Bridgestone Corporation

Hello this is Hishinuma, CFO at Bridgestone Corporation. Thank you very much for gathering on the occasion of the Announcement of Financial Results for the First Quarter Fiscal 2021.

So, I am going to lead off by sharing with you the business financial performance for the first quarter. My agenda today.

So, I would like to start with the business performance and key initiatives for the first quarter of fiscal 2021. The overview of the performance as well as key initiatives for the first quarter based on the mid-term business plan announced back in February.

First quarter, both sales and profit increased year-on-year as global tire demand recovered and sales increased mainly for trucking bus tires. In terms of profit, adjusted operating profit from margin recovered over 10%, thanks largely to the effects of strengthening price/mix and expensing cost structure reformation.

The company strategically reduced sales in the commodity segment with the expanding sales in the premium segment. Going forward, we plan to further sales growth in the premium segment and to improve the top line in the future.

Byproduct. Passenger car/light truck tires, sales of both replacement and OE increased especially for higher rim diameter tires.

These are -- high rim diameter sales above 18 inches. Total amounted 170% over the previous year.

Replacement segment loans are 122% year-on-year. Replacement sales, sales decreased in North America year-on-year which was the effect of the strong demand which went to our competitors before near price hikes, but the situation has been recovering since April.

OE sales. In the first quarter, we saw an increase year-on-year despite the impacts of semiconductor shortages.

We do need to keep a close eye on the impact in the second quarter and beyond. TB tires.

Sales of most replacement and OE tires recovered significantly supported by strong construction and transportation demand. Particularly replacement sales was remarkably strong as they recovered to the level above in 2019, which is before the spread of COVID-19, mainly in the United States and Europe.

ORR tires. Mining tires, the market is recovering compared to the second half of the previous year with mineral demand increasing, but it is still weak.

At the same time, construction tires, sales of OE recovered significantly as construction demand recovered in the US. As for replacement largely strong, but this medium is slightly lower than in the previous year.

So, as you can see we focused on the performance recovery at the moment. But at the same time in reference to the mid-term business plan and also back in February, we have been promoting the structural reformation.

Premium business strategy. Sales mix improvement increase in the portion of sales of high-rim diameter tires focused on major brands as well.

Price management reinforcement responded to raw material price rise and reinforced strategic first management based on Dan-Totsu products. Expense and cost structure reformation improvement in Gemba activity at production sites.

Increased productivity by improvement in manufacturing and optimized conversion costs by maximizing the use of existing equipment which contributed €6 billion benefit in the first quarter. Business portfolio and manufacturing footprint restructuring announcement made back in January.

The completion of the sales of the FSBP at the end of March and the closure of Bethune plant in France which was at the end of April. Strategic growth investments.

For Mining Tires Solution business, we announced investment in cutting edge equipment at Shimonoseki plant and the acquisition of Otraco in Australia which is back in April. Moving on to the business environment surrounding Bridgestone Group as well as entire demand.

FX, US dollar depreciated against Japanese yen year-on-year, while euro appreciated against yen. Raw material prices.

Natural rubber market remained at a high level following a large increase in the final quarter previous year. Crude oil price dramatically went up in the first quarter 2021.

Tire demand. Demand recovery continued globally while PSR OE was affected by semiconductor shortages.

Demand for truck and bus tires was especially strong with replacement in the US and Europe were well above 2019. Next is tire sales volume, the volume in comparison with the previous year.

First quarter 2021 global sales volume of PSR/LTR tires was 107% over the previous year; TBR for the same 112%. For the TBR, both OE and replacement sales recovered significantly and for the PSR/LTR to continue above 18-inch high rim diameter sales and growth stood out.

For the ORR, backed by the recovery of mineral demands, there was a turn of sales recovery for ultra-light tires since the second half previous year. However, sales volume was 95% year-on-year still remaining bearish.

At the same time for large and small medium categories backed by robust construction demand, OE sales recovery was particularly strong. Consolidated results for the first quarter fiscal 2021.

Revenue was JPY 756.9 billion which was a 7% increase year-on-year. Adjusted operating profit was JPY 82.3 billion 79 percentage point increase year-on-year.

Profit attributable to owners at the payroll was JPY 285.2 billion which saw a substantial increase year-on-year. Please be aware that this JPY 285.2 billion does include the quarterly profit contribution by the discontinued operations namely Firestone Building Products and subsidiary of JPY 225 billion.

Also please be aware that the company categorizes Firestone Building Products and its subsidiaries as discontinued operation from the first quarter of fiscal 2021. So please be aware also in the 2020 first quarter results have been restated using the same classification as that used for 2021.

So, it's on that basis that we are making the comparison versus the previous year. In this first quarter global tire recovery have perceived.

So, we focused on production sales activities as such based also on the midterm business plans and the fundamental structure improvement has been acted on which enabled us to bring up the adjusted OP margin which appears above 10%. Analysis of -- adjusted operating profit to follow-on the next page.

So please take a look at Page 7. In this first quarter FX factor was negative.

But in preference to the trucking bus tires sales increased and also on the price/mix and the cost improvement pushed up profits. And after the restatement of the FSBP into the discontinued business JPY 36.3 billion increase in adjusted profit.

As priority strategy in the auto midterm business plan of rebuilding earning power in the core business, initiatives to improve profitability centered on the premium business strategy and expense and cost structure reformation which made a substantial contribution to boost in the profits. Premium business strategy based on the products strategic price management.

So JPY 6 billion contribution leading to net price as a factor and also the expanded sales of high rim diameter sales and concentration in major brands yielding JPY 8 billion contribution to the mix. Expense and cost structure reformation.

Manufacturing activities pushed up profitability and the maximum utilization with existing client equipment which led to the noteworthy improvement in conversion costs year-on-year. So JPY 6 billion of the JPY 13 billion positive conversion cost factor was attributable to such production site activities.

On top of that, fundamental cost structure improvement activities which have been continuing since last year contributed JPY 5 billion to the operating expense as a factor. Next financial results by segment.

