Hitachi, Ltd. (HTHIY) Q1 2023 Results - Earnings Call Transcript

Jul. 30, 2022 12:43 AM ETHitachi, Ltd. (HTHIY), HTHIF
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Hitachi, Ltd. (OTCPK:HTHIY) Q1 2023 Earnings Conference Call July 29, 2022 3:30 AM ET

Company Participants

Yoshihiko Kawamura - Executive Vice President and Executive Officer, Chief Financial Officer

Tomomi Kato - Vice President and Executive Officer and Deputy Chief Financial Officer

Masao Yoshikawa - Executive General Manager, Investor Relations Division

Conference Call Participants

Tsutomu Yamazaki - Kudo Press

Junji Okawa - Daiwa Securities

Operator

It is time to start. We are now going to start with Hitachi Limited’s Web Conference on Q1 FY 2022 earnings. Thank you very much for attending despite your very busy schedule. As for today’s presentation materials, they are posted on Hitachi Limited IR site and the news release site. Please go from the materials we needed.

Now, let me introduce today’s speakers. Yoshihiko Kawamura, Executive Vice President and Executive Officer, CFO of Hitachi Limited; Tomomi Kato, Vice President and Executive Officer and Deputy CFO; Masao Yoshikawa, Executive General Manager, Investor Relations Division. These are the three participants from our side.

Now, Mr. Kawamura will introduce the outline of the financial results. We are going to switch the screen. Please wait for a while. Mr. Kawamura, over to you. Thank you.

Yoshihiko Kawamura

Ladies and gentlemen, thank you very much for taking time out of your busy schedules to join us today. Hitachi Limited’s first quarter results for fiscal year 2022 and based on that, we would also like to share with you our full year forecast for FY 2022. And I would like to use the material as I speak.

If you could please look at Page 3, here are the key messages of the first quarter results, one, two and three. First is about the numbers for the first quarter. And second, is about DX and GX, digital transformation, green transformation are the areas which are performing very well and number three is about the full year forecast.

So to come back to number one, in the first quarter, the business performance, as is described here on a consolidated basis, our revenue was ¥2,569.8 billion, up 9% year-on-year. Adjusted EBITDA where there is cash flow, ¥154.8 billion. It was down ¥6.3 billion year-on-year. And quarterly net income was ¥37.1 billion, down ¥85 billion year-on-year. And the reasons for decrease are as noted below, with respect to digital systems and services and Hitachi High-Tech, these saw increases in revenue and profit, as we will discuss later. And there was a large decrease due to semiconductor shortage and lockdown in China, in Hitachi Astemo and Smart Life & Ecofriendly Systems appliances business. And this was reflected in the numbers I just mentioned. And there is another one-off factor as is in the third bullet. We shifted to risk-sharing corporate pension plan. It’s a onetime factor, but there is impact – ¥51.1 billion of impact. And so this is another factor negatively affecting the numbers.

Going to point number two, areas which are performing very well, DX and GX. For these business areas, performance is robust and growing successfully. So Lumada business, including GlobalLogic, is performing well. Hitachi Energy and Railway Systems have seen increases in orders. For specifics, please take a look below, Lumada business was up 58% year-on-year in revenue. Adjusted EBITDA ratio was around 12%. GlobalLogic has been seeing a very rapid growth, up 47% year-on-year. And Hitachi Energy’s orders remained firm. And this is related to the environment. It has a strong tailwind blowing for Hitachi Energy. As is in the bracket, order backlog of approximately $16 billion, actually, this is worth a year’s backlog or even more. And Railway Systems business orders are very firm. And order backlog, ¥3,718.6 billion. So GX, DX businesses are doing very well. So based on one and two, what’s going to happen for the full year.

Number three, and in the brackets, these are the numbers noted in the outlook we announced in April. So FY 2022 forecast is revised offered for revenues of ¥9,850 billion, up 4% from the previous forecast adjusted EBITDA, ¥845 billion, up ¥25 billion from previous forecast core fee cash flow, ¥235 billion, up ¥25 billion.

Net income forecast of ¥600 billion remains the same from April. ¥600 billion of net income forecast is record high. We used to say that it’s around ¥570 billion, but it’s ¥600 billion in terms of forecast. And there are going to be major divestitures that we are planning. Less subsidiaries were up for divestiture according to our plan, we have said. So Hitachi Construction Machinery share is to be expected to be divested in the first half. Hitachi Metal – Hitachi Transport System are to be divested by the end of FY 2022, Hitachi Transportation divestiture is already ongoing. So with the divestitures of these three listed subsidiaries, there is going to be a negative impact on revenue, but this is according to our plan.

Please have a look at Page 4. This is a description of macroeconomic outlook. Please have a look at the table, calendar year 2022. This is much forecast by Hitachi Research Institute. And in the middle or to the left, there’s forecast as of June and GDP outlook is down for a number of countries, well, social infrastructure is area that we focus on, so we will be affected by the macroeconomic impact – macroeconomic environment. And – please have a look at negative factors in the right-hand side, lower quarter. As I will provide you with the details, material and parts prices are up logistics disruption, semiconductor shortage is also having an impact, especially for automotive and electric appliances business.

And please have a look at Page 5. So, by specific business segment and business area that’s been impacted by these factors. On the horizontal axis, semiconductor shortage, so material prices, activity constrained due to pandemic and lastly, situation in Ukraine and Russia. Vertically, business segments are described.

Please have a look at the boxes highlighted in black solid line, Astemo because of semiconductor shortage power price increases – power price increases, these are affecting Astemo. In Shanghai, we are producing substrates for electric appliances, washing machines because they are not being produced and supplied to Japan, we have not been able to produce these products. And that business is affected. On the far right, with respect to Ukraine and Russia, the impact has been minor.

Please have a look at Page 6. So these are about the major business areas, snapshot. Clockwise, top left, GlobalLogic. As I just said, GlobalLogic is growing very rapidly. It was up 47% in terms of revenue Y-on-Y and adjusted EBITDA plus 41%. Hitachi Energy to the right. Revenue is doing very well, 14% year-on-year increase. Adjusted EBITDA, plus/minus zero, but it’s being affected by material price increase, especially electric sale sheet price, and we have to absorb increased costs. So compared to last year, it’s flat.

