At this moment, we would like to start the meeting to present Hitachi's performance for the first half of fiscal year 2013. First, let me introduce the speakers: Representative Executive Officer, Executive Vice President and CFO, Toyoaki Nakamura; General Manager of Finance and Accounting, Mitsuyoshi Toyoshima; Executive General Manager of Corporate Brand and Communication, Ken Mizoguchi.

I would now like to turn to Nakamura for the presentation of the first half performance.

If you could turn now, take a look at the presentation material. What the first page is showing, the large tree.

If you could flip a few pages, I would like to start from Page 5, which is about the consolidated statement of operations.

For the second quarter, for 6 months on a cumulative basis, revenue was JPY 4,470.6 billion, 103% year-on-year. We had an increase in revenue.

And as for the operating income, it was JPY 173.4 billion, up JPY 9.8 billion year-on-year, an improvement of JPY 28.4 billion from the previous forecast. EBIT was JPY 142 billion, up JPY 17.9 billion year-on-year, an improvement of JPY 22 billion from the previous forecast.

Net income attributable to Hitachi's stockholders was JPY 32.7 billion, up JPY 2.6 billion year-on-year, an improvement of JPY 17.7 billion from the previous forecast. So year-on-year, we had increase in both revenue and income.

As a result, up until the second quarter for fiscal year 2013, 16 quarters in a row, we have seen positive bottom line.

With structural reform, we believe that we now have profitable makeup firmly rooted in our organization, and major factors for change in operating income is shown in Page 6. Operating income increased JPY 9.8 billion year-on-year.

If we look at the variances, there were negative factors, including lower sales prices and lower capital utilization, as well as impact from higher raw material prices. Now these negative impacts were offset by foreign exchange from cheaper yen and cost reduction.

Overall improvement of JPY 9.8 billion year-on-year was posted.

And as for the benefit from Smart Transformation Project, the effect was JPY 43 billion, JPY 20 billion in the first quarter and JPY 23 billion in the second quarter. However, unfortunately, the benefit of JPY 43 billion was offset by the impact from worsened capacity utilization of JPY 62 billion up to the second quarter.

And therefore, the benefits of Smart Transformation Project did not show in the first half. But then in the second half and onward, our plan is to make improvements.

So the impact of lower capacity utilization in the first quarter was JPY 40 billion. It was JPY 22 billion, however, in the second quarter.

So the scope of negative impact from lower utilization is steadily narrowing. With Abenomics' effect taking place, domestic capital expenditure is starting and exhibiting signs of recovery.

So second half and onward, we would like to see positive numbers.

Page 9 shows the revenue by market, domestic versus overseas. Domestic revenue was JPY 2,413,000,000,000, 95% year-on-year.

Our nuclear power plant maintenance business is still sluggish. That's one factor.

And in High Functional Materials, former Hitachi Cable structural reform, had a negative impact on sales, so that's 95% year-on-year. Overseas revenue was JPY 2,057.6 billion, 114% year-on-year, centering around China and Asia overall.

North America and Europe, we saw double-digit growth in revenues. So overseas revenue was 114% year-on-year.

The share of overseas revenue as a percentage of total is now 46%.

I would like to explain Page 11, which is about the balance sheet. That's Slide 1-8.

For manufacturing services and others, total assets amounted to JPY 8,649.8 billion, up JPY 325.4 billion compared to last fiscal year end. ForEx translation, JPY 150 billion, and higher stock prices have resulted in higher investment valuations, JPY 100 billion.

And total Hitachi stockholder equity was JPY 2,090,000,000,000, up JPY 157.6 billion. As a result, shareholder equity ratio was 24.2%, a 1.0 point increase, and debt-to-equity ratio was 0.48, in line with our goal of keeping it at 0.5 or below according to our Mid-term Management Plan.

We will continue with this policy going forward.

With respect to Financial Services, growth strategy results in increase in total assets in this area, JPY 2,275.5 billion, up JPY 310 billion-plus increase. Acquisition of Nippon business lease resulted in an increase of JPY 250 billion.

Expansion of overseas business also was a factor, and trade receivables went up. Total shareholder equity ratio was 7.5%.

D/E ratio was 5.17. The assumption is to maintain a rating, and our plan is to keep it within the maximum of 7x.

And growth strategy will be implemented under this midterm business plan.