First quarter 2021 global tire demand recovery on top of that premium strategy enhancement expense and cost structure reformation among others meant that we were able to see the push up in both revenue and profits in all regions. In particular, Europe Russia Middle East India and Africa volume and mix improvements were significant.

This was a turnaround accomplished from the previous year to the positive profit. Performance by product; PSR/LT.

Revenue was JPY 386.6 billion with the OP margin of 14.3%. For TB tires, revenue was JPY 178 billion -- JPY 178.1 billion with the OP margin 11.7%.

All recovered year-on-year both in revenue and profits and profitability improved substantially. Specialty segment including mining, aircraft, agriculture and motorcycle tires revenue was JPY 87 billion with the OP margin at 19.6%.

Mining and aircraft tire sales are still bearish, but profitability has been improving to a higher level of margin. Diversified Products business.

First quarter revenue was JPY 89.6 billion with adjusted operating profit of minus JPY 300 million. Diversified Products business in the Americas and Sports and Cycle business secured positive profits on the other Japanese Chemical and Industrial Products business.

Though the profitability has been improving this is still suffering form the business portfolio issues. So landed at JPY 2.9 billion operating loss.

As completed the diversity of FBPA -- March 31 is now categorized into discontinued operations. So, this page does not include their numbers.

I'm going to come back to this a little bit later. For now, let me discuss balance sheet and cash flow highlights for the first quarter of fiscal 2021.

Total assets, JPY 4596.1 trillion. Through the sales of Firestone Building Products, those are cash and also the effect of FX.

So, since the December end 2020, the increase of JPY 406.8 billion in total assets. Equity ratio increased 3.1 percentage points from end December last year at 54.4% quite healthy indeed.

Free cash flow, please be aware, that the divestiture of the business inflated, the cash flow from investing activities, which is a effect -- include -- reflected in free cash flow, which landed at JPY 380.7 billion. Adjusted items and profit from discontinued operations.

Adjusted items include, expenses related to the closure and restructuring overseas plant at JPY 1.2 billion and loss related to Hurricane disaster in North America at JPY 0.2 billion, totaling JPY 1.4 billion. Profit from discontinued operations having classified Firestone Building Products into continued operations, the company recorded profit from discontinued operations of JPY 225 billion, which combines the gains on sales relating to the transfer of SSBT [ph] and the profit from the operation for the three months January through March.

Lastly, let me talk about forecast of business environment for fiscal 2021. Fiscal 2021, the forecast of business environment and higher demand.

Currency exchange. We expect that the US dollar to appreciate against the Japanese yen competing from the February assumption.

And for euro, our expectation is that the exchange rate will basically remain at around the same level, as announced back in February. Raw material prices, we will -- we expect actually remaining at a high level throughout the year, continuing from the first quarter.

Tire demand. Demand is expected to increase steadily year-on-year as recovery trend continues globally.

Demand of both the passenger car and light tires and truck and bus tire is expected and it will recover to roughly 2019 level for the full year. Now, I also would like to share with you our observation as regards the risk of COVID-19 resurgence.

In the first quarter, the global economy continued to pick up as countries took steps to balance infection control and economic activities. However, we are still monitoring the impact on the business and financial performance for fiscal 2021, as we cannot see the convergence of the spread of COVID-19 infection, including the spread of the variance.

So, we continue to conduct business operations, putting the highest priority on the lives and safety of our employees, customers and related parties, while minimizing the risk of COVID-19. Based on these observations, at this time, there's no change in consolidated projection for fiscal 2021 from that announced in February 2021.

However, may I say that if there would be any changes to the projections based on the future business environment and/or business performance, we will disclose it promptly at that time. And with that, I conclude my presentations to you today.

Thank you very much.

That was our CFO, Naoki Hishinuma on the first quarter results. Next, our Global CEO and Representative Executive Officer, Shu Ishibashi will present the midterm business plan progress update.

Hello everyone. I am Shu Ishibashi, Global CEO of Bridgestone Corporation.

Following the financial results, I would like to provide an update on the midterm business plan. In February, I presented the midterm business plan and the Bridgestone Group's direction towards 2030 and beyond.

Going forward, I plan to provide you with its progress update on the occasion of quarterly earnings briefings. The midterm business plan is guided by the group's mission Serving Society with Superior Quality and is based on the mid long-term business strategy, which sets forth a new vision, continuing to provide social value and customer value as a sustainable solutions company toward 2050.

To accomplish this and to contribute to achieving the UN Sustainable Development Goals or SDGs, we have defined a new business portfolio, which positions the Tire business that produce and sell tires as our core business and the Solutions business that provides value at the time of the use of tires, as our growth business, which are to be coordinated to amplify their value for continued expansion and reinforcement. Furthermore, we have started exploring the Recycle business, which renews end-of-life tires to raw materials.

We aim to facilitate a circular economy by 2030, where business value such as revenue and profits is sustainably generated and is linked with efforts toward resource circulation and carbon neutrality across all of our business areas of produce and sell, provide value at use and renew. This is our unique sustainability business framework.

For the full-scale execution of the midterm business plan, we have planned actions by business for 2021 to 2023. The theme is aggressive approach and challenging spirit.

Considering COVID impacts, which remain uncertain, we are continuing with a thorough crisis management and also started to drive our strategic growth investments, which are built on rebuilding earning power. I will explain execution and results for the first quarter of 2021, as well as next steps, starting with the core business.

We are rebuilding earning power and executing the premium business strategy end-to-end across the entire value chain to thoroughly improve the quality of our business and in terms of improvement of sales mix, such as increased sales of HRD tires and reinforcement of price management. We are already seeing results being generated, as explained at the last earnings briefing.

Improvements in sales revenue remain as an agenda for the second quarter onwards. Focusing on North America we will drive efforts to capture demand recovery, while striking a balance between quality and quantity.

We will also accelerate global actions to further improve our sales mix and selling price. Regarding expense and cost structure reform, we are executing thorough expense and cost management, based on contributions to ROIC improvement.