And please have a look at right hand side, lower corona Hitachi Astemo, which is affected by semiconductor shortage, Y-o-Y as well as Q-on-Q, both numbers are noted. Adjusted EBITDA is down by ¥70.8 billion year-on-year, Q-on-Q, ¥29.6 billion decrease, so severely affected by market conditions. And Hitachi High-Tech to the left, clinical business, medical business and semiconductor manufacturing equipment business is doing very well. So – you can see that by the numbers.

Now order results. Orders are very strong. At the very top, digital systems and services Y-o-Y, up 12% year-on-year, Hitachi Energy, 102% increase year-on-year. So these are the areas where orders have increased substantially year-on-year. Hitachi Energy has almost doubled in orders compared to last year. As I said upfront, because this is a business related to the environment, there is very strong tailwind for this business.

Please go on to Page 8. Here are the numbers for Lumada. Now with respect to Lumada, up until last year, we disclosed based on two categories. One is core, the IT business per se and related business where IT is applied. And starting this year, we are using these four quadrants. Please have a look at the table below. Digital engineering, as is noted on the line, GlobalLogic is included in digital engineering and system integration and below that is client connected products. As is in the right hand side part, Lumada is implemented on hardware in power grid equipment and other connected products. And the last 1 is managed services. Getting back to the upper left hand side bar chart on the left, shows the comparison between Q1 last year and this year and a yearly comparison on the right.

Please have a look at early comparison. Second, from at the bottom dark red, ¥660 billion, up 64% year-on-year. This represents connected products. So semiconductor manufacturing equipment where Lumada is implemented on hardware and this is growing very steadily. And margin is 13%, very high, and 13.4% increase forecast is ¥1.87 trillion. On the right hand side, Q1 FY 2022 and on the right – or to the right, FY 2022 forecast and our revenue, ¥1.87 trillion, you can see that the business is split 50-50 between Japan and overseas. So these are the qualitative comments for the performance in Q1.

Let me show the numbers next. Have a look at Page 10. Here are the highlights for the numbers for Q1. On the left revenue, on the right, adjusted EBITDA, please have a look at the revenue wise. Dark gray is unconsolidated, three sectors plus and light gray represents less subsidiaries. As you can see, for both three sectors plus Astemo as well as this subsidiaries, revenues increased. On the other hand, adjusted EBITDA has gone down as is on the right. That’s because of impact from China’s lockdown semiconductor shortage, Astemo and electric appliance business is down, so Y-o-Y, down ¥6.3 billion for adjusted EBITDA.

On the far right, overseas revenue, ¥1.696 trillion, up 16% Y-o-Year, Lumada business, ¥399 billion, 58% year-on-year, and net income attributable to shareholders, ¥37.1 billion, down ¥85 billion EBITDA, ¥222.7 billion, down ¥77.2 billion because of risk-sharing corporate pension plan and the shift there of ¥50 billion. Cash flow from operating activities, ¥106 billion, down ¥30 billion; core free cash flow – as noted, there are increased orders from power grid and so forth and therefore, increased working capital needed, and that’s reflected in cash flow from operating activities.

Moving on to the next page. So three sectors of Astemo and listed subsidiaries, the breakdown is given, from left to right, so increased revenue, decreased profit at 7.6%. That’s the ratio for three sectors. Astemo increased revenue decreased profit list subsidiaries, increased revenue as well as profit. So, as is on the right total – adjusted EBITDA, ¥154.8 billion, revenue ¥2,569 billion.

Moving on to the next page, Page 12 and onward. These are the details of each segment. On Page 12, Digital Systems & Services, green energy and mobility are described. So Digital Systems & Services please have a look in the first quarter, revenue, ¥505 trillion and adjusted EBITDA of ¥49.3 billion, 9.8%, so increase of ¥5 billion in adjusted EBITDA year-on-year. Green Energy & mobility have a look in the same way. Revenue of ¥512.4 billion. EBITDA, ¥18.5 billion. The ratio is lower at 3.6%. This will be increased Y-o-Y, 108% adjusted EBITDA plus ¥6.7 billion.

Next, Hitachi Energy, revenue, ¥301.9 billion, adjusted EBITDA ¥70.4 billion. So revenue is up because of increased power prices. But in terms of EBITDA, it’s flat year-on-year. Below the Railway Systems, ¥155.7 billion revenue, ¥6 billion adjusted EBITDA, 107% increase, ¥6.3 billion in EBITDA. Next, connected industries, ¥670.8 billion in revenue, adjusted EBITDA, ¥61 billion, which is 9.1%, revenue, 100% EBITDA flat. Please have a look at Smart Life and Ecofriendly Systems. This is about electric appliances. Adjusted EBITDA was down by ¥9 billion year-on-year. That’s because of the severe impact from Shanghai lockdown.

Next, Page 14, please. This shows subsidiaries to top Hitachi Astemo. For Astemo, if you look at the right-hand side, Y-o-Y adjusted EBITDA is minus ¥17.8 billion and Hitachi Construction Machinery, if you look at those items, 117% plus ¥8.1 billion, Hitachi Metals, 122% plus ¥3.8 billion.

Next is Page 15. This shows our revenues. On the left hand side is Q1 last year until Q1 this year, how we move and also the bottom one is adjusted EBITDA. Look at the revenues that I talked for last year was ¥2,367.4 billion and then GlobalLogic acquisition effect and then also another major feature now is the weakening of a yen, ¥184 billion is the impact of foreign exchange, although there are other adjustments on the right hand side, ¥2,569.8 billion. Adjusted EBITDA also is the same in terms of items, left hand side is Q1 last year and the acquisition of GlobalLogic was positive, impact of foreign exchange and others on the right hand side, ¥154.8 billion. This is how it’s trended.

And next is Page 16. This shows the cash flows. This is at the end of Q1. So this is a snapshot as of end of Q1. The top 1 is restoration of BS because of the weakening of the yen, it used to be ¥10 trillion to ¥11 trillion, but now it’s more than ¥14 trillion, this is a situation, but if – in terms of full year it would be about 0.4 to 0.5. So as of end of this fiscal year, net equity ratio will return to the normal situation. Below are our cash flows. Cash flow from operating activities, ¥106.1 billion, investing activities, minus ¥72 billion and free cash flow ¥34.1 billion and core free cash flow, deducting CapEx for investment activities is ¥5.3 billion.

