228 billion. This is not entirely due to inventory. As for interest-bearing debt, with the acquisition of U.K. Horizon and also another factor is that December is a bonus month, so interest-bearing debt grew by JPY 284.9 billion. But toward March, we will be paying down commercial paper and therefore, this is to be reduced. As a result of this, stockholders' equity ratio is 19.6%. We are, we think -- 0.4 percentage points to the target of 20% in our mid-term management plan. Debt-to-equity ratio, because of seasonal factors, it is 0.91x. But we will be trying to make improvements to get to 0.8x.

Next, Page 12. Outlook for fiscal 2012 shows consolidated revised outlook. Revenues is JPY 8.9 trillion, revised down by JPY 100 billion vis-à-vis the previous outlook. Operating income is JPY 420 billion, which is down by JPY 60 billion. As a result, revenue will decline, but operating income will be higher on the year-over-year basis.

Bottom line is JPY 150 billion, which is down by JPY 50 billion. The European economy remains stagnant and the economic growth in emerging markets, including China and India, continues to slow down. So the uncertainty will continue until March. We factored in the delayed recovery in demand, especially in electronics such as semiconductor and information equipment in the world. Operating income also reflects the write-off of falling rare earth prices, and therefore, is revised down overall by JPY 60 billion.

Next, please skip to Page 23. Consolidated revenue and operating income by business segment and revision. Revenue is revised downward for Electronic Systems & Equipment segment, High Functional Materials & Components, Digital Media & Consumer Products and others. Therefore, mass production businesses are facing sluggish demand now.

On the year-over-year basis, Social Infrastructure business, including Information & Telecommunication Systems, Power Systems and Social Infrastructure & Industrial Systems revenue will increase. Operating income is revised downward for Information & Telecommunication Systems, Electronic Systems & Equipment, High Functional Materials & Components, Digital Media & Consumer Products and others.

Except for Information & Telecommunication Systems, the other segments are mass production systems business, and the current conditions are factored in, in the forecast. In Information & Telecommunication Systems, we are taking measures for the cost overrun in projects that we took from the competitors, and we have 2 more months to go. But it may be difficult to recover JPY 5 billion. So we've revised downward.

Total downward revision is JPY 60 billion. Listed group companies, mainly, in the mass production business, have announced a downward revision of about JPY 50 billion. And therefore, in Hitachi, Ltd, Information & Telecommunications System and Digital Media & Consumer Products are revised downward by JPY 10 billion.

Operating margin is 4.7%. It may seem as though we have given up on 5% target, but we have 2 more months to go. So we are taking improvement measures and accumulating small orders in the entire group. Yen is weakening, so we will aim for 5% for the 2 remaining months by taking various measures.

That is all. Now we would like to take questions

Question-and-Answer Session

Unknown Analyst

[Question] I have 4 main questions. First, third quarter operating income is JPY 68.3 billion. This seems JPY 20 billion to JPY 30 billion lower than the internal budget. So please explain your third quarter by segment.

Unknown Executive

[Answer] Third quarter did not fall short by JPY 20 billion to JPY 30 billion, but the situation is different this time. We usually expect JPY 20 billion to JPY 30 billion upside in the third quarter. But this year, it is in line with the plan or slightly below the plan. Downside comes from the listed subsidiaries, which was compensated by the Power Systems and Social Infrastructures segments. In total, we fell short by about JPY 7 billion. But the listed subsidiaries declined considerably, so Power System and Social Infrastructure & Industrial Systems made up for much of that loss.

Unknown Analyst

[Question] If net is JPY 7 billion, what is the gross number? What went up, and what went down by how much?

Unknown Executive

[Answer] Power Systems was strong. Power Systems and Social Infrastructure & Industrial Systems improved by over JPY 5 billion each. Information & Telecommunication Systems fell slightly short of our plan. Big shortfall came from High Functional Materials & Components, JPY 12 billion lower than our internal plan. Construction Machinery and Electronic Systems & Equipment fell short by JPY 5 billion each. Renesas' bad debt allowance was set, and when INCJ paid for capital increase, we waived the debt for Renesas, and minus JPY 3.8 billion is included in the third quarter.

