gains in the previous year, and ¥550 million from reviews of the headquarters functions. Conversely, there was ¥500 million in other income due to changes in the classification of affiliated companies.

The Pathology business saw improved profitability due to price revisions and cost reductions. However, this was not enough to offset the impact of revenue decline from Biomedical and IVD businesses, partly due to the impact of tariffs.

Page 17 shows sales by region. Japan experienced a modest rise, with growth in LSIM and healthcare IT solutions offsetting declines in CRO and IVD businesses.

Europe achieved a 4.7% increase in sales, driven by strong performance in BGM and Pathology, as well as a recovery trend in Biomedical. North America experienced decrease in revenue due to the continued impact of exchange rates and stagnant equipment demand in Diagnostics and Life Sciences, despite growth in BGM.

Other regions experienced a slight increase in revenue, driven by growth in Indonesia, despite declines in BGM and Diagnostics and Life Sciences. Page 18 provides details of the adjustments made to operating profit to calculate adjusted EBITDA.

These adjustments include depreciation, amortization, as well as one-time income, expenses. Depreciation and amortization decreased by ¥1.0 billion due to completion of amortization for certain intangible assets and the impact of yen appreciation.

Adjustments from EBITDA to adjusted EBITDA include restructuring costs of ¥300 million in the previous year and ¥500 million in the current year. Additionally, the previous year included ¥600 million of one-time income.

Next is consolidated balance sheet. Below is a brief explanation of the main assets and liabilities.

Goodwill balance was ¥212.1 billion, an increase of ¥5.6 billion. This was due to the weakening yen against the euro.

There was no change on a local currency basis. Interest-bearing debt decreased by ¥7.6 billion to reach ¥247.7 billion, despite repayment of ¥11.9 billion, due to foreign exchange effect.

Furthermore, existing borrowings maturing in June 2026 were reclassified as current liabilities. However, these are structured with refinancing as a prerequisite.

Discussions with financial institutions will continue during this fiscal year. ROE calculated based on profits over the most recent 12 months was 4.2% for the quarter, due to year-on-year decrease in profit attributable to owners of the parent.

Cash and cash equivalents decreased by ¥6.3 billion during the second quarter. Operating cash flow was ¥12.1 billion, while capital expenditure was ¥4.4 billion.

Financial cash flow, including repayments of borrowings and lease liabilities, dividend payments, and others, resulted in an outflow of ¥17.6 billion. This concludes the explanation of the results.

Next, I will explain the revised full-year forecasts. The total revenue forecast is unchanged.

Operating profit forecast is revised upward by ¥2.6 billion. I will explain each segment changes on the following pages.

As an assumption, the foreign exchange rate based on the recent trend is ¥171 to the euro and ¥146 to the dollar. In September, we announced the transfer of CGM business, and currently, we are in the final stage of the agreement and negotiation.

As planned, we plan to close this in January 2026. In this forecast, we included the impact amount reasonably expected at this time.

In September, we communicated the signs of the possible impairment and potential need for the impairment, but this time, we have implemented an impairment test, and currently, we do not believe it is necessary to book the impairment loss, and this has already been audited by the auditor. Operating profit forecast is revised upwards by ¥2.6 billion, and ¥6.8 billion FX losses recorded through Q2 was factored in.

Pre-profit before tax, ¥8 billion is down ¥4.2 billion. After adjusting the tax impact, the profit attributable to owners of parent is revised to ¥4.4 billion, down ¥3 billion.

FX losses are unrealized and evaluation loss, it does not impact the cash. We maintain the annual dividend forecast.

Page 23 shows the comparison to previous forecasts by segment. In Diabetes Management, for CGM, we factored in its planned transfer and deconsolidation in Q4 and onwards.

For BGM, the strong results through Q2 and favorable foreign exchanges are included. Overall segment revenue revised upwards.

Revenue of the Healthcare Solution is revised downward based on the CRO business results and recent orders. Revenue of Diagnostics and Life Sciences is revised downward based on the assumption that the sluggish equipment demand affected by the market stagnation due to the tariff and reduced government subsidy mainly in US will persist.

In others, upward revision is made as negative risk on the revenue we expected was eliminated. With higher BGM revenue and planned deconsolidation of the CGM, Diabetes Management operating profit is expected to increase by ¥4.2 billion.

For Healthcare Solutions, our assumption is to offset the lower revenue with cost reduction and others. Diagnostics and Life Sciences lower revenue will lead to lower utilization.