Next page 17, revenues by market. Clockwise, the small circle is a comparison between Q1 of previous year this year North America is growth of 32%. Europe, growth of 20%. China there has been adjustments. So compared to the price, there is a slowdown, the growth is 1% and going down. What is tough is the situation in Japan. You can clearly see that Japan – Japan growth is negative as shown below. Astemo and home appliances are greatly influencing leading to this negative growth and then ASEAN India, 12% growth and other areas, 16% growth. So China and Japan are facing a tough situation. So in total, overseas revenues, ¥1,696.3 billion, the ratio as of a total is 66%. So this was a situation of Q1. And next is the full year forecast for FY 2022.

Please turn to Page 19. Just like Q1, revenue retained adjusted EBITDA. So revenues, as you can see, we expect a decline. Adjusted EBITDA also is going down. The reasons, as you can see in the graph below. Just like a previous one, dark gray of the three sectors, plus Astemo of lease subsidiaries for revenues. Three sectors plus Astemo growing subsidiaries as I’ve mentioned, there will be a reduction. Adjusted EBITDA to the right, is facing a similar than you can see on the graph. Three sectors plus Astemo is growing, but listed subsidiaries, there will be a decline. So in terms of total consolidation, there will be slight declines. So three sectors and Astemo has increase in revenues and profit. But in general, because of the changes in the assets, there will be a reduction in revenues and profit. Look at the figures at the right, Lumada, will go up to ¥1,870 billion, net income, ¥600 billion. There is no change from April. This will be a record high figure.

EBITDA, the largest part of cash flow ¥1,144 billion compared to the previous year, plus ¥51.1 billion, cash flows on operating activities, ¥675 billion, down ¥54.9 billion year-on-year, because of increase in working capital, we are seeing this situation quarterly cash flow of ¥235 billion, invested by working capital in ROIC, 7.2%. FX rate, we assume is ¥130. It was ¥120 in April. So we calculated at ¥130. And FX sensitivity, there is ¥1 movement of a dollar there will be an impact of ¥13.5 billion revenues and ¥1 billion to adjusted EBITDA.

Page 20 onwards, shows a forecast of individual businesses. Page 20 of the three sectors and Astemo and less subsidiaries figures. So look at the three sectors. We expect increase in revenue and EBITDA for full year revenues, ¥7,050 billion, on year-on-year increase of 105%. Previous forecast comparison is 102%, which is an increase. Adjusted EBITDA, ¥690 billion, increase year-on-year and adjusted EBITDA ratio goes up to 9.8%.

In the previous medium-term plan, we expect a 10% increase in terms of operating income. But because of the pandemic, I said that there will be delay about 1 year, but now it’s up to 9.8%. We need another 0.2% there are still 3 quarters remaining, so we will try to raise this level to 10%. Then the figures under the 2021 medium-term plan will be achieved with a delivery year net income of ¥170 billion and Astemo, increase in revenues and profit, ¥1.8 trillion and ¥92 billion adjusted EBITDA. Listed subsidiaries will be reduced over a full year. There will be a reduction both on revenue and profit. On marketing side, so total revenues, ¥9,850 billion, adjusted EBITDA, ¥845 billion, 8.6% and net income, ¥600 billion.

Please turn to Page 21. This shows the forecast by business segment. Page 21, Digital Systems & Services and Green Energy & Mobility, Digital Systems & Services at the top. Full year forecast of ¥2,290 billion, adjusted EBITDA is ¥200 billion. So the ratio will go up to 13.1%, going to the right Y-o-Y 106% plus 18.5%. So for the previous year, growth is going on smoothly. And green energy and mobility ¥2.3 trillion, ¥159 billion, 6.9%, 112%, ¥66.6 billion. And going on to Hitachi Energy, ¥1,291.2 billion, revenue, ¥104.5 billion profit. And ratio has recovered to 8.1% and Y-o-Y revenue 120%, adjusted EBITDA, ¥39.2 billion and Railway Systems at the bottom, ¥687.9 billion, ¥43.5 billion, 6.3% Y-o-Y, 109% plus ¥14.6 billion.

Page 22. This is Connective Industries. Total data revenues, ¥2,770 billion, adjusted EBITDA, ¥296 billion. It is more than 10.7% Y-o-Y, 101%, adjusted EBITDA, ¥38.1 billion. Going down for Smart Life Ecofriendly Systems to the right, adjusted EBITDA comparison with that, there’s a reduction of ¥8 billion.

Page 23. These are our subsidiaries. First one is Astemo. As I have been saying, because of a lockdown in China and the influence of a semiconductor, as you can see to the right hand side, the adjusted EBITDA was revised by ¥17 billion, and Hitachi Construction Machinery, Hitachi Metals are recovering.

Page 24. These revenues, adjusted EBITDA, comparing full – last year full year and this year. For revenues, FY 2021 was ¥10,264.5 billion. In GlobalLogic acquisition and divestiture of listed subsidiaries was a negative impact, the positive impact of foreign exchange and others. On the right hand side, forecast for FY 2022 ¥9,850 billion. And adjusted EBITDA below also left-hand side is last year, ¥855.3 billion acquisition of GlobalLogic and divestiture of subsidiaries, foreign exchange and then to the right-hand side, ¥845 billion.

Page 25. The same trends are shown. The top part is FY ‘21 bottom one is FY 2022 showing how net income is proceeding. For FY 2021, ¥855.3 billion and right hand side, ¥583.4 billion and the factors are shown. From the third one from the right, income taxes rate is about 20%. GlobalLogic was acquired in North America and there was tax benefits from that acquisition. So income tax rate is 21.1% and FY 2022, starting ¥845 billion, going to the right.

The third one Hitachi Construction Machinery, Hitachi Metals and Hitachi Transport System divestitures take place and going further to the right. There is the shift to the risk-sharing corporate pension plan and the right-hand side, tax rate is 25.3%. Astemo is having losses. So that leads to lower revenue, but the profits at our subsidiaries, which means that effective income tax will be higher. So the effective income tax rate gets higher, right hand side net income, ¥600 billion.

Lastly, Page 26. So this shows a summary of a consolidated statement of profit and loss. The gray on the left-hand side is Q1 revenue starting at ¥2.569 trillion and operating income, ¥121.5 billion and adjusted EBITDA, ¥154.8 billion. And there are other adjustment items and EBIT, ¥80.6 billion and net income of ¥37.1 billion. And FY 2022 revenues, ¥9,850 billion, adjusted operating income, ¥725 billion. The other adjusted items, adjusted EBITDA, ¥845 billion and EBIT ¥903 billion and net income, ¥600 billion. This is our plan.

So this is all from me. So this is Hitachi Limited Q1 earnings results and forecast for the full year. Thank you.