Unknown Analyst

And second question and onward is on outlook. On segment basis, Information & Telecommunication Systems' 9 months result is behind plan. But subtracting fourth quarter is JPY 71.8 billion, and operating income forecast is up by JPY 20 billion. So can you achieve higher income despite lower revenue? In Digital Media & Consumer Products segment, seems like JPY 5 billion loss in the fourth quarter according to my calculations. So could you elaborate on that as well as the key points in the segments in the fourth quarter?

Unknown Executive

[Answer] In Information & Telecommunication Systems, we are aiming to recover the cost overrun, and we are almost there. So the shortfall is not as big as JPY 20 billion.

Unknown Analyst

[Question] So you think you can reach JPY 20 billion?

Unknown Executive

[Answer] Yes. We are almost there. Digital Media & Consumer Products have some special factors.

Unknown Analyst

[Question] Restructuring costs?

Unknown Executive

[Answer] Yes, to put an end to the problem.

Unknown Analyst

[Question] My third question is on PL. Net other deductions is approximately JPY 10 billion worth. You mentioned Renesas, and effective income tax rate is up. Last year was JPY 110 billion on JPY 400 billion. And this year, it is JPY 105 billion on JPY 330 billion. So the rate seems higher. I understand the increase in the net losses of affiliated companies, so please elaborate. Please also explain the downward revision on full year free cash flow.

Unknown Executive

[Answer] Net other deductions is revised from minus JPY 80 billion to minus JPY 90 billion on a full year basis, which comes directly from the increase in the net loss of affiliated companies. It impacts all the way down through income before tax to the bottom line. So the effective income tax rate went up. Regarding free cash flow, we usually have large cash from operations or operating cash flow in the fourth quarter, around JPY 300 billion to JPY 400 billion, never below JPY 300 billion. We spent JPY 90 billion to acquire Horizon Nuclear Power, so we were aiming for JPY 100 billion profit, but it will be that much lower. We will try to achieve breakeven or some black ink.

Unknown Analyst

[Question] My last question is on foreign exchange assumption and foreign exchange impact up to the fourth quarter. Yen is weakening, so please share with us your views. Please also touch on the progress of the Hitachi Smart Transformation Project. It seems that there is some room for recovery, so if you could explain that including cost reduction side, please.

Unknown Executive

[Answer] Foreign exchange assumption is JPY 90 to the U.S. dollar and JPY 120 to the euro for the fourth quarter. It is now stable around JPY 92 to JPY 93 to U.S. dollar and JPY 126 to JPY 127 to euro, so that is our assumption. As for foreign exchange sensitivity, JPY 1 fluctuation to USD 1 has JPY 1 billion impact and to euro, JPY 200 million. Yen is weakening but global market, including the emerging markets are sluggish in the fourth quarter, so weak yen benefit will not be fully enjoyed. Capacity utilization is declining. Once revenue increases, we will see more benefit from this weaker yen. We think we have a little room for recovery.

Unknown Analyst

[Question] How positive will that be?

Unknown Executive

[Answer] On revenue? Operating income?

Unknown Analyst

[Question] Both.

Unknown Executive

[Answer] On operating income, if yen depreciates by JPY 3, the impact is JPY 5 billion on profit. Is that 9 months?

Unknown Analyst

[Question] No, fourth quarter alone. Year-over-year comparison based on the assumption.

Unknown Executive

[Answer] As we said, foreign exchange sensitivity is JPY 1 billion for U.S. dollar and JPY 200 million for euro. For 9 months, JPY 5 billion in operating income is from foreign exchange in fourth quarter if it reaches JPY 93 to $1, we hope.

Unknown Analyst

[Question] What about the effect of Smart Transformation Project?

Unknown Executive

[Answer] We were aiming for JPY 60 billion to JPY 70 billion, but now we think we can reach a little more, JPY 70 billion to JPY 80 billion. We are seeing small increases and have launched emergency measures on costs. So we are making good progress in cost reduction.

Unknown Analyst

[Question] But it's still JPY 420 billion?

Unknown Executive

[Answer] Yes.

Unknown Analyst

[Question] I have 2 questions. The first one, sorry to press on this point, but it's about foreign exchange. You said that you have revised the foreign exchange rate to JPY 90 to the dollar. In the second quarter results announcement, it was explained that when there is JPY 1 move in foreign exchange, it will have an impact of JPY 4.2 billion in the operating income in the second half. Now that you have revised it to JPY 90 to the dollar, the original plan and the current fourth quarter plan, how much foreign currency impact is factored in? That's my first question.