Now consolidated cash flow, if you could look at the second table, manufacturing services, cash flow from operating activities was JPY 238 billion; year-on-year, JPY 9.6 billion, a positive number. Free cash flow was JPY 29.7 billion, and core cash flow improved by JPY 17.9 billion and posted a positive number.

Page 14 and onward, I would like to show segment information. Now under the midterm business plan 2015, it seems from the customers' perspective, Hitachi must act as One Hitachi and is to provide solutions to our customers.

Based on that, since the first quarter of this fiscal year, we have started to disclose performance information by segment for the 6 groups plus Financial Services business. If you could look at Pages 14 and 15 for this, compared with previous forecast, as for the operating income, operating income improved in all segments.

In total, operating income improved by JPY 28.4 billion. As for EBIT, there was a negative impact from plea-bargaining in the Automotive Systems business, and foreign exchange forward contract had a negative impact on Construction Machinery.

But other than that, improvement was seen. Overall, EBIT improved by JPY 22 billion.

Moving on to Pages 16 and 17, these pages show the breakdown by conventional 10 business segments. Where revenue was down compared to previous forecast, was the second line from the bottom on the table on Page 16, Construction Machinery, 94% year-on-year.

Operating income, all segments experienced improvements. In terms of EBIT, aside from Hitachi Construction and Automotive Systems, as I've said earlier, all other segments improved in terms of EBIT year-on-year.

So Page 20 is our outlook for fiscal 2013. Fiscal 2013 forecast for revenues is JPY 9.2 trillion; operating income, JPY 500 billion; EBIT, JPY, 440 billion; and bottom line is JPY 210 billion.

Our plan of increased revenues and income remains unchanged. We will do our best, so that the actual results will be better than these.

There's some revisions in the segment outlook. Please turn to Pages 25 and 26.

Page 25, Social Infrastructure & Industrial Systems' revenues are up 4%. Elevators and Rail Systems are improving.

But in Infrastructure, as we have mentioned before, we carefully examined the cost overrun of the large overseas project, and its negative impact is included. In Electronic Systems & Equipment, group companies like Kokusai Electric and Hitachi Medical Corporation are doing well, so their outlook is up.

High Functional Materials & Components, automobile products and the weakening of the yen are raising the revenues. As for income, results of structural reform of former Hitachi Cable is contributing, and improvements are also present.

Hitachi Metals and Hitachi Chemicals are included.

For Automotive Systems, the North American and Chinese markets are improving. So both revenues and income are slightly up.

But in EBIT, unfortunately, with the fines paid for the plea-bargaining, this result is included.

In Financial Services, revenues is 97% because of downscaling of domestic Financial Services. But with the decline of domestic loan loss risks and expansion, overseas business income is up.

Corporate items and eliminations are negative. And in total, our outlook remains unchanged.

Next, toward achieving 2015 Mid-term Management Plan from Page 28. First, Hitachi's Smart Transformation Project progress.

For production costs, we are promoting global SCM reforms and completed SCM reforms at 3 business entities, and we plan to expand application to another 9 businesses entities in fiscal 2013, covering 60% of the total. And with the application of modular design, we established a dedicated team and are providing consultation to each business entity starting in April.

For direct material costs, we are expanding centralized purchasing globally. And to lower materials expenses by utilizing global corporate procurement bases, we will shorten development lead time by collaborating with Hitachi China Materials Technology Innovation Center in China, by using low-cost materials made in China, result bringing them to Japan.

For indirect costs, we will promote headquarters reforms by changing the mindset. We will promote global logistics reforms by leveraging Hitachi Transport System's expertise and setup global development of shared services, and jointly with PCS to promote global development of BPO.

Page 29 onwards is the progress of the 2015 Mid-term Management Plan. First, global expansion of our Social Innovation Business.

We were selected to provide an additional 270 rail carriages for Intercity Express Programme in July. And as we announced recently, we started Proof of Concept projects to improve healthcare services with National Health Service England (Greater Manchester).

And to strengthen global management system and financial base, we recently announced restructuring elevator and escalator business in Japan to strengthen and expand this business scheduled for April 2014. And as a result of a 2012 Mid-term Management Plan, S&P raised our credit rating to A-.

And with this, all our ratings are A or higher.