Operating profit is revised down by ¥2.6 billion. Revenue impact and one-time cost review included, the overall operating profit forecast is revised upward by ¥2.6 billion to ¥20 billion.

Page 24 shows newly revised forecast compared to the previous forecast as of August and November. Finally, updates on US tariff impact.

P&L impact year-to-date, including additional tariff impact, was about ¥800 million. Progress of countermeasures to optimize supply chain, including review of the production, is on track.

Based on the effects of the already implemented price increases in Q3 onwards and cost reduction, full-year forecast of ¥1 billion to ¥1.5 billion impact remains unchanged at this point. That concludes my presentation.

We will now move on to Q&A session. Joining us as responder is Senior Executive Vice President and COO, CSO, Koichiro Sato.

If you have questions, please click the raise hand button. When your name is called out, your microphone setting is changed.

Please unmute, state your name and affiliation, and ask questions. If you have questions, please raise your hand.

I will call on you in the order of your raising hands. First, Yamaguchi-sama, please unmute and ask questions.

Do you hear me? Yes, we can hear you.

Thank you. Good morning, this is Citi, Yamaguchi.

The first question is about Biomedical. You revised the forecast, but Q1, Q2, there was no big impact, but including the situation in the United States, the business situation is grim.

These impacts will appear stronger in the second half or already appearing in the first half or from 2026 fiscal year and beyond? Biomedical, just as you mentioned, is being impacted by the US situation where the companies are restrained in making capital investments, and that effect is already with us in the first half and that will also be so in the second half.

Probably in FY2025, the stagnant equipment sales will continue. The market condition will continue to be not favorable, which is reflected in the forecast.

That is why we are currently focusing on launching new recurring consumable businesses, and also at the same time we are trying to implement measures to mitigate the tariffs, just as Yamaguchi mentioned. We are transferring the production sites and making efficiency in production so that we can ensure margins, and these are the measures that we are doing in FY25.

What about FY2026? We will continue to monitor the market situations, but in Europe, some pharmaceutical companies are shifting their production sites in the United States and making capital investment in the United States, probably within 2026 the North American market will recover.

I would like to augment. The market impact is already with us.

What about in the second half? We do not think that the situation will be worse.

According to our plans, compared to Q1, Q2, in the second half, because of seasonality, sales will be up. We have our plans, and against the plans, probably there will be a wider gap from the reality to our plan, and that is why we have revised downwards the forecast.

What about FY2026 and beyond? This year, the market situation will not improve.

In 2026 and beyond, we will make the plans, but all in all, as Deguchi mentioned, major pharmaceutical companies are investing in the United States and they have already made the announcements. Of course, we will have to see whether these investments will be materialized, but from the second half this year through next year, if these things happen, then probably we will see the comeback of the US market.

Thank you. Another question regarding BGM and some CGM.

Your profit margin is good for BGM, just as you mentioned in the second quarter, but you said that that situation will continue throughout the year. I believe that the BGM market per se is not favorable, do you think that this higher profit margin for BGM will continue through FY2026 and on?

Thank you for the question. Just as I explained in Q1, we are seeing the recovery in the profit margin.

There are four factors behind that. The first is the COGS improvement and SG&A improvement, and then amortization, depreciation favorable, and also excluding CGM is the fourth factor.

COGS improvement, that is gross profit improvement. We succeeded in hiking prices in the United States, and that is offsetting the decrease in the volume.

Also, with regard to COGS, we have been improving the operations, particularly regarding inbound logistics, we are consolidating the procurement. Also, there were meter restraint that I explained in Q1, but in Q2, we are making investments into meters, particularly in the US market.

On the other hand, in China, there are not profitable channels, and also some markets in the Middle East. In these low margin areas, we are restraining our investment into meters.

We are investing in areas where there are gross margins, but otherwise we will not, we are putting priorities. With regard to SG&A, we have been making efficiencies there, and we are reducing the professional fees and reducing the staffs.

Also, amortization, depreciation are as I have already explained. GP improvement 25%, SG&A improvement 35%, amortization, depreciation 40%.

These are some of the percentages contributing to the improvement. What about FY2026 and beyond?

This situation will continue. With regard to the market, the BGM market will be down by 10%, but we are the number one position in the market, we are gaining the market share from our competitors, into the next fiscal year on, we'll continue these initiatives.

That is why our forecast will not change markedly. This has been the answer.

Let me augment. In VCP or mid-year plan, we said that BGM sales will be stabilized, and probably CAGR will be -2.4%.