We will also continue examining the restructuring of our business portfolio and manufacturing footprint. Rebuilding earning power in our core business enables strategic investments for the future, which are essential in achieving the mid-term business plan.

In the growth business, we will focus on accelerating global expansion of solutions. We have made strategic growth investments for the mining Tire Solutions business.

Already or in addition, we are accelerating a global deployment of mobility solutions, with web fleet solutions in Europe as the center of excellence. We aim to expand them in North America this year, with possible mergers and acquisitions.

For the exploratory business, we are speeding up study for the commercialization of the recycle business and soft robotics business. As enablers for execution, we are first working on HRX, human resources transformation.

Regarding financial strategy foundation, we have established a global controller function. We will properly identify business opportunities through PDCA cycle and rigorous evaluation in injecting strategic resource and investment.

From here, I will highlight the execution and results of our efforts during the first quarter and the core business, growth business, sustainability and HRX. In the core business, we are reinforcing the Dan-Totsu product strategy, by combining the group's traditional core competency, mastering rubber and new competencies such as DX and innovation, while taking into account sustainability and the evolution of mobility.

Also our new product development process, which is based on project-based agile development and innovation and co-creation, will enable us to make agile response to the accelerating evolution in mobility. One successful outcome is the co-creation between innovative tire technology of Bridgestone and solar electric vehicle Lightyear One of Netherlands-based Lightyear.

We have been collaborating with Lightyear for more than eight years through the Bridgestone World Solar Challenge. The co-creation effort has entered a new dimension with this technology innovation.

The Turanza Eco that we have developed specifically for Lightyear One includes ENLITEN, the innovative tire technology for the next-generation eco-friendly products and ologic, the tire technology realizing superior fuel efficiency to boost the driving range of electric vehicles. We aim to commercialize Lightyear One by the end of 2021 as the world's first long-range solar electric vehicle.

We believe this is a truly meaningful example of our new Dan-Totsu product strategy and one that contributes to sustainability. The second item of our premium business strategy, reinforcing premium sales, focuses on improving the customer experience in order to sustainably provide solutions to society and customers and support the advancement of mobility.

One of our key initiatives is the MOBOX offering, a subscription model, that we are expanding in Europe. In April, we officially launched this offering in Japan.

MOBOX allows customers to customize and combine tires and vehicle maintenance services according to their conditions of use. It is also being expanded, to North America and other regions.

In addition, we will leverage the group's Dan-Totsu network, to enhance our mobile van service globally to support customers closer from where they are. We have also launched an AI-powered diagnostic solution service in Japan, in which, customers need only to answer simple questions on their smartphones.

And the service will recommend the right tire, for them. We will continue to accelerate the enhancement of our premium sales that provide safety and peace of mind.

We're also speeding up improvements in manufacturing, as it is the foundation of our product and sales. Improvements in conversion costs based on, the reinforcement of manufacturing Genba resulted in reductions of approximately ¥20 billion in 2020 and ¥6 billion in the first quarter of 2021, compared to the previous year, respectively.

We are also supporting the development of teammates on-site remotely, leveraging digital technology, considering safety and peace of mind based on the idea, that to manage manufacturing is to develop the people there. For example, our engineers with great know-hows of Genba, are supporting plants-facing difficulties in Europe, U.S.

and Asia remotely, from the technical center in Tokyo. We will continue further improvements to ensure, a competitive cost structure.

Furthermore, to capture demand recovery and link it to performance, so as to turn change into opportunity we are promoting agile supply chain management. For instance, we enhanced supply support from Asia, to respond to demand recovery in the U.S.

and Europe. We will continue to closely monitor the business environment including such risks, as impact of COVID-19 to globally optimize our activities.

As part of our fundamental expense and cost base restructure reform, we are continuing to look into restructuring the manufacturing footprint and business portfolio. We have completed the closing of plant, in France, in the tire business and the divestment of Building Products business in the U.S.

and the Diversified Products business. Including the restructuring of the Diversified Products business, we have executed restructuring of 21 sites.

We will continue to examine further looking at, the sustainable growth of each business. Concerning strategic growth investment, I would like to talk about, execution and results in the Mining Tire Solutions business, which is positioned as one of our main businesses in the mid-term business plan.

We will make proactive investments and continue to reinforce and expand the business, as it is a key business for providing society and customers with solutions and for securing our profits and competitive advantage. First and foremost, we are reinforcing the system for a premium production in the core business which is the foundation of all our businesses.

As part of Bridgestone's DX digital transformation, we have introduced a skill transfer system in the manufacturing processes of OR tires and aircraft tires. This system was developed through co-creation with Nabi Tech, a Japanese company, whose strengths are in the visualization and measurement of high-speed phenomena.

Visualizing and standardizing the advanced skills of expert workers through DX, ensures certain and efficient transfer of expert skills with greater data much faster, more easily and accurately. The system has already been deployed in the Japanese plant, and we plan to deploy it further in Thailand, to support the evolution of manufacturing through DX.

We have also upgraded facilities in the Shimonoseki plant, the flagship production sites of OR tires. Not only to enhance safety disaster preparedness and quality and productivity levels, but also to strengthen sustainability features such as, solar power generation facilities and to strengthen contribution to harmonization with local community, by offering the plant's infrastructure to be used for lifeline services, in case of emergencies.

We will continue to enhance our core business to support society and customers. Strategic investment, have also been made towards the evolution of mining solutions.

We have decided to acquire Otraco, an all our tire management solution providers based in Australia. Otraco's skilled engineers reside in mines in Australia, Chile and South Africa, providing high-quality tire maintenance on-site, while the company's original digital platform ultra-com enables tire life cycle management.

As Bridgestone aims to contribute to the optimization of mining operation through unique solutions combining real and digital, we believe there is strong potential for synergy with Otraco. Considering it was the optimal choice for strategic investment, we decided on this acquisition.

As a result, our mining on-site services will be reinforced as a global leader position by adding the 50 locations of the Otraco. Also combining Dan-Totsu new product, MasterCore we will accelerate the value spiral up between our core and growth business.