Question-and-Answer Session

Operator

Thank you very much. We would like to move on to questions and answers. [Operator Instructions] Any questions? [indiscernible], please unmute and ask your questions.

Unidentified Analyst

Can you hear me? I have two main questions.

Yoshihiko Kawamura

Excuse me. Excuse me, your voice is breaking up. So if you could please repeat once again.

Unidentified Analyst

Apologies, I’m sorry. This is the business results of the first quarter of the new medium-term management plan. So what is your assessment? It’s only 3 months into the new plan? So for the execution of the plan for the medium-term business plan, what’s been the achievement and what are the challenges? So that’s my first question. So if you could go into your second question, should I.

Yoshihiko Kawamura

Yes.

Unidentified Analyst

So here’s my second question. About the risk factors. Semiconductor prices, parts and components prices and impact of lockdown in Shanghai, as is described on Page 8, if you could tell the impact for each of the factors, please?

Yoshihiko Kawamura

Well, thank you for the question. So as you rightly pointed out, we’re having the first business results of the first quarter into the new medium-term business plan. What’s our assessment so far was the question. As I said, there are areas that are on plan. But on the other hand, like Astemo and electric appliance business, there are those who are underperforming compared to our initial plan. Macroeconomic environment, semiconductor problems, problems in Shanghai, there are a number of factors and reasons. But inclusive of that, we need to manage our businesses properly business management is about. So we are learning lessons here, reflecting upon the fact that we have not been able to do so efficiently.

So how to improve Astemo and electric appliance business going forward into the second half. That’s what we have to do. And in terms of cash flow, the FY ‘24 medium-term business plan, the most important cash flow is core free cash flow. From operating cash flow, you subtract CapEx, we want to maximize this. core free cash flow in Q1 was not sufficient. So from the second quarter into the second half, we would like to expand our maximum effort to maximizing core free cash flow, we’re looking into CapEx. We’re taking a look at CapEx. So we will like to suppress investments into a fixed asset while investing in intangibles. And by so doing, we would like to curtail CapEx so that we can maximize our core free cash flow. So specifically, we’re going to focus on recovering Astemo and electric appliance business. And overall, free cash flow control will be improved.

So based on this assessment in the first quarter, we would like to continue running our businesses for the rest of the fiscal year 2022. So – for the next 3 years under the FY ‘24 medium-term business plan, now that challenges are clear, I think we will be able to come up with the countermeasures steps for that. And given that these two businesses I mentioned, are underperforming, we can’t necessarily say that everything is good. But I think we have been able to set forth our first step based on the plan. And to answer your second question, I would like to turn to Kato-san for an answer.

Tomomi Kato

Kato speaking. First about the impact semiconductor shortage. Shortage existed last year. So compared to last year, plus/minus zero, it’s been planned. But in terms of the absolute numbers in the first quarter, in terms of revenue, there was a negative impact of ¥40 billion, mainly concentrated in Astemo automotive parts business. And second, the impact from rising prices – parts prices year-on-year in the first quarter, ¥35 billion, that’s the direct impact with various efforts on our side, the net impact was ¥30 billion in profit and lockdown. Well, this is a factor specific to this year, ¥40 billion in the first quarter, in revenue and ¥20 billion in EBITDA. Astemo and GL, these were the business is affected, that would be all.

Unidentified Analyst

Thank you very much.

Operator

Thank you. The next Yamazaki-san. Please unmute yourself and raise your question.

Tsutomu Yamazaki

I’m Yamazaki from Kudo Press. Can you hear me? So I have a few questions. In the earlier question, Kawamura mentioned that the issue is how to recover in the second half, the home appliances and Astemo. So I wondered how do you plan to recover this business? And as for your forecast revenue, you made the upward revision. What are the major factors for that revision? And number three, shortage of semiconductors is continuing until when do you think the shortage will continue? How long do you expect this will continue? And what measures do you plan to take against that situation? So those are my three questions.

Yoshihiko Kawamura

Thank you for your question. Number – questions one and three, I will answer. And the second question about upward revision, Mr. Kato will answer. For Astemo, NGL, what we to do about that, for home appliances, we are thinking of doing two things. Shanghai lockdown is not relaxing. And as I have said, centered on washing machines, the control board. Production is already starting. And we are starting to have those parts coming to Japan. So refrigerators and washing machines are now possible to manufacture in the factories in Japan. So we are collecting market information from mass merchandisers and others. And our washing machine refrigerators have a very big potential demand and also vacuum cleaners as well. So in Q1, demand that we couldn’t respond, in Q1, we plan to focus in responding to such demand in the second half because the boards will be introduced. So for refrigerators and washing machines and vacuum cleaners, we plan to concentrate in the second half.

And with the weakening of the yen, exports, well, we have a joint venture with actual Turkish company in selling overseas and they have a global network, so we can use this company for exports. So in the second half, we plan to recover our performance and for Astemo and the last question about semiconductors. Because of semiconductors problem, when this will recover. Of course, we are watching the situation we are trying to go through a fundamental reform.

Automotive manufacturers we are a subcontractor to providing parts of components to automotive manufacturers. That occupies a very, very large portion will gradually reduce that level and increase areas that we can deploy by ourselves. There is a Bosch model, there is a IT, which is a precision machinery. So instead of being a subcontractor, we want to introduce our own model and Bosch we are like a simple doctor, but we want to look at their business and see how we can provide our parts. And also we have unique technology, which is not like a contractor like safety, and we are taking such measures. We expect results. And secondly, within Astemo business, what is difficult chassis. Chassis if electrification continues, they are not heavy chassis that you to be noticed, but there will be a light and weight, and we will allocate more resources to that. And number three, cost control. To be more specific, integration of factories and concentrate more on R&D like ADAS and electrification.

So we are making a general research on that towards the second half, will we on a recovery of the semiconductor market. But ultimately, we want to recover our revenue and profit. So this is about recovery of home appliances and Astemo. And the second question will be answered by Mr. Kato, the content of upward revision.

Tomomi Kato

Compared to what you announced in April in terms of sales, 4% plus 4% and adjusted EBITDA, ¥25 billion upward revision was made. But in general, there is a big impact from foreign exchange and by sector, as for the features. In terms of profit upward revision doing Green Energy and Mobility is ¥7 billion. The impact of foreign exchange, but probably Hitachi Energy has been accumulated demand, as I have said, and that is influencing. So for these, there are more deals and also there is an impact of foreign exchange, which leads to higher profits. And for connected industries, there is impact of foreign exchange, but because of a lockdown in China, performance deteriorated. So there is a downward revision in automotive was already explained before. So roughly speaking, there is an impact of foreign exchange. But for Power Grid, there is an influence of increase in deals.