For group structural reforms, we plan to consolidate companies that mainly operates TEPCO's administrative systems, scheduled in March 2014. And also, we will transfer all Hitachi Via Mechanics' shares to The Longreach Group in November.

We are promoting solution provision by leveraging Financial Services. We will create a global factoring scheme to achieve stable material procurement, and we will fuse products and Financial Services to expand the Social Innovation Business.

We will also strengthen financial advisory functions for expanding orders in the Social Innovation business.

And with respect to the interim dividend, this will be JPY 5. It was decided at today's Board of Directors' meeting.

This concludes my presentation. Thank you.

We would now like to have questions and answers. Those of you with questions, please raise your hand.

I see a hand in the front, please.

I have 3 questions that I would like to ask. Question number one, which is about the status of orders or situation of orders.

I would like to know the status of orders, especially about Social Infrastructure & Industrial Systems and Information & Telecommunication Systems.

Orders?

Yes, orders by segment, if you have information available.

For Social Infrastructure & Industrial Systems, orders are growing. In the first quarter, for Hitachi overall, on a year-on-year basis, orders grew by 1% year-on-year.

In the second quarter, there was effectively a 10% increase year-on-year in orders. To give you the actuals in the previous fiscal year, because we had IEP contract in the U.K., which is about 200 billion, excluding that, in the second quarter, the growth was around 10%.

Including that, in the second quarter, the growth was around 2%. So finally, orders are starting to grow, it seems.

In the Social Infrastructure & Industrial Systems, the first quarter's growth year-on-year was 106%. In the second quarter, excluding the IEP contract, 119% year-on-year, so we are starting to actually feel that orders are growing.

Where we see growth and orders includes elevators and infrastructure-related business, including control equipment and motors. That's where we see growth in orders.

What about Information & Telecommunications?

In the first quarter, for the segment, 102% for Information & Telecommunications. In the second quarter, 104% year-on-year.

So in this segment as well, orders are growing.

My second question is as follows: elimination is increasing from JPY 30 billion to JPY 40 billion. So at a first glance, it seems that you are factoring in Hitachi Constructions' risk.

If there is any other risks factored in.

It's not specific to Hitachi Construction. I had a chance to visit China 2 weeks ago.

I visited Beijing, Hefei, and Shanghai, spending about a week. Are these Chinese cities turning into awful ghost towns as we see in the magazines?

That was not the case for it. The 3 cities, as far as I could tell, there may be ghost towns in the Western Northern part of China, perhaps.

So I came back from China with the impression that China is doing quite all right. And this week, China has announced monetary tightening, so as to rein in total demand, it seems.

But I'm not sure because I haven't had a chance to study the topics to be discussed by China's 3 plenary session of the above Central Committee of CPC. It was covered in this morning's newspaper.

Perhaps, China's policy is to keep the economy at a cruising speed going forward. In the Construction Machinery business, a large part of China's business depends on market demand after Chinese New Year.

So what will happen in the fourth quarter remains to be seen. Other than that, what we can say is that the proportion of the fourth quarter business is still large in Information & Telecommunications, as well as Social Infrastructure & Industrial Systems.

So we do believe that we can do what's required and be on plan in the fourth quarter. But we're not yet prepared to change or revise our plan, and that's because of China, as well as the U.S.

In the U.S., there has been major controversy. The deadline for the government's temporary budget was extended to January 15, and debt ceiling deadlined to February 7.

But that's all we know about the U.S. If there's another government shutdown, in 2 weeks, it will have an effect of reducing United States' GDP by 0.5 percentage points.

And our fourth quarter is between January and March. So we are taking those risks into consideration.

Thus we did not change the plan.

My last question, you talked about the fourth quarter. But before that, we have to look at the third quarter.

According to what's been disclosed, there has been no specific plan indicated for the third quarter. So from the CFO, Mr.

Nakamura's point of view, what will be a satisfactory performance?

Well, it's hard to say -- cite a specific number. But this year's third quarter has to be better than last year's third quarter, several tens of billions better for the third quarter.

Well, tens of billions of yen over last third quarter performance at least. Even so, this fourth quarter will be higher year-on-year compared to last fiscal year.

So I hope the third quarter will be higher. And we hope to see year-on-year increases for both the third and the fourth quarter equally.

At the current pace in the second half of this fiscal year with the third and fourth quarters combined, we will see a record high income. Record high income in the second half was posted in 1989.