Unknown Executive

[Answer] JPY 1, having a JPY 4.2 billion impact in operating income. Currency forward contracts have been signed, but with the revision in the foreign exchange rate, the impact on a full year basis is about JPY 15 billion positive.

Unknown Analyst

Is that for the second half?

Unknown Executive

No, for the full year. JPY 15 billion for the full-year.

Unknown Analyst

Second question. As Mr. Nakamura explained, the current operating margin is 4.7% revised because of the external environment. But internally, you said that you have a slightly higher target. Now which segment has upside potential? If you have a sense of which segment has such potential, please let us know, including cost reduction potential.

Unknown Executive

[Answer] In terms of segment, Power Systems, Social Infrastructure & Industrial Systems, Financial Services and others and among listed group companies, Electronic Systems & Equipment, High Functional Materials & Components, these had major declines in this quarter. And measures are now being taken such as building order intake for shorter delivery periods or cost reduction projects are being launched. So compared to what they had announced, that will be the bottom. And I feel that they are trying to make improvements. So we do have expectations for that.

Unknown Analyst

[Question] So your current plan, including consolidated subsidiaries, that's the minimum level. Is my understanding correct?

Unknown Executive

[Answer] Yes. Let me make a correction about my earlier statement about the foreign exchange impact. As we announced previously, our operating income was previously JPY 480 billion. But that's now revised to JPY 420 billion, of which yen depreciation impact in second half is about JPY 32 billion. This is a positive impact.

Unknown Analyst

[Question] I have 3 questions. In Information & Telecommunication Systems, what are the factors for the profit increase in the fourth quarter, product mix will improve or fixed cost will decline? The lost project in the first quarter has been explained, so you are seeing that loss cannot be covered or balanced? Please explain the reasons for the profit increase in the fourth quarter. My second question is on foreign exchange. We want to think about next year, so please explain the net exposure of U.S. dollar and euro for this year. as well as the factors for the fluctuation for the next year. Third question. You said there are some factors in home appliances and Digital Media & Consumer Products. Could you explain the revenue and profit after those factors are over next fiscal year?

Unknown Executive

[Answer] Information & Telecommunication Systems will increase by JPY 20 billion as mentioned earlier. We are drastically cutting costs, so the reduction in expenses and yen depreciation benefits will emerge. Storage solution and ATM are selling well overseas, not anymore in Japan but selling well overseas, so we will enjoy the weak yen advantage. But we need to take some more measures, which we take into account. And therefore, we may fall slightly short of JPY 20 billion. Now net exposure of U.S. dollar and euro, we are currently in the budgeting process, but we will increase overseas portion, so we hope that will be the case. But we cannot say for sure now. But sales revenue will not decline greatly next year, so weak yen will surely have a positive impact. We are focusing on reducing unprofitable business. Unprofitable business will suffer loss under weak yen on yen basis, but that is not happening now. Digital Media & Consumer Products had some special factors. After that, it will not have negative factors next year. The segment is originally mainly home appliances, so it should be able to generate profit. Digital products other than TV -- now it is B2B rather than home appliances. And optical storage is B2C. In PC-related area, mobile PC market is not good. Price competition is intensifying, but it should end soon. That said, we must take measures in this area. And so that we can have a good prospect by the end of this fiscal year.

Unknown Analyst

[Question] Will you generate profit?

Unknown Executive

[Answer] Yes, if we take measures. But we can't be that sure and clear cut. We will explain again later.

Unknown Analyst

[Question] In Information & Telecommunication Systems, given that storage is a business that enjoys the benefit of a weaker yen, is it the case that, domestically, in systems integration, cost overruns are still continuing? Is this a correct understanding? And what are the countermeasures taken? What is your policy for systems integration?