Development in the mining tire solutions businesses have led to a package offering, combining the produce and sell and value during use of tires as a sustainable mining solution. We have already signed a long-term contract with major mining companies for 41 mines and will continue value co-creation with our customers.

The foundation for these developments are the combination of a strong ,real and digital Dan-Totsu product MasterCore, mining vehicle, tire monitoring digital tool, et cetera. Furthermore, continuous expansion and reinforcement of Dan-Totsu Network, which is expected to consist of approximately 120 locations after the completion of the Otraco acquisition will also be a strong enabler.

We will continue evolving the mining solutions business as it enters a new stage. Regarding sustainability, which we place at the core of management and business, we are carrying out initiatives in all of our produce and sell tire business, value during use solution business and renew recycled business to realize our sustainability business framework as explained in the mid-term business plan.

In the mid-term business plan, we are focusing on efforts to achieve carbon neutrality and to realize a circular economy. Regarding carbon neutrality, we set a mid-term environmental target to reduce our CO2 emission by 50% compared to that in 2011 and aim to achieve carbon neutrality in 2050.

To realize this in our mid-term business plan, we set a target to reduce more than 30% of our emission vis-à-vis by 2023 and accelerating our global efforts. In Europe, group company BS EMEA has already achieved a renewable energy ratio of 100% of electricity at its all European site this March.

We will expand our use of renewable energy globally and aim to achieve more than 50% in 2023 from a current level of approximately 12%. Towards the realization of a circular economy, we are verifying and screening the potential of recycled technologies.

We will continue further study in order to achieve, commercialization between the 2024 and 2026 timeframe. For such sustainability efforts, we believe it is important to cooperate and deepen empathy with external stakeholders.

This slide summarizes the results of third-party sustainability assessment, as well as our participation in various sustainability and environmental initiatives. We have been recognized for a number of key sustainability indices on a global level including being selected in the climate challenge a list for our environmental initiative by CDP, a global non-profit that runs the world's leading environmental disclosure platform.

We have also actively joined sustainability and environment related initiatives to carry out our role as a leader in the industry. The Bridgestone Group will continue contributing to the resolution of social issues and the achievements of SDGs to live in harmony with nature and the community.

This year's addition of the sustainability report is planned to be issued at the end of June. This report is intended to give comprehensive introduction of the Group's sustainability efforts and explains our commitment to contribute to the realization of sustainability society.

We hope, it will serve as an innovation for future co-creation with various stakeholders and I hope you will have the opportunity to reach them. Last but not least, I will explain progress on a human resource transformation, which covers human resources and talents, the foundation of all our activities.

We will separate our organization step-by-step and build an HR strategy and organizational structure for each of our core growth and exploratory business according to the business characteristics of each. First, we have started with organizing the structure to generate technology innovation.

We have separated our R&D division in the technical center in Kodaira, Tokyo into one for core business and the other for growth and exploratory business. We will create a new culture for technology development in the Solution and Exploratory business where talents with an entrepreneurial spirit will be grouped by project in an agile manner.

Organization and decision-making for product development in the core business have been revised to be more firm, lean, quick and simple. Agile development structure will also be incorporated to accelerate technology innovation.

Based on these new structures and the Bridgestone innovation product plan to be completed by the end of the year, we will continue to consider and organize the system enabling the group together with our partners to understand the problems of society and customers and provide solutions sustainably. In addition to evolving our organization, we are also working on developing talent.

The development of digital talent is especially important in the expansion of the Solutions business. Based around the technical center in Kodaira, we have a plan to develop more than 1,000 advanced digital tenants globally in three levels by 2023.

First in Japan, we will hold basic training for all of our employees. For our engineering staff, we are expanding opportunities for internal development of data scientists.

For the development of solution field engineers, responsible for providing customers with solutions on site, we are providing advanced training where they can acquire data science and AI knowledge through internal real-life examples and exercise. Furthermore to develop and recruit advanced AI algorithm experts, we are -- who are essential for the realization of digital solutions and DX, we are reinforcing our cooperation with universities, et cetera.

We will continue to accelerate the development of talent capable of realizing digital transformation. Additionally in Japan, we launched a talent matching system providing opportunities and supporting the ambitions of teammates who are proactive in their career development and self growth.

The job-based employment plan is to be applied to 20 positions requiring advanced expertise, skills by the end of the year. This type of employment will also be applied to some existing manager positions, gradually being expanding to about 150 positions within the year.

In addition, new systems such as the open possessing system, the job matching system, job-based recruitment, have also started from this year. We are also continuing efforts to advance diversity and inclusion to expand our growth and exploratory business emphasizing with customers from diverse points of view is essential.

Starting with our participation in the Valuable 500, a global movement to promote inclusion and opportunities for those with disabilities, we will continue striving to build a workplace that encourages diversities and empowers all teammates to fulfill their potential. We are also working to empower female participation and representation through reinforcing appointment of female managers and establishing support system, for example the mentoring system.

This concludes our execution and result update for the mid-term business plan. As the second year of Bridgestone 3.0 Third Foundation, we will continue to drive forward with an aggressive approach and challenging spirit, focusing on execution and delivering results.

On March 1, we celebrated the 90th anniversary since the company's founding in 1931. Guided by our unchanging mission serving society with superior quality, we will continue to support the mobility and movement of people and objects and contribute to the realization of a sustainable society by evolving into a sustainable solutions company.

Thank you for your attention. Thank you very much.

Now that the presentations are complete, we now would like to move on to question-and-answer session.

Yonezewa from Yomiuri Newspaper. Thank you very much.

My first question refers to the shortage of semiconductors and its impact on your business performance. You said that despite the impact in the first quarter sales did increase year-on-year.

However that -- you said that you continue to take note of the situation, so would you elaborate on that?

Yes, the shortage of semiconductors. As you are aware by area or by company, there is a sense of variability, which means that for us in each area or with each customer we have been continuously exchanging information with one another.