We have to exceed that. So a record high in the third, as well as fourth quarter is what we're looking for.

Given the orders and foreign exchange rates being stabilized, we would like to exceed historical highs. In 2010 and 2011, we had record high bottom line numbers.

However, in the operating income that reflects Hitachi's products' competitiveness, we have not been able to exceed historical highs yet. So this fiscal year, we would like to have a record high operating income.

Next, we would like to grow EBIT further. That's what we would like to achieve.

That will have to wait until next year. And this year, we will work even harder.

I have 3 questions. The first question, you mentioned in your presentation about the effects of Abenomics.

That capital expenditure is recovering. So what is outlook of the domestic market?

It may be too early to say, but the Olympic Games were decided. So how are you trying to prepare your organization towards that?

Could you talk about sequestration of domestic market?

I recognize that there are strong effects of Abenomics. Domestic orders in the first quarter, in the domestic market, orders in the first quarter was 96% year-on-year for Hitachi Group as a total.

In the second quarter, it improved to 102% year-on-year, so we are gradually seeing the effects. But it will take about 1 year to see a J-curved effect.

So a large increase may be expected the next year, but orders are steadily improving. But the law for investment tax reduction has not been approved yet.

And the SMEs that are interested in investing in equipments are making inquiries, but they're still waiting to see. So I think contracts are yet to be made.

But we are seeing steady effects. And as for the Olympics, I think that this is the fourth arrow.

So for the Japanese economy, this will be a midterm and long-term growth strategy, and the present measures are short- and midterm measures. But with the fourth arrow, it is possible that in the long run, the Japanese economy will last for a long period.

And the stock market is rising since the beginning of the year. So for the global market, in terms of growth rate, the Chinese growth rate is high at 7%.

But among the developed nations, Japan could become a growth market. And about the growth strategy or the fourth arrow, as the Hitachi Group, we have made a top 5 project promotion headquarters.

This is a long-term perspective. But if Japan is going to be a growth market, we have to focus on these areas and the target increase in revenues and income year-on-year in Japan.

My second question is about the storage solutions business. In the first half, revenue went up 14%.

But I think there is the effect of the foreign exchange rate. And in substance, I think it's not growing that much.

What is the market situation? And what are the measures you are taking?

In storage solutions, the hardware price is declining, and the proportion of software is expanding. In terms of market as a whole, in the American market, as government expenditures are controlled, storage sales is declining, not only in our company, but in other companies as well.

And under such a situation, I think we are doing well. But the situation of our storage is such, and the ratio of software is increasing.

So I think there will be more development competition. 2 years ago, we acquired BlueArc Corporation, and I think this type of managed software is an important area.

But development is taking time. So this fiscal year may be difficult.

But I think next year, we can shift to growth.

My last question, as you explained earlier, there were changes in your organization in October. You established of a healthcare business strategy division, and there were head office reforms.

Could you explain the purpose of these changes?

For the head office reform, there are about 1,800 people at the head office. When you call head office, this sounds as if this is a sector for approvals and authorizations.

This is not a good mindset for management reform, so we separated into a group to think about a strategy and then, as a group, to manage with specialized knowledge. We clearly separated the 2.

In the head office, we'll continue to think about the future of Hitachi Group's growth strategy and create future value-added. So this group will have a size of about 600 people.

It is difficult to immediately shift one's mind. We will spend about 6 months, and we will make a clear organization by April next year.

In Japan, if you stay in your sector, time passes, and you can earn your salary. So there is a lack of aggressive competition.

So we wanted to make this more clear. For healthcare business strategy division, going forward, in the developed countries and in China, healthcare will be a very important market, and I think this is a growth industry.

So how to strengthen this sector? Including the head office reform, we established a division to think about strength in this sector, Hitachi Medical Corporation and Hitachi High-Technologies, and also, we have good products like proton beam therapy device.

These are good products, but they're somewhat sold separately. So we wanted to have a coordination of a policy in the group to sell as one business, as One Hitachi solution to the customers.

And we want to develop an information network to be able to do so. So we established this division to show to the customers that we will emphasize healthcare.

Any other questions? I see a hand in the middle.

I have 3 questions myself as well. My first question is as follows: I would like an update on the losses from the Information & Telecommunications Systems business.