Unknown Executive

[Answer] In the past, there were times when hardware was making losses but no longer. We've changed the structure so that both systems integration as well as hardware can generate profits. But we may have let down our guard a bit, and in competitor replacement projects, we were not careful enough in project management. There's a number of such cases. And countermeasures are being taken, but as to whether there will be such similar problems in the future, well, we have changed the mechanism. We have changed the tools. And therefore, I don't think there will be any more of such problems in the future. The biggest problem is at the time of getting the contract. And we are now putting into place the process management. And therefore, there are no future projects with such problems in the future. So in terms of countermeasures, we do a good job of managing such projects. Going forward, large banking system development will get started. So we must make sure that there will be no societal impact. We are taking measures to be fully prepared. But unfortunately, in this period, because we have already started these projects, we cannot just abandon them midway. That's not consistent with our policy. So we'll resolve the problem by thoroughly completing the projects.

Unknown Analyst

[Question] I have 2 questions. It's about the general direction of the next fiscal year. In the non-mass production business, namely Information & Telecommunication Systems, Power Systems and Social Infrastructure & Industrial Systems, looking at the current level of order intake, how should we be looking at the next period? Next question is about Smart Transformation Project. This year, you're projecting JPY 70 billion to JPY 80 billion benefit. In the next fiscal year, how much benefit are you expecting?

Unknown Executive

[Answer] For the direction of fiscal 2013, you asked this question at a very difficult timing. Because on a whole company basis, we still have not conducted our budget deliberations. And therefore, I cannot say much about this. But looking at Social Infrastructure-related segments, order intake, as we closed the accounts in December, it's up year-on-year. So it's not like there is going to be large fluctuations as we see in mass production business. But generally speaking, my sense is that the first quarter may not be so strong. I don't know. In terms of the market environment, the government is doing a lot to stimulate demand in the Japanese economy. So we'd like to build on that. But so far, only looking at data through December, I would like to ask you to be a bit more patient and wait a little longer. As for Smart Transformation Project, as you know, it was on the 1st of August last year that we established our Smart Transformation Project initiative division. The work is being accelerated. For the benefit in fiscal 2012, as I said before, the plan is that this is through 2015, because this is an activity to change our cost structure. So the plan is to reduce cost by JPY 400 billion to JPY 450 billion from the current level. By each fiscal year, well, our target is to increase the benefit in a linear fashion so that in 2015, full benefits can be enjoyed.

Unknown Analyst

[Question] Then it will be about the same as this level?

Unknown Executive

[Answer] Yes. Incrementally, JPY 100 billion or so additional benefit is something that we would like to generate. There are about 7 projects in all, and I'm talking about the total benefit.

Unknown Analyst

[Question] I have 3 questions. In Information & Telecommunication Systems segment, looking at segment software and services and hardware, software is revised downward by JPY 12 billion and hardware is JPY 7 billion, and storage solutions is JPY 10 billion upside on full year basis. Is upside in the hardware from yen depreciation and strong ATM sales that you mentioned earlier? And shortfall in software and services JPY 12 billion is due to poor loss control?

Unknown Executive

[Answer] Yes, that is pretty much correct.

Unknown Analyst

[Question] Next question is on balance sheet. The exchange adjustment account improved by about JPY 100 billion compared with the end of September. Yen is weaker than the end of December, so if yen is JPY 93 to USD 1 and JPY 126 to EUR 1 at the end of March, other comprehensive income, OCI, should be bigger. Could you give us a clue on how big it could be? And stock price is up, so pension should be improving. So please touch on that too.

Unknown Executive

[Answer] Regarding foreign exchange sensitivity, JPY 1 fluctuation to USD 1 has JPY 3 billion impact on the translation adjustments. Regarding pension, 1% investment yield equals JPY 10 billion. 0.1% discount has an impact of about JPY 30 billion. That is how we view OCI.

Unknown Analyst

[Question] Then in 3 months, JPY 5 means JPY 15 billion improvement in translation adjustment?

Unknown Executive

[Answer] Yes, if the base foreign currency remains the same.

Unknown Analyst

[Question] Your fourth quarter is usually high, so maybe a more impact?

Unknown Executive

[Answer] We hope, but we don't know much about the exchange market. If so, it will impact the year-end stockholders' equity ratio. Translation adjustment goes to equity capital. JPY 1 with JPY 3 billion impact is after tax, so it is discounted by 60%. It should be more, but tax rate is high in Japan.

Unknown Analyst

[Question] My third question is how much impact did Horizon Nuclear Power have on your balance sheet at the end of December? And when you sold the storage business, part of that is stock, I believe. But how did you incorporate the impact?