In doing that what we take note of is that first of all, we say our companies, but it's not as though they had full grasp of the situation. So we did create set of numbers.

But our reach is that by and large, they seem to say that in the second half of the current fiscal year, there's been going to be a recovery. However, some of the automotive manufacturers are saying that they may not be able to come out of it by the end of the fiscal year.

Thank you. Masueda from Automotive Tires News.

I have two questions to you, okay? The first question refers to the Q1 performance.

Listening to the announcement made by different manufacturers, quite a few have been taken note of the fact that China drove the operation. How -- what's the situation in that regard at Bridgestone?

And the PSR business in China as I understand is categorized into the so-called next category. But with the existence of the local manufactures among others how would you plan to compete in China?

Thank you for the question. First of all, Bridgestone's presence in China is not necessarily very high.

So that's reality. And so from the standpoint of the overall classification the China is positioned in the next category.

The peers or the business in China is really focusing on the premium segment meaning that it has the comparative emphasis on quality rather than quantity or volume. We recognize that the core companies from Japan, US and Europe will focus on the premium raise of car models that be operating in China with be it the OE or rep segment to the market.

So that is the key consideration behind our premium focus. Now other competitors they are different.

So on the same companies, they -- do you have the volume from which they can count on. In the case of Bridgestone, the volume has been increasing, but not yet to say that it then has a significant impact on the overall operations of Bridgestone.

So point number one, we will continue to focus on the premium segment to continue to grow steadily.

Thank you. And the question number two, page 18 of the midterm business plan presentation, “the expression of mastering rubber”.

Now in reference to that there's some output though the benefits have been introduced already. But outside of Japan for instance in the period of synthetic rubber working with those companies, so the synthetic companies in the process of creating technology platform for the future.

I understand that you probably have some projects which are in the pipeline not ready to be announced yet. But what are the overall expectations?

Thank you. My answer isn't that.

Well the world of rubber is so profound. So although we say "mustering rubber" how are we?

We have not mastered rubber yet because many new things are continuously popping up. For instance, natural rubber versus a synthetic rubber, that is no synthetic rubber which eclipses natural rubber and durability.

So the development of synthetic rubber with durability which would exceed what can be expected from natural rubber. It's in the lab under the testing stage.

And there's some positive signs are there. And as the technology is ready then be it for the shared service application or the mining operations, I'm sure that the benefits will accrue.

And also on the rubber, what we consider is that there are features, properties of rubber for instance low rolling resistance, good fuel efficiency that is to say. And yet the braking performance is good.

And the durable life is long enough. And these, sort of, agreements coming -- to have the combination of all good features of rubber.

That is what all companies aim for. This -- the challenge is made collectively.

So for the Bridgestone's purpose we receive requests from our customers. We also have a sense of prior performance which large instance rely on rubber.

So many ideas which are in Kodaira, Akron and Rome and there various research activities are going on. I'm sure that from time to time we have opportunities to share those with you.

So please look forward. Thank you.

Thank you for your answer.

Jodie from Bloomberg. Thank you for this opportunity today.

Two questions. Question number one refers to your statement about the mobilities solution in North America by the end of this year inclusive of the possibility of M&A.

Would you elaborate on the background the scale or the time line? Or why the end of this year?

So I would like to know more details as you see fit? And also the second question refers to the worldwide Olympic partner that you are for the Olympics -- enter Olympics in Tokyo.

Only two months the beginning of the games. But of late the TV and the newspaper are starting to record -- the report that many are calling for the cancellation of the games.

There were some episodes of the priorities speaking on behalf of athletes. So at present what are your thoughts Mr.

Ishibashi? What's your hopes and aspiration?

What's your outlook?

Thank you for the question. So the question number one as regards to the North American mobility solution.

It was back in 2019 that the European number one Webfleet was acquired. And since then the operation has been expanded this step by step.

That's exactly what we committed to you. So having started in western part of Europe onto the Eastern Europe to South Africa, Australia, Chile and Mexico we really have been -- the expanding and enhancing.

But the world's largest market after all is North America where unfortunate to have to say that Webfleet Solutions does not have a very strong sense of presence. Meaning that whereas the biggest market North America, our aspiration is to establish and startup mobility solutions operation as early on as possible.

In North America trucking bus tire business in North America or truck and bus tire retread operations in North America are there in our portfolio and will the biggest share of the market. All the more we seek that -- on the basis of the strong -- the tire business we the retread operations that we would like to have from the mobility solutions which we believe that we can be quite successful at.

So sooner than later deleveraging the wisdom and expertise of Webfleet and also knowing that there are quite a few mobility solution providers no one very large and quite a few start-ups, but why don't we join hands with them? With the application of expertise which has been accumulated in Europe basically from Webfleet?

So that's the reason why we came to the view that by the end of this year, we will like to have the stage ready inclusive of the M&A. I hope that answers.

Yes, it does. Thank you very much.

In response to your second question regarding the Tokyo Olympics and Paralympics. Yes, I am aware that varying views and thoughts expressed.

And I'd say that particularly of late various comments have been made to or regarding the Olympian athletes, which may I say are extremely regretful indeed. I'm sure that various other Olympic sponsors they have been feeling the same.

In the case of Bridgestone based on the empathy and to the spirit you have of Olympics we decided to become this worldwide on Olympic partner. At the heart of it is the existence of the Olympians athletes.

Their never yielding efforts, wonderful play and performance and the total -- the movement of emotions that they gave to us. And that's the reason why -- and also the everlasting pursuit of the DPs on the growth and diversity and inclusion those are the reasons why we originally made a decision toward become a worldwide Olympic partner.

My thought at present so long as safety and assurance it can be confirmed. Then I still hope that the games can be played.

If not be it IOC or other parties will make different sort of decisions. If so then I would -- Bridgestone respect such a decision.

So for now the -- believing that the safety and assurance they can be there and therefore the Olympic games numerous parties they are dedicating their efforts, including our own employees who are serving as volunteers, and we still understand ready to support the athletes. Thank you.