And about Social Infrastructure & Industrial Systems, most of it is -- have been used. But if there are problems, I would like to know.

Without Information & Telecommunication Systems business, your performance could have had -- seen a greater upside.

Well, thank you for the question. For Information & Telecommunication Systems, since April last year or first half of last year, a part of our competitors' business has been replaced by Hitachi.

We obtained contracts prior to that. And so starting from April, by replacing competitors' products, Hitachi has had to bear the cost of replacement.

But this fiscal year, these projects are being resolved. So I hope they are resolved, so that we won't have to cause any more concerns on your part.

But having said so, there will still be projects that we will pursue because of strategic reasons. There will be such projects this fiscal year as well.

In that regard, this year will not be very different from last fiscal year. And last year, there were losses of JPY 20 billion.

But for this year, the losses will not be as great. It will be half of what we incurred last fiscal year.

And I believe that these were more or less resolved by the first half of this year.

What about Social Infrastructure & Industrial Systems?

When it comes to air conditioner projects in overseas markets, these are new overseas markets, including near Middle East or Southeast Asia. There are differences in the way in which specifications are read or a business practices, especially where installation work is necessary, and that could stall progress in construction work later.

That does happen. And so losses of around JPY 7 billion are being incurred.

It's not going to become too large?

Well, that will end this fiscal year. So we will not pursue projects that would burn us going forward.

So combined what Information & Telecommunication Systems' improvement, the increase of JPY 27 billion can be expected next year?

Yes.

My second question is about the integration of your thermal power business with MHI. May I have an update on that?

Renesas has had to wait until September 30 for INCJ to decide on an investment, and the monopoly-related transactions often take longer time because certain local authorities always seem to move slowly. So may I have an update on thermal power business integration?

Business environment seems to be becoming better.

With respect to the integration of our thermal power business with the MHI, certainly, approval from Chinese MOFCOM usually comes in the last minute. But I understand that it will come in time.

Well, it's not for me to say. It's up to them.

But I think the approval will come in time.

What about the business aspect?

In terms of business, demand is strong for this business. In overseas, we are receiving orders.

So this business will be transitioned to the new company, and products will be delivered via the new company.

It seems that there are some malfunctions or problems happening.

We are taking countermeasures to deal with such problems. So I don't think there will be any concern on the part of the new company.

My last question is about the overall situation. As I've mentioned earlier, this fiscal year, there could be a sudden surge in demand.

Why before the consumption tax hike? And I may be talking about the future at a premature stage.

But as far as the business environment goes, some people say that next year may see a better environment. But then on the other hand, there could be reactionary fall in demand after the tax hikes.

So maybe too premature to forecast, but what is your take on the future situation as CFO?

There will be a last-minute surge in demand, right before the consumption tax hike. Looking at the past precedent, that will happen.

But then unlike in the past, finally, we are starting to rid ourselves of the deflationary mind. But deep down in our hearts, we're not totally convinced yet.

But then, consumer price index, excluding food stuff, is improving 4 months in a row. So certainly, the deflationary mind is fading, I think.

And combine that with the benefit of the cheaper yen, capital expenditure tax reduction and improvement in overseas markets, I don't think there will be a major fall or reduction next year. Between January and March, there will be a surge in demand because it's right before the consumption tax hike, and there will be reactionary fall in demand in the following April through June.

If that fall or reduction is going to be large, then we will be heading toward something different from what Abenomics is trying to achieve. But Japan's GDP, 16% of it is consumer spending.

For consumer spending to grow, corporate sector performance has to improve, and we have to pay more compensation to employees. That is what we would like to achieve in that regard.

Unlike in the past, I'm hoping to see more shifts away from deflation and toward inflation. And so that's why some people believe that next year will be better.

Will you give us hints about the status of orders in the first half? And the second half, what's the situation surrounding orders?

If orders are growing in the second half, given the lead time, I think the first half next year will even be better. Is that the case?

Yes, it's true that orders are increasing according to the internal forecast. I can't give you a specific number because it has not materialized yet.

And the impact of consumption tax hike is purely domestic, be it a benefit or a disadvantage. And because of the cheaper yen, exports in value are growing.

But if you exclude the benefit of the cheaper yen, year-on-year, exports are slightly down, as was the case with our storage business. And revenue from overseas in our case is 46% based on the Japanese yen.