That's in our VCP. The major factor is to stabilize the situation in the United States, and the measures that I have explained are successful, and these are contributing to the sales profits.

CGM is also increasing the penetration, probably the CGM downside is a little bit smaller. I believe that our priority is getting the market share of BGM in major market, we are making sure that we will be in tandem with what we mentioned in VCP.

Thank you.

Next, Ryotaro Hayashi,

please.

Yes, Hayashi from Morgan Stanley Securities. I hope you can hear me?

Yes. Thank you.

Two questions. About the CGM, the transfer.

Originally, 26 March, the CGM's revenue and operating loss were factored in. I think that the numbers were not disclosed.

This time, now the effect of the deconsolidation is included in your guidance. At this timing, the Q4 CGM revenue and also the deficit, what were the size of them that you assume?

Maybe this time you will be able to tell us, I'd like to know that. The reason I'm asking this is that the next fiscal year, CGM revenue, that will be gone, to what extent should we deduct that from the guidance?

That's the reason I'm asking this question. Yes, thank you.

The forecast and what we factored in, the contract negotiation has not yet final over, it has to do with the negotiations, I cannot really talk about the numbers. The way of thinking is that at the time of the MoU, I think we explained that as of last year, ¥9 billion operating loss is what we have, and for this fiscal year, this will be less, that was included in our original plan.

Q4 only, so that means 1/4 of that number. In addition to that, the transactions incurred one-time cost, we need to deduct that, and so we reflected that in the revised forecast.

In that sense, this plan itself we believe is rational, reasonable, and the CGM impact itself is not increasing so much. Thank you.

I see. Thank you very much.

My second question is in September, CGM business transfer was explained, and at that time, Q2, mainly BGM, the Diabetes Management, potential impairment of the goodwill might happen, that's what you said. You said this time you did the test, the impairment, but you think that it's not necessary.

In Q4, when you close fourth quarter, making the judgment again, is there any remaining risks? The probability of having the impairment loss, is it the same or is it lower?

If you can explain the nuance there. Yes, thank you.

In that sense, based on the IFRS, we do the impairment test at least once a year, and as of the 1st of January, when we close the full-year numbers, we would have another test. In this case, by announcing the CGM transfer, there were signs and possibilities, at the time of the quarter end, we implemented this impairment test.

When we close the full year, we would, of course, conduct another test, and if there are any signs of the impairment, we would also do that test, so that would be the rule or process. As for the risks, this time impairment test was done, and currently, looking at the BGM performance and the progress, we made a judgment.

From now on, for example, say that the interest rate goes up significantly or the BGM performance comes down significantly, without those, the conclusion is not likely to change in six-month time period. If you ask me whether it's possible or not, I have to say yes, but the risk in comparison to the September timeframe is lower, I believe.

I see. Thank you very much.

Thank you. Next, Tokai Tokyo, Mr.

Yoshida, please. This is Tokai Tokyo, Yoshida.

Do you hear me? Yes, we can hear you.

This is the first time for me to ask questions. There are three questions.

First is on BGM. External environment is not changed, that's what you said, but you are increasing your share.

For instance, you had initiatives, and you said that these initiatives were successful. Could you please elaborate on that?

Also, are your competitors withdrawing from the BGM market or not? Thank you for the question.

With regard to external environment, as we mentioned at the outset, BGM market per se is -4%, -5% down every year. The trend will continue in the future.

The reasons are as follows, because we have CGM, that is an alternative product which is penetrating into a certain segment of the market. Just as Yamaguchi mentioned, the CGM segment is there, and some percentage of the patients are Type 1 patients or serious Type 2 diabetic patients requiring insulin.

These are the targets for CGM. In the past few years, the market accelerated.

That is why the BGM market is down. Considering the current trends, we believe that the CGM penetration reached a certain level of plateau for the time being.

From this point on, the penetration will be gradual. That's the basis of -4%, -5% for BGM.

Another reason is that we have a high share in the BGM market, and there was a mentioning of competitors. Competitors, particularly in the United States, because of economic reasons, they filed Chapter 11 bankruptcy filing.

We are taking the advantage of that, capturing their market in the United States. Also, in Europe, we are strong already, and the competitors, some are withdrawing, some are continuing.

We are focusing on strong markets to further grow our market share. That is why, although the BGM market is down, we are increasing our shares in the market where we're strong.

That is how we are doing the offset, and that is the plan in our VCP, although this is the first year of midterm plan, but so far these initiatives are successful. This is FY25?