Thank you very much.

Let's now move on to Ms. Fujiwara [ph] from Nikkan Jidosha Shimbun.

From Nikkan Jidosha Shimbun, my name is Fujiwara. Thank you very much for giving me this opportunity today.

I too have two questions to you. The nurturing of the digital talent in the first question.

I would like to know more. For instance, you talk about collaboration linkages leading to your parties in and outside of the organization.

How you nurture those digital talents? Can you tell us a little bit more?

And what will be the ultimate aim behind the development of digital talents at Bridgestone?

My answer is that in reference to the basics of our mid-term business plans it stands on the two pillars of having this strong rail and then the digital. So that's something that I have been explaining to you, and in saying that we are going to develop on such talent.

It's the combination of doing it organically within the organization and also the inclusion or the invitation of the new associates who have been -- who will come through M&A transactions in the [indiscernible]. Currently, the 900 digital talent our aspiration is to bring that to 1,200 digital talents.

Now on the different grades of those talents, the intermediate to the advanced levels of the digital talents. The intermediate level, I'd say that we will be able to develop and strengthen their expertise in-house within the organization of -- I mean, the Bridgestone, excuse me.

However, as an advanced level and we are talking about very few or limited experts available in the entire globe, and then those are the eligible persons. Then we'll be able to make the global contributions, which should mean that inclusive of not only universities in Japan, but also universities outside of Japan to make sure that there are opportunities granted to them to have the [indiscernible] available inherent skills.

So that is the overall considerations that we make. And of course, ultimately, we expect that they will come back to Bridgestone and to make continuous contributions.

I have to refrain from identifying which universities, but which universities both in and outside of Japan we have relationships and we tend to enhance those relationships. I hope that answers your question.

Yes, it does. And speaking of the relationships were universities, I would like to make sure that you are talking about not only Japanese, but universities outside of Japan?

Yes. So it's yes.

It's already there. There are fellows who are studying in universities outside of Japan.

Of course, in the Japanese universities, but it's both, and the teams of research does vary over the front. For instance, the actual example the increase in the resource and development of the aircraft tire where it trend to the algorithm development, which has been developed uniquely for Bridgestone.

It has been developed by digital talent who are on that advanced level of expertise, and other examples, including the mining tire properties and the other ideas, which have never been disclosed yet. This was speaking from relationships with universities.

We have ideas, we have resources, we have material so that we can look to for the future.

I see. Thank you.

My next question is on your efforts to achieve carbon neutrality. I believe this is the first time you mentioned strengthening the internal use of carbon pricing system.

So can you elaborate on how it works?

Back in 2011, we introduced the carbon pricing system to be applied to the internal investment decision-making process. So that in making various investment decisions for instance on manufacturing facilities the element of carbon pricing is always taken into consideration.

Simply put the intention is to incentivize investments to lower the CO2 emissions. And we are planning to raise the level of carbon pricing soon.

Currently, it's set at around JPY 3,000, but we are considering raising it to JPY 6,500, on a global scale in Europe to around €50. And this is applied, not only to investing activities, but is to be incorporated in all aspects of our business operation, so that it would always be considered in our business.

We are to apply the globally common metrics to various actions we take. We believe that is necessary to achieve carbon neutrality.

Of course, at each of the production sites, manufacturing sites, concrete efforts are being made in various activities already. That has already started.

So I believe this is very important in changing the mindset within the group.

I see. Thank you.

A follow-up question. In your procurement process of materials and others, how do you plan to assess the efforts by your suppliers in reducing CO2 emissions?

We need to make assessment on a product life cycle basis. Currently, we are working on Scope 1 and Scope 2 which pertain to processes within Bridgestone.

But in reducing CO2 emissions, Scope 3 is also very important which involves the level of CO2 emissions at the stage of the usage of our products by the customers as well as the production of the materials that we procure. So we need to look at the CO2 emissions throughout the product life cycle.

We need to identify the CO2 emissions level on a life cycle basis and try to lower it. Of course, we do have various policies and procurement to take into account such aspects as CO2 emissions and human rights, through which suppliers are asked to visualize and reduce CO2 emissions.

And we are also making joint efforts to reduce emissions. We're trying to reduce CO2 emissions on a life cycle basis.

I see. Thank you very much.

Hiraoka from NewsPicks. My first question is on your financial position.

For the year ended December 2020, you recorded a year-on-year decline of both revenue and operating income to end the year with a net loss for the first time in decades. Yet, your free cash flow was over JPY 300 billion.

And for this first quarter with the divestiture of a certain business, again the free cash flow positive by a similar amount. So in terms of earning capability, you are taking options to address anticipated trends of tires becoming a commodity and you're also working on restructuring the Diversified Products business.

Given that you have abundant cash on hand, am I correct to assume that you are thinking that this is a good opportunity to embark on business portfolio restructuring?

This is Hishinuma speaking. I will take that question.

In terms of cash allocation, our top priority is strategic growth investments, followed by maintaining sound financial position and then comes shareholder return in that order. As you have correctly indicated, yes, we do have rather a larger amount of cash on hand currently and it is to be used for strategic growth investments as outlined in the midterm business plan.

And we are currently reexamining the business portfolio and some of the measures entail cash outflow. So these are the priorities.

Should there be any surplus allocate that to shareholder return. That is our basic thinking.

I hope that helps.

Yes. Thank you.

You described where cash would be allocated briefly. Do you feel you have enough cash for measures planned for the next year or two including M&As?

Yes. The midterm business plan envisions investing around JPY 700 billion during this period up to the year ending December 2023.

So we do not believe that large amount of borrowing is needed to finance our investment plans.

I see. Thank you.

My next question is on your plan to transform the human resources system and other institutional organizational changes under the midterm business plan for instance the job-based system. Some companies in Japan are now introducing the job-based system so as to accommodate the talent needed for digital transformation and other specialized positions.

And in the case of companies implementing business portfolio restructuring, as they carve out certain businesses certain group of people who will leave the company, while through the acquisitions of companies especially foreign companies, new talent is brought in and that would require changes in the appraisal and payment system. So, more standardized system is needed.