And for semiconductors, from a macro perspective, actually, this time last year, we expected that after 1 year, which is this year, there will be more room in terms of supply, but it is still in a very tough situation. But it’s not that semiconductors are facing a tough situation. It is different from last year’s semiconductors. There is a concentration of investment for the advanced semiconductors that is used on AI and others for a nano-type semiconductors. But for automotive semiconductors, you are not super advanced. There are about 20 or 30 in nano, there is one or two generations orders. So compared to advanced semiconductors, there is some delay in investment. So the supply demonstration is not yet fully relaxed for the semiconductors to be used in automotive purpose of low-end semiconductors, we expect the current situation will continue for about 1 year. We are talking about semiconductor manufacturers about the sophistications to provide to the manufacturers, but the industry as a whole. That is the situation of supply and demand. The semiconductors that are used in automobiles, the low-end type 20 or 30 nano semiconductors to be able to recover, we believe will take another year. This situation is going on. So what we are doing right now is that not semiconductors, but we are trying to control the operations through software at Hitachi, we are making developments of software that can be used for semiconductors and by doing so, not to use semiconductors that is a shortage, but change of design so that we can use semiconductors that are relatively available so that the impact can be minimized as much as possible. So that is all. Thank you.

Tsutomu Yamazaki

Thank you very much.

Yoshihiko Kawamura

Well, thank you for the questions. Just one point from BMC. So lockdown a negative impact in the first quarter, a negative ¥60 billion. So that is something that the BMC wishes to comment on.

Operator

Next, let’s move on to the next person. Please unmute and ask your questions.

Unidentified Analyst

Can you hear me?

Yoshihiko Kawamura

Yes.

Unidentified Analyst

Thank you very much for the presentation and the remarks. At the outset, revenue growth in GlobalLogic is doing very well, it was mentioned. In April, GlobalLogic Japan was established and new projects are up and running. So in terms of business in Japan, what would be its strategy in the second quarter onwards?

Yoshihiko Kawamura

Well, thank you for the question. So as was mentioned, in April this year, we established GlobalLogic Japan. Here in Japan, there are not a lot of companies who specialize in DX. So although demand in market for DX is high, supply has not been enough. So we’re targeting that, and that was the reason why we established a GlobalLogic Japan. And we are already having specific business, consumer manufacturers, manufacturing companies, wholesalers, all these companies are making inquiries to GlobalLogic Japan with respect to DX, we are providing individual consulting service. We are inviting experts from the U.S. to perform a joint research project and so forth. So we are starting these efforts. How much profit are we going to gain? We will come out with a plan soon. And profit in GlobalLogic Japan is expected, we’re going to have expertise from the U.S. And we need to recruit people, people recruited will be placed in Tokyo, so that in wholesale, manufacturing and so forth, we would like to capture our DX business. So in the next announcement, we hope to have more discussions about GlobalLogic Japan included. So that is the overall direction of GlobalLogic Japan.

Masao Yoshikawa

So this is Yoshikawa speaking. Let me add to that. It’s been just a few months since we established the business. In June, we made an announcement about DX partnership with Nojima, we released information about that project. So digitization of real brick-and-mortar source through that, and other means, we’re going to implement DX. At this moment, the business is at a small scale, but onshore and offshore included in the future, the staff will be increased to 1,500 people. So that’s the plan, which I wanted to add. Thank you.

Yoshihiko Kawamura

Thank you very much. So 1,500, you said that’s for Japan. Well, onshore and offshore included, it’s not just Japan for both 1,500, 1,500 staff numbers.

Operator

Thank you very much. Dan-san, could you unmute yourself?

Unidentified Analyst

Can you hear me? I have two questions. Centers in Japan, we are facing the 7th wave of COVID-19. And currently, in your business or performance, is there any influence to your business? And to prevent such impact, what measures are you taking? Another question, in your forecast for the full year, you said that China and Japan both are facing a difficult situation. What are the factors for that? Those are my two questions.

Yoshihiko Kawamura

Thank you for your question. First, the 7th wave of pandemic in the last 1 or 2 years, there has been a large increase of people infected, I’m concerned about it. But so far, there is no major impact on our operation at the head office as well. People are working as usual and other factories also, we are not facing any lockdown. So we are able to overcome the situation so far. But of course, we have to keep vigilant. So central remote work, working from home, we are able to work from home and other factories. We are taking shifts so out to our employees. We will not have to be gathered together to enhance the risk of infection. So, so far, it is all right with us. And vaccination, we are doing our best so that people can be vaccinated. So it’s been under control so far. But is there a further increase of people infected, you may have to think of other measures. That is one point.

And your second question about why Japan and China are not growing? It’s a very difficult question. In case of China, one clear issue is the demographics. In these 5 years, there is a reduction of population of a range of millions. So that is one major factor. And secondly, those may be detailed issues, but real estate and construction industry are under adjustment, which infest elevator business last year. So the adjustment of the real estate business is influencing.

And number three, China is facing the very difficult trade tension with the United States. They were manufacturing a lot and sell a lot of the U.S., which is difficult now. So these are macroeconomic issues, demographic issues, adjustment of a real estate market and relationship with the United States leading to a decline in growth. In case of Japan, so there may be many views, but one is that the income in Japan, not only of the workers, but income of corporations as a whole is not growing. That may be one factor. And another factor just like China is demographics. So growth is stagnant, overall GDP growth is stagnant.

And number three, there has been excessive capacity. So BOJ has lowered the interest rate to such a low level, but CapEx is not reacting to that. So there are a lot of excess and adjustment is not over yet. So Japan is not growing demographics and also because of adjustment issues, Japan is not growing. So both China and Japan, there are limitations from a macro environment. for individual companies on a macro basis, there are companies overcoming through technologies and innovation, but there are a lot of limitations in terms of a macro perspective. That is all.

Unidentified Analyst

Thank you very much.

Operator

Thank you for the questions. [Operator Instructions] Raise your hand, please unmute and start your questions.

Unidentified Analyst

Thank you. Can you hear me?

Yoshihiko Kawamura

Yes.