Or you said Chapter 11, that's Chapter 11 bankruptcy filing in the United States. Did it happen last year?

No, it happened this year. Some of your competitors filed for bankruptcy protection.

The second question is about Biomedical. You said European companies, pharmaceutical companies, are investing in the United States.

What about the competitive situation there? For instance, ultra-low temperature freezer, you have a certain share in the United States and you have a share of 10% in Europe.

European companies making inroads into the United States, you have 10% share in Europe, which is not high compared to your market share in the United States. These European companies are going to the United States, and then what about your performance in these markets?

You have 20% market share in the US market, or will this be adversely impacted? What about the competitive situation and your forecast?

Thank you. In the United States, we believe that we have the existing market share maintained.

We have major pharmaceutical companies in Europe, biotech companies in Europe, with production sites. They are investing several tens of billions of dollars to shift the production bases in the United States, and that is to avoid the tariff measures in the United States.

At that point in time, we have the strong dealer sales network and direct sales channels. We have both.

We believe that these systems will have the strong base. There we have also the research base, academia, through which we will be able to utilize through our existing and new channels to further expand the market share in the United States.

Let me augment. The market share is a market share for the whole North American market, but we have the dealings with global pharmaceutical companies, and, of course, in the United States, our competitor has a larger share, but our product is of high quality, and we are targeting large pharmaceutical companies.

Considering these, the relations with large pharmaceutical companies, we will be able to beat the competitors in the US market. Thank you.

The last question from my side. Last year you announced VCP, and you will withdraw from CGM.

I believe that that will impact the revenue, but what about profits? Would there be any change from transferring the CGM business?

Thank you. This time in VCP, with regard to the figures in profit, we use profit margins, and also in terms of the revenue growth rate.

We are not disclosing the absolute figures, but the percentage of growth, that is our target, and we would like to make sure that we can realize the contents of VCP. We believe that we are on track with the progress.

If that is the case, 4% to 5% is the revenue growth. Will this figure be impacted by CGM sales?

Or there will be no change? Just as you said, in VCP, we said that CGM will be a priority.

That is why this ought to have the impact, but we would like to make sure that this can be offset by businesses in other areas. If that is the case, the sales will be down, but the negative impact on the profit will be gone, the profit margin will be improved.

Probably you will not disclose the absolute values, but probably the absolute profit level or the margin level will not be changed? Yes, we are making sure that we strengthen our portfolio management.

Our goal is achieving the percentage targets, and that is what we mentioned in VCP. At this point in time, it is exactly as you mentioned.

This is rolling, or this will not be changed? We are not thinking of changing the content.

Thank you. Thank you.

Thank you very much. We have some time left, are there any questions?

If you have any questions, please raise your hand.

Takeuchi, go ahead. Thank you, Takeuchi from BofA Securities.

One minor point about the tariffs prospect, I'd like to clarify. In Q1, ¥200 billion and ¥200 million and ¥600 million, so that means that probably it will be higher than your expectations from 10 to 1.5.

Are there anything that included in the second half initiatives specifically? Yes, thank you.

In that sense, now ¥800 million at the end of the first half, and for the full year, it's 1 to ¥1.5 billion, it's at the higher level, and as you pointed out correctly. The reason for that is that we calculated based on the 10%, but there were additional tariffs, so that's one of the reasons.

As for our initiatives, already the prices were increased as of the 1st of April, and the effect of this or the timing of it in Q2 was not 100%. In Q3, Q4, it would become more obvious or it would be realized.

So 1 to ¥1.5 billion, and at the high level, we are trending at that level, we'd like to make sure that we can harvest. The tariff impact increasing further is not something that we expect.

We'd like to control well so that we can achieve those targets. Additional comment that tariffs impact is biggest in the life science.

As Yamaguchi mentioned, the price increase is done starting from Q2, and the effect of that will be fully realized in the second half. There will be additional price increase, and the securing the margin is, in the first year of the VCP, is the most important thing.

SG&A cost reduction, especially we have multiple plants in life science, transferring the products among those plants so that we can provide or ship products to the United States with lower tariffs and increasing the production capacity in the United States, so that's what we are trying to do, and we accelerated it in the second half. There could be a higher impact from the tariff in the second half, but we will be taking more mitigation plans to offset that.

Thank you. Price increase and supply chain initiatives will continue.

I see. Thank you very much.

Are there any other questions? Thank you very much, everyone who has questions.

This concludes the briefing session. Thank you very much for taking time out of your busy days.