I believe that is the motivation. So in the case of Bridgestone what is the background to reforming your HR systems?

As I mentioned last year, Bridgestone is faced with issues common to typical traditional Japanese companies. We have the seniority system, so you are promoted to a certain position after X number of years of service in the company.

And there are silos from function to function; manufacturing, development, sales, administration, and what have you. And one's career development plan is set within each silo.

And in terms of organization so many levels from top management to rank and filers. So, we had a very heavy rigid organizational structure and we wanted to change that break and remove the silos and reduce the number of layers in the organization, simplify the organization to become more agile and flexible.

And the basis of that is as we examined what kind of organization and what kind of functions would be needed to be successful in the mid-term business plan? What will be the profile of the people that will be needed to fulfill the functions?

We made extensive discussion on that. And what we found was that there are many unnecessary wasteful tasks and work and we wanted to eliminate those.

And we assessed what functions and responsibilities are needed and found that there are many mismatches that we the positions and the people who fill those positions. So, we wanted to address that and improve for a better match between the talent and the positions.

And the job-based system is clear on that. I spent a lot of time in North America in my career and there the job-based system was given.

Responsibilities are clearly defined and the output and expectations are clear, little room for ambiguity. I think that is a global standard.

So, step-by-step we wanted to move in that direction. At the same time, the traditional typical Japanese membership system has benefits as well where people would have lifetime employment, have strong loyalty to the company, and feel your personal growth and the company's growth are identical.

That is also very important. So, we want to come up with the hybrid system that best fits Bridgestone.

So, we introduced a job-based system where they fit, for example, in such areas as digital transformation as you mentioned, as well as, legal, intellectual property, and finance where expertise needed is clear. We decided to start from those areas.

Also in the hiring system, although job-based system has not yet been applied, we are asking the applicants to identify what areas they are interested in and try to assign them to those positions so as to avoid a mismatch as much as possible. And on a step-by-step basis, we are clarifying the roles and responsibilities, eliminate unnecessary wasteful work.

Job-based system is part of the efforts to create that kind of culture.

That’s very clear. Thank you very much.

Thank you. Sakamaki from Daiwa Securities.

I have two questions. First is on your first quarter results.

The adjusted operating income for the first quarter. How much was the upside compared to your internal plan?

And also you have not changed the forecast on a full year basis, but currently the distribution cost and material costs are increasing. So, how confident are you in achieving a full year forecast?

Are you confident that increasing your selling prices would be sufficient to offset the increase in costs? Can you comment on that?

I will defer that question to the CFO.

Thank you. Your question is how the adjusted operating profit for the first quarter compared to our internal plan?

The first quarter profits projected back in February that we shared with you was in line with the actual results of the first quarter of last year. And therefore, the year-on-year difference was about the same or comparable to the variance from our internal plan.

As for higher distribution costs including higher ocean freight in particular, we had already incorporated that in our February forecast to a certain extent and therefore the additional cost is not that significant.

I see. So the higher material costs for the remainder of the year, you are confident that raising selling prices would be sufficient to absorb that.

Am I correct?

In the first quarter, we did raise selling prices and the product mix effect was positive as well. So, it's not that we think the selling price would be the only means to be used.

We will raise prices, but there are others as well for Q2 onward including the product mix. As for the material cost, the prices are increasing globally.

And of course, that will have an adverse impact, but through various measures we are to absorb and offset that impact.

I see. My second question is on the restructuring of manufacturing footprint and business portfolio of 160 sites.

About 40% are to be restructured. And during Q1, 21 sites have been restructured.

It appears that most are in Diversified Products business. Would that be true for the remainder of the period as well?

And at the same time, you are considering acquiring the fleet management company. So, do I understand correctly that restructuring in terms of shrinking is almost complete?

And going forward you all will be working on the expansion aspect?

As for business restructuring and manufacturing footprint restructuring since we have tire business diversified business and materials manufacturing businesses like synthetic rubber and carbon black etcetera, we do in fact have a total of 160 manufacturing footprints. And for some time, we have been thinking about 40% of them.

And we did make announcement for 21 of them at present. However, as we have stated in the past, since these involve very sensitive issues in relation to the community and employees, we will provide clear explanation when the time is right.

But for now, I hope that you will understand that we would like to refrain from providing you any specifics or naming any such footprints. You also asked about aggressive approach.

We have stated that for our Tire business we will actually outperform 2019 in the year 2023. For the tire manufacturing footprints, we are looking to close old small and noncompetitive sites.

In other words, South Africa and fell into that category. For manufacturing capacity for example as was explained in the Q1 presentation, the basic premise is to improve productivity and increase the volume or increase the manufacturing of more premium products in the existing facilities.

We will make full use of them until the end. Secondly, in Vietnam and Thailand in Asia for example, we have high production capacity, but the human capacity and capability has not matched that level yet.

At these plants, we will improve human capabilities and make new hires to enable full use of the capacity. This effort has already started.

Because the recovery was much stronger than we had anticipated, we are hiring people in Asia and the training will take place to improve the situation in the second half of the year. So, we have already started those efforts.

In that sense we will be very proactive. We have always done that and that is playing offense.

We will make these aggressive moves in the premium area in the midterm business plan. And even now, we are actually implementing that.

Because of the stronger than the anticipated recovery that we are now experiencing we are trying to determine how far we can really advance this offensive move. As you know, we did significantly reduce the inventory last year and we improved our cash flow.

Under the COVID-19 crisis situation we did play some defense. But as the recovery started in the second half, we increased our production.

However, we are still experiencing a declining inventory. In other words, the production has not caught up yet.

We did indeed first reduce the inventory, which is not adapting in itself and we try to improve our organization or efficiency to reduce unnecessary inventory. And that is also a good approach as it improves our structure.

While we face various challenges we make efforts in parallel to gain profit and benefit out of this process.

Thank you very much.

Thank you. Next, I would like to invite Mr.