Unidentified Analyst

Thank you. Question number one, Hitachi Construction Machinery in the first quarter, but then into the second quarter, there seems to be some delay. So deconsolidation development. If you can share something, Hitachi Metal, Astemo, Hitachi Transport inclusive of these, what’s the status? And the second question about the status of orders, orders are very robust. It appears, especially for Hitachi Energy, building the business. China economy is stalled, but orders remain robust. What’s the background? And the Water & Environment business perhaps orders are not up as much, and that’s because of the size of the business. But what are the factors that you see continuously? So if you could provide a summary comment with respect to orders as well.

Yoshihiko Kawamura

Thank you for the questions. So about divestiture of listed subsidiaries, I will answer. And the second half of your question will be responded by Kato-san. So Hitachi Construction Machinery, metal and Astemo, what’s the status of these three entities? So HCM and Hitachi Metal, as I said, a planned. By the end of this fiscal year, we’re going to divest the shares were on plan. And HCM in April, we said that we will do that in the first quarter. There has been some delay since. And that is because of the reviews carried out overseas.

So in terms of the procedure, there has been some delay. But according to the information that we have received, it will be okay soon. So there is slippage. It’s going to be into the second quarter, but ultimately, we will complete divestiture. And Hitachi Metal there has been delayed as well. That’s because of the review process and so forth. But it’s a matter of time. By the end of this fiscal year, at some point in time, we will be able to complete the divestiture. And Astemo, well, I talked about the status. We are taking recovery measures. But in parallel, we’re trying to figure out how to handle this. As to the capital structure, we are running a number of simulations on that, but we’re still having internal discussions which we are not yet prepared to share at this moment. But we would like to optimize our capital structure in the future, what should we do? And of course, IPO may be one of the options. We’re having a comprehensive review and discussions as to what to do. So, that’s all for me. And I would like to turn to Kato-san.

Tomomi Kato

So Kato speaking, Hitachi Energy, 202%, very large growth. As is on Page 7 of the slide, there have been large orders non-C3 also offshore wind farm, this is DC, HVDC in North Sea and Mumbai India’s HVDC project. So major projects have been received, and that’s why the growth. And with respect to order backlog, $16 billion of order backlog on Page 3, we mentioned compared to March, there is an increase of $2 billion. So there has been a steady increase. And buildings, certainly, the China market itself, this year, unfortunately, is expected to decline according to our forecast, but orders for Hitachi continue to remain firm, but that’s mainly because of the positive impact from ForEx compared to the local currency, in Japanese yen, there is been an increase, and that’s one of the factors. And Water & Environment business, 187% as a ratio, it’s up as is on Page 7. So domestically, public sector, water service sewage business and so forth, there has been a major project that was commissioned and that pushed up the number that would be all.

Masao Yoshikawa

Yoshikawa speaking. I would like to add comments about the elevator business. In China, our competitors, for example, company K from Europe has 40% exposure in China, and their revenue is down substantially. But even amidst such circumstances, we have been able to be resilient. But the location of our plant for Hitachi, it’s close to Guangzhou and our rivals because they have their plants close to Shanghai, they were affected negatively by lockdown. And in the first quarter, there was no supply chain disruption. And so orders in China compared to our rivals, Hitachi’s orders have been quite robust. Company K of Europe, the orders in China according to their results was 108%. For us, orders in China, 120% in value, in volume, 110%. So, our position continues to be number one in China, and we have been able to leverage our advantage in that regard in China. Thank you.

Masao Yoshikawa

Thank you very much. Next, I would like to ask the next questioner to un-mute yourself.

Unidentified Analyst

Thank you very much. I have three questions. Maybe I missed it, but in the first quarter, adjusted EBITDA, how do you evaluate compared to your assumption? You made an upward revision. And I think in total, there was a rise in the corporate elimination, corporate items and eliminations. But – so am I like to understanding that you implemented these at the early stage. Maybe there was an impact of the delay in the timing. But in terms of operation, how should we interpret the upward and downward revision? And also was there – I think there was impact of the revision of the foreign exchange assumption. So, how do you evaluate that? And what is the impact of a full year forecast? And number two, about the orders, digital systems orders growth of 12%. GlobalLogic, is consolidated, which may be another influence. But if this is excluded, what was the situation? Could you explain how it would be the situation for IT? And lastly, my third question centered on Europe and North America, there may be concerns of slowdown. So, how do you evaluate the risk of slowdown? In particular, your business, you have been shifting our portfolio aiming at being resilient. But if there is a slowdown whatever businesses from your position as CFO that you believe there might be risk there may be exposure in Europe. And I think the large portion is rail and power grid, so would – that would not be influenced that much? Could I have your comments on that?

Masao Yoshikawa

Thank you very much for your question. The impact of foreign exchange how is that evaluated in making this evaluation, Mr. Kato will talk about it. And the second question Yoshihiko will talk and lastly, I will answer the final question. Now first, Mr. Kato.

Tomomi Kato

About Q1 evaluation, in terms of revenue, in general it was acquired by ¥100 billion compared to the plan. But out of that, more than ¥10 billion is foreign exchange. So, in organic terms, there was a reduction of ¥10 billion. And in terms of profits, compared to our internal plan, the Q1 adjusted EBITDA was almost close to the plan. But the foreign exchange helped an addition of ¥9 billion. So, in terms of organic growth, there is a reduction, mainly Astemo and GLS, these are the items that mainly declined. And for the fiscal year’s upward revision in terms of revenue, ¥350 billion upward revision was made. The major factor is foreign exchange. Out of that, ¥450 billion and organic, we expect a decline of ¥65 billion. And for profit, ¥25 billion upward revision was made. Also, ¥35 billion impact from exchange organic decline of ¥9 billion. Astemo and GLS were the major items that we expect to decline. And as for the corporate items and eliminations in the beginning of the year, in terms of GlobalLogic the investment was not clear. So, operating ¥35 billion and operating ¥35 billion in total, ¥70 billion was expected. And the business risk in Q1, in particular, for GLS and Astemo this surfaced, which was ¥25 billion and remaining ¥10 billion is included in the forecast. Now how about orders, DSS orders, GlobalLogic deals are included. To be more specific, at GlobalLogic on a standalone basis in Q1 from 25 global top brand customers, there were new orders placed. The total is $120 million. I cannot disclose the names, but this includes major sports manufacturers of the United States and car provision service and online stores, in a variety of areas there were orders received. In addition to that, GlobalLogic business is time and material. So, revenue and orders taken are recognized at the same time. So, you don’t have a concept of backlog, as this is additional information.