Unknown Executive

[Answer] When we acquired Horizon, cash out was JPY 87 billion on the balance sheet, adjusting to the current exchange rate, JPY 88.8 billion impact on the interest-bearing debt. But intangible fixed asset, we acquired JPY 55 billion worth of land, and so goodwill is JPY 30 billion before PPA. In storage, we have 25 million stocks of Western Digital, which is around $46 per share. When we exchanged and included it on balance sheet, it was slightly over $37 per share. So it is up by $9. So unrealized gain is over JPY 10 billion on the balance sheet. It is now $46 per share. It was a little lower in December, so a little more now. Please calculate on your side. We have a sizable unrealized gain.

Unknown Analyst

[Question] I have 3 questions. First one, you have talked about onetime problems such as in rare earths or Digital Media & Consumer Products. All in all, quantitatively, how much is the impact for this fiscal year? Second question, compared to the interim period announcement, you said that when things get tougher, you believe that you can get to JPY 480 billion with cost reductions. I can understand that the macroeconomic environment as well as mass production businesses are tough. But what area do you think has changed? It could be by region? Can you tell us how you are viewing some qualitative changes? Third question. Your outlook going forward. You said that things are likely to remain tough through the first quarter of 2013, but on a macro level, looking at Japan, China, U.S. and Europe, what is your outlook on the changes in the environment? If you could share with us your views.

Unknown Executive

[Answer] Onetime elements. It's hard to define them. But in operating income, onetime elements are in our portfolio restructuring. I've talked about -- there is the loan-loss provisions of JPY 3.8 billion and the lower of cost or market we applied in metals. And we also conducted a structural reform of flat-panel TV. So all in all, there is about JPY 35 billion or so. So in my mind, if you account for that, we can get to 5.1% but there's no point in saying this. If you haven't asked that question, I wouldn't have said it. Internally, we're saying that there's no point in saying it. Well, structural reform is something that we implemented intentionally, so there's no point in saying what would've been without it. But the write-off of this [indiscernible] was painful. We did some in the first half, so there's about JPY 17.5 billion or so, but when you have a high market share, this is the responsibility that comes with it. So from next year, my personal view is that if we get an operating margin of 5%, about 1/2 of that or 2.5% of revenue should stay in net income. So 1/2 of operating income could feed through to net income. That's what I'd like to see. That's what we have been working in our 2012 mid-term management plan. And I feel that generally speaking, we now have such a structure to achieve that. So when I speak of onetime elements, it's always net other deductions or taxes where our profits are eroded in large numbers, and we've been getting criticism that it's such a waste. But in our 3-year period from 2010 to 2012, we feel that we've been able to change our structure, by segment or by region, what kind of changes there were. Well, recently, many electronics products are now digitized and in certain business markets, there are 2 major players, and the others are doing poorly or manufacturer over product. At onetime, there's one strong manufacturer but another time, another one becomes strong. So there are big swings between winners and losers nowadays. So we feel that we need to deal with all sorts of customers. By region, so far, in China, we had been seeing very large market growth, but the substance of that growth is now changing. But as for Southeast Asia -- as for the rest of Asia, it's quite good. And hydraulic excavators for mining and city development, I don't think the market has collapsed. But it seems that it is taking a bit longer to recover. In Social Infrastructure-related businesses, this is the area where we can expect strong and stable demand. Power Systems, Social Infrastructure mediated businesses and Information & Telecommunication Systems, where we can provide unique solutions, these are the areas where we would like to strengthen. In terms of region, the U.S. is strong. In auto-related areas, where we are strong technologically, that's the area where we to continue to build up. Think about the future. We should not neglect technology and try to make money with mass production. That is going to be difficult. So technological development should be the focus more than ever for fiscal 2013, first quarter trends. Smartphone volume is going up. But in terms of production capacity expectations, there may have been over investment. And that is being reflected in the market environment. So eventually, demand will be growing, and therefore, it will catch up. But maybe there is a time lag. With ergonomics, we are expecting demand to be generated, but that's for Japan's domestic market. So looking at the global economy, not much could be expected by the first quarter. But we'd like to continue to look at the total picture. That's my sense. Any other questions?

If not, that concludes the briefing session. Thank you very much for your attendance.

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