Yoshida of Citigroup Securities.

Thank you very much. I would like to ask you one question.

On the page of the material, you presented the results, revenue and operating profit by products. Especially for PS/LT, there is quite a good level of profit and the margin looks like 14.3%.

The volume recovery is not back yet like that of the trucks and it is less than 2019 level. But then, what could be the factor leading to this much profit for Q1?

There could be various factors such as product mix and product -- price increase. But it seems to me that it's a little bit too much.

Could it be because of some one-time transient factor? Or is this sustainable?

Or would there be any risk for Q2? The number I see looks to be quite surprisingly high.

Let me try to answer the question. As for the profit margin for the product mix improvement and the sales prices, we have reduced the general tire -- general purpose tires, especially the associate brands, significantly in Europe and the Emerils.

We reduced the volume as well quite a bit. That is one of the factors leading to improved profit margin as you see here.

We do not believe that it involves any one-time transient or a special factor. Obviously, if the raw material cost increase in the future, there could be some impact, but it is basically the result of the improved business structure.

If I may add, as I mentioned earlier, the base is the improvement of both top and bottom line by focusing on the premium products. Especially in Europe associate brands such as Dayton was reduced by -- will be reduced by several million pieces this year.

So the focus is on the major brand. Similar approaches are made in the United States as well.

In other words, in order to improve quality, we will focus on the premium for passenger tires. There are obviously improvements of the mix for high rim diameter tires, but there is also the brand mix improvement.

So, there are these two factors involved here.

Does that mean that you will further reinforce those efforts? I believe even until now, your approaches was more or less like that.

But dropping the general purpose tires is this accelerating this year?

In the Americas, the reduction had already started significantly in 2019 some continuing into 2019. In Europe it will be done this year.

As you know, we suffered a major loss in Europe last year. So, the huge challenge is to turn it around to a black figure.

This year BS EMEA will make a turnaround from loss to profit, which will be a major milestone. We will also generate profit out of the European business.

We will close the tune and we will reduce the general purpose production and we will focus on the premium. These efforts are all connected and linked.

The turnaround especially in BS EMEA is making a significant contribution to the overall improvement in the profit and we hope to be able to continue this.

Thank you very much.

Thank you. Next, we would like to invite Mr.

Kakiuchi of Morgan Stanley Securities.

In listening to the presentation today, there does not seem to be any essential issue in North America. But in the first quarter, there was an increased demand before the price increased by other manufacturers.

While others were raising prices, Bridgestone kept your own stance position as you always seem to have discipline when it comes to prices. Should I assume that there are no inherent issue with that?

Earlier in the presentation, you talked about the balance between volume and quality. There was also a related question, and I believe you responded about reduction in the associate brands.

But my feeling is that it may be time that you should -- so make some offensive approach of us increasing the volume. What is the trend general direction and future prospect in the North America?

As you know, in North America, we improved our business structure in the first quarter, and we are seeing the bottom line improvements. Also various prices are improving as well.

Maybe it is time for us to take an active ambitious steps now. And since March, we are continuing to have some discussions regarding this with the top management in North America.

As for the retail business in North America, we call themselves out. But where we actually equip the final users, actual customers with our products, we are very strong and competitive.

The data often shows sell in the numbers of shipment to the dealers. And there could be some variation in months to months figures.

But I do not think that that is much of an issue. We are very strong in the retail which is very good.

But even with that, we believe we can further improve these results, while keeping the quality of the top line numbers. Active discussions are underway.

April was better than March. And in that sense, how much we can still improve on this quality and maintain this in May and June for the first half is something we need to challenge.

For the first quarter, should I understand that negative PSR sales in North America is not a factor drawing lower results for Bridgestone?

Well in North America too, the bottom line improving significantly. In that sense, rather than directly linking volume to the bottom line figure, improvements as seen through end-to-end.

Gross profit margin has improved significantly. The fact that gross profit margin increased much in Q1 I think is the first indication of the result of the rebuilding of the earning power that improved profit margin in North America is also seen.

If we can maintain this while increasing the volume, we can make further advances. And obviously that is what we would like to achieve for we need to -- first we need to build a solid structure and increase the gross profit.

That is why we can say that weakness seen in North American passenger is not directly resulting in the bottom line that you see.

Thank you very much. I hope and expect to then see good results for Q2 as well.

Thank you. Sakaguchi of Mizuho.

Thank you for this opportunity. I would like to ask you one question.

For the results by products and for specialties, there seems to be solid profits compared to last year which is even larger than the growth of revenue. Although, I think the volume and internal efforts do have bearing on these numbers there must be a backdrop to this improved profitability.

Regarding the recovery of volume around ultra-large is still only in its midway towards recovery. How are you looking at the future trend for recovery?

Can we expect to see further improvement in the profitability along with your outlook? Please inform us as to how we should understand the present situation as well as the outlook for Q2 and beyond?

As for the improvements for the profitability of specialties, they include products like ORR; AC; AG agri; and MC. For ORR in the latter half of last year, we saw a trend for recovery in the bottom line in volume.

In other words, there are trends of recovery for profitability. In addition, we saw significant volume growth for AG and MC which contributed much to overall improvement in profitability.

But on the other hand, AC aircraft continues to face a very difficult situation. Looking at the entire year, I expect the AC tires to remain in red this year.

For the time being, I think the business will turn around to generate profit in 2023, although there may be different situations which might impact the result. But I expect this to be very difficult.

For the mining tires, large mining tires are very strong, medium and small somewhat lagging behind, but there are demands for medium and small OR for construction market where demand is quite strong. I expect that that will make good contribution in Q2 and onwards.

For ultra-large, we need more improvement. But right now iron and copper are doing very well and are gaining as we have improved our relationship with major mining companies.

When the demand returns I am confident that our sales will also increase. I feel this is an area where we can expect to see much from in the future.

So I will take it that with the exception of AC volume is on the trend of recovery and that possibly will make positive contribution to the overall mix.

Thank you. I understand the situation very well.

Thank you very much.