Unidentified Analyst

Thank you very much.

Yoshihiko Kawamura

Let me add. I would like to add one more point. In DSS segment, in total, 112% in total, excluding GlobalLogic is 101%. So, GlobalLogic growth was a major factor. That is all. Thank you.

Unidentified Analyst

Thank you very much.

Yoshihiko Kawamura

And your last question about our views about Europe and North America. Yes, this is a very difficult question. Starting from Europe, the problem of Ukraine is a major factor. Now, winter is coming and gas supply from Russia if this supply declines, there are many materials about Germany, if supply reduced to half GDP has a sensitivity of more than half and if gas roses 10%, there could be a negative growth of GDP. So, in Europe as a whole, in the continent as a whole, we expect a strong impact. And how about our business under such situation, as was mentioned, our European major businesses is rail and power grid. It’s not cyclical as a consumer business. From a long-term, the long-term business with clear funding in 3 years or 5 years, based on long-term contracts with our customers, we make investments and provide products and technology. So, unless something extremely bad happens like a collapse of the market in Germany or France, we have commitments and firm funding. So, so far, we don’t think there will be a big downward impact. In terms of current ratios, Mr. Kato said, in Europe, power grid is increasing greatly and for rail as well. [Indiscernible] is almost stable, order are increasing as infrastructure and funding is also available. The situation may be very tough, but in our case that is our capital business that we are doing. So, I think we can control the impact, relatively speaking. In case of the United States the situation is more complex. A few weeks ago, there was an increase of 0.75%, in the past, increase was about 0.5%, but now there was a set increase by 0.75%. So, this will really impact the revenue. In the emerging countries, funds are mainly denominated in dollars. International organizations and banks provide loans in dollars. So, if the dollar rate goes up, that money will come from the emerging countries. So, there may be a deflationary pressure in the emerging countries. 20% of our business is with emerging countries. If there is a strong deflationary pressure there could be problems like default as we experienced in the past. So, rate hike in the U.S. and impact on emerging countries is something that we must keep watching. About the United States, for two consecutive times, there was a negative growth of GDP, which is defined as a recession. And housing investment, I understand is minus 10%. Under such a situation, they are entering a recession and the stock market is also stagnant. All Americans are investing on equities. So, if stock market declines, that will impact the personnel consumption. So, this may – will impact the consumption market. And Central North America, we are central our business, industrial machinery and also IT in California and automobiles with Astemo, of course, there will be influence. But as I have said before, we are committing on infrastructure business. So, we will try to control the downward impact in collateral business. But in North America, North America is a very important growth market. Population is increasing. So, in this economic cycle, we are not thinking of reducing our resource allocation. We will continue to invest in North America. That is all. Thank you.

Unidentified Analyst

Thank you very much.

Masao Yoshikawa

Thank you. Then to continue San. Please un-mute and ask your questions.

Unidentified Analyst

Can you hear me?

Masao Yoshikawa

Yes.

Unidentified Analyst

So question – only one question. Hitachi Energy’s orders are very robust. Year-on-year, it’s doubled very good. Congratulations. In the first quarter with reduced profitability, although revenue is up, EBITDA did not grow. So, on a full year basis, EBITDA was revised upward. Second quarter to the second half, profitability is expected to grow? And what kind of steps are being taken for that? Are you going to take such steps?

Yoshihiko Kawamura

Well, thank you very much for the question. Good morning. I would like to turn to Kato-san for the answer.

Tomomi Kato

Kato-speaking. So, in the first quarter, profit and loss in terms of revenue and profit. Revenue is up substantially, Page 6. But profit is flat, and that’s because of being negatively affected by parts and component price increase. And we are talking with our customers with respect to the cost in principle. Cost increases are basically going to be passed on to the customer price and that’s the kind of agreements in contracts we are having with our customers. So, we are taking steps to reduce cost and so forth. So, in the second half, we are planning to recover profitability.

Yoshihiko Kawamura

But just to add to that, Kawamura speaking, orders are very robust. The production structure in Europe, actually, plants in Europe are running at 100%. Under the pandemic utilization was down, but it’s now a full capacity. We need to ramp up production, increase production. So, we are going to invest in technology as well as products. We are going to strengthen production. And so into the second half, that will have a positive impact. That would be all.

Unidentified Analyst

Thank you very much. Well understood.

Masao Yoshikawa

Thank you very much. Next Okawa san, please un-mute yourself.

Junji Okawa

Thank you. Okawa from Daiwa Securities. I have two questions. One is about Lumada business. In Q1, sales results, how is it compared to the plan? Is it progressing ahead of the plan? And in addition to that, system integration and managed services sales are increasing. This – is the growth because of topics, or is there any other background for this increase in sales and revenue?

Yoshihiko Kawamura

Thank you for your question. Mr. Kato will answer the details.

Tomomi Kato

Thank you for your question. For Lumada, Q1 results, we have been using four quadrants, and there has an increase in revenue. Compared to the previous situation, there were some downward factors like shortage of procurement. But in general, because the impact of foreign exchange, the result is higher and system integration and managed services in your question, as we think the topics on Page 8. These shows were outlined. So, in terms of actual features, is for system integration, 134%, a large growth was seen. DSS doing IT trended firmly and connective industries, there is a team doing industrial digital. Central and DSS business grew and green energy as well, Central Hitachi Energy, there was an increase in revenue, including influence of foreign exchange. So, those are major factors for increasing revenue for system integration. And managed services, 124% growth was seen. Each sector connected industries, the building remote monitoring industrial products, maintenance of large equipment increased and digital DSS, Hitachi Vantara, because the shift in the environment was increasing sales mainly in foreign countries. And solutions such systems in Japan, security monitoring services increased. So, this grew both overseas and Japan. And green energy, rail and energy, Hitachi Energy, maintenance service increased leading to the increase in revenue. Let me make some additional comments. Actually, with GlobalLogic, we are seeing synergy with existing business on Page 8. Connected products, transmission line and conversion situation was seen, and that is a result of Hitachi Energy and Power Grid synergy and rail control as well we are seeing synergy. We didn’t write this down in the material, but Lumada is contributing in terms of synergy as well. This was one additional comment. Thank you very much.

Junji Okawa

Thank you very much. I have a second question, about eliminations, in Q1, ¥5.7 billion minus. And compared to the top line, top line is quite large minus ¥82 billion. Besides buffer, is there any upside factor?

Yoshihiko Kawamura

I missed the first part of your question. Could you repeat that? Was that about elimination?

Junji Okawa

Yes, corporate items and eliminations.

Yoshihiko Kawamura

Are you asking about Q1, or are you asking about the forecast for the full year?

Junji Okawa

Compared to the Q1 figures is not that large. So, is it as large as minus ¥82 billion?

Yoshihiko Kawamura

On Page 14 in Q1, there is business acceleration [ph]. This is a management basis for the whole company to be much specific. We are making an IT infrastructure for company-wide management. So, we plan to have the surface in the second half. The plant stuff has not changed, but – it looks as if Vermont is smaller. Thank you very much.

Masao Yoshikawa

Let’s continue to another person to ask questions. Please un-mute and start your questions.

Unidentified Analyst

Thank you. I have just one single question. With respect to energy orders, very firm, doing very well, I think much of it is in overseas. On the other hand, here in Japan domestically, clean energy strategy by the Japanese government, that’s there and strengthening infrastructure resilience, which is announced by the government. So, in the Japanese market, strengthening of infrastructure, digitization of infrastructure, I think Hitachi can play a major role in those areas. So, at this moment, what is the outlook here in Japan? Is it robust?

Yoshihiko Kawamura

Well, thank you for the question. So, here is the answer. As you rightly pointed out, we are very much interested in the themes that you mentioned. And we are setting them. Power grid business, we took over from the European business, what to do with the Japan business, that’s next. The Japanese market is difficult, and that’s because there are 10 power utilities inclusive of Knoll [ph], part of the utilities have separated generation and transmission. The power grid business, you need to have HVDC 1,000 kilometer – 1,500 kilometers without any attenuation. So, just like Germany, in North Sea, how generated can it be supply to Munich in Germany, well, that does work in Europe, but here in Japan, would it work. So, power utilities, there are 10 of them in Japan, and they both performed generation and transmission. And there are local characteristics when it comes to power generation, so they can do this business separately. But power transmission is also done separately by these utilities. So, power generated in Ocado based on supply and demand, you may want to send power to Fukushima [ph], but there are so many grids in between. So, you have to change frequency in the process, charge up electricity. There is a lot of energy loss in between. And so we need to have discussions with the authorities. Well, power generation can remain the same, but power transmission, for example, at the national level, why not create a one single transmission company so that power grid can handle 1,000 kilometer of transmission, [indiscernible] problem can be overcome. I think we need to have that kind of transmission structure in Japan. Otherwise, we will not be able to efficiently send DC power. So, inclusive of such discussions, we need to think about how to structure power business in Japan. Unofficially, we are starting discussions with the relevant parties. And so that should be the overall direction. And beyond business, we have to respond to power shortage in Japan, and that is something very much we are looking forward to engaging. That would be all.

Unidentified Analyst

Thank you very much. That is understood.

Tomomi Kato

Well, certainly, as you said, transmission and distribution, it’s segregated utility-by-utility, locality-by-locality, that is true. So, if we can make proposals as such, I think we can make the grids more efficient. Thank you.

Masao Yoshikawa

The next question, please.

Unidentified Analyst

Thank you. Can you hear me? I have two questions. For Astemo, the full year adjusted EBITDA, ¥17 billion down. So, what is included in this ¥17 billion? In the first quarter, year-on-year, I believe you assumed certain difficulties. The first quarter assumption, downward revision, how much did you assume in your second quarter, what’s the visibility? Is there a trend of bottoming out seeing? That is my first question. And number two, for DSS orders, you said that there is 101% excluding the effect of GlobalLogic acquisition. That 101%, how do you evaluate in terms of IT service in Japan compared to the industry statistics I have impression that there might be some weaknesses. But as a momentum, is that what you have assumed, how do you evaluate that? That is my second question. Thank you.

Yoshihiko Kawamura

Thank you for your question. About Astemo, Mr. Kato will answer, and then I will make additional comments.

Tomomi Kato

For Astemo, in Q1, compared to our internal plan in terms of profit, about – there was a drop of about ¥10 billion, although foreign exchange was positive about ¥3 billion. So, the remaining ¥13 billion is the actual worsening. And – there are nine months remaining and in nine months compared to the initial plan, ¥17 billion is for the full year, ¥10 billion in Q1 and remaining ¥9 billion we assumed for many of years. You can see on the slide, lockdown in China was for the first quarter, but shortages in conductors, we expect not to end soon. So, those are our two major factors and also some impact of foreign exchange leading to these reductions. That is a breakdown of our forecast.

Unidentified Analyst

Thank you very much.

Yoshihiko Kawamura

So, this is a situation for this fiscal year, but next fiscal year FY 2023, what will be the recovery of automotive sector is a major issue that we are discussing. We have pandemic and the 2 year or 3 years market has changed greatly, like what share and healings included U.S., people maybe is not possible to leave even without automobiles. So, demand for automobiles that recover to a situation that we experienced a few years ago. That’s a major problem. If there is no recovery, what will happen, the structure of our overall operation, business model must be changed. We are discussing that, and we will continue what we are doing this year. But for next fiscal year, we will think of ways of recovery in the profit. And for DSS IT service, Mr. Yoshikawa will talk about it.

Masao Yoshikawa

About restating the market in July, IT investment market size forecast was 2.4%, plus positive growth of 2.4% is the data that we have from ITC. And among ourselves, how to grow other businesses except GlobalLogic or except Lumada, to make SI business cash cow to increase profitability and accelerate coordination of global in Japan and also the legacy business, business opportunities, in particular, our mission-critical areas like cloud migration modernization, we are confident that we can provide the support – we will not go into unprofitable businesses. But in the market, we will try to catch the business opportunities in the market. So, other than Lumada, other business opportunities, we are discussing in focusing on such opportunities. In addition to that for IT business, large financial institution systems and the pension system of the government, my number card system, Yes, there are steady businesses coming. This year and next year, these businesses are also related to Lumada and related to digital transformation, so we will maintain relationship with existing customers and continue to secure IT service businesses. That is all. Thank you very much.

Unidentified Analyst

Thank you.

Masao Yoshikawa

Thank you very much for so many questions. It’s past the scheduled time to end. There are still several hands being raised. Our apologies, we have to bring the meeting to a close. We will be responding to your questions individually later. So, with that, we would like to end the web conference on Q1 FY 2022 earnings. Thank you very much for your participation despite your busy schedule.

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