And consumption tax hike is irrelevant to exports and sales overseas. What counts is what happens in the U.S., Europe and China.

So in that regard, we are hoping to see better situation next year.

Any other questions? The person in the front, please.

I have 3 questions. First, like in the case of Power Systems, there are segments, which results of a first half exceeded the plan, but the annual plan remains unchanged.

Is it because you are conservative? Or are there expenses or deliveries shifted towards the second half?

Could you explain that?

In the first half, in the 10 segments, they all exceeded the outlook. Information & Telecommunication Systems, in the first quarter, there was a slight decline, and it recovered by half.

So for Information & Telecommunication Systems, they are effects of our Smart Transformation Project. But in the fourth quarter, this group will have to try harder.

Revenues are up 2%, but income remains unchanged. So there are many points that they have to do better.

For Power Systems, it exceeded the plan, but this business is concentrated in the fourth quarter. So our outlook remains unchanged.

For Social Infrastructure & Industrial Systems, there was a cost overrun of a large overseas project, which is included in the outlook. But other segments are doing well, so they are offsetting each other.

Electronic Systems & Equipment, this is a listed company, so we are using their numbers. Kokusai Electric was revised upwards, which is affecting the general situation.

Construction Machinery, the market situation is not yet clear. Japan and China is getting better.

But in mining, Australia is not very good, and the United States rental market is not good. So these are offsetting.

For High Functional Materials & Components, this is going up, and Automotive is also up. Financial Services, I think, is also going up.

So for others, the difference under corporate items and eliminations, this is minus JPY 14 billion compared to the previous forecast. I went to China 2 weeks ago, and I think the market environment was good.

But after I returned, a monetary tightening took place. So in January, March Chinese New Year demand, I don't know what will be the situation.

Financial year in China is from January to December, and in Japan is April to March. So January, March next year in China, that will be a new fiscal year.

So the monetary tightening, I hope that will be after the monetary tightening situation, but I'm not sure what will be the situation. In the United States, the 15th of January is the timing of a budget.

Budget has shifted to the 15th of January, and the debt ceiling is up to the 7th of February. But there may be problems.

There are concerns about problems after that. So these are included in the corporate items and eliminations.

My second question, perhaps you have not visited these places in China. I believe elevators are doing good in Japan.

But what is the update in China?

In the Chinese market, cases like orders where rare earth was discovered all of a sudden and everybody became rich in the village and they constructed buildings and invited factories using that money but all collapsed and became a ghost town. But at least in the 3 cities that I visited, that was not the case.

There are buildings being built and urbanization is going on. So buildings and hotels in the coastal area and in Northern China are having tenants.

And the economy in these areas is good. But from middle towards the West, I have not seen those places.

So I don't know. Chinese GDP is JPY 820 trillion to JPY 830 trillion, so there is still room for growth in the Chinese economy.

And looking at our orders of elevators, there are no cancellations, and payments are being made. So the Chinese elevator market, I don't think is in a situation, which the market is reversing.

My last question, I'm sorry to repeat, but about losses. In Information & Telecommunication Systems and Social Infrastructure & Industrial Systems, I believe you review past deals.

But in the last 3 months, am I right in understanding there are no new losses?

Yes, you are right.

Any other questions? I see a hand in the front.

I have 2 questions that I would like to ask. Point number one has to do with what you explained at the beginning regarding capacity utilization.

Capacity utilization worsened in the first and the second quarters. So is it correct to understand that the benefit of Smart Transformation Project will be seen from the third quarter?

Yes, that is correct.

So once capacity utilization is up, the benefit of Smart Transformation Project will start to kick in fully. So by segment, which segment will see the most benefit once capacity utilization goes up, if you could give us an indication?

Where capacity utilization will have a positive impact, that would be Automotive Systems and Consumer Products. Well, Digital Media has become much smaller, so not Digital Media, but Consumer Products.

And other than that, High Functional Materials, I think our capacity utilization will go up in these segments.

What about Power Systems? Will there be no impact?

Yes, there will be some impact or benefit for the Power Systems business as well.

My second point, just to clarify, between the first half and second half, have there been cases where expenditure is postponed, or revenue posted later than planned? Did that ever happen?

There has been some timing delay in expenses. For example, expenses that were planned were not spent.

That did happen in the first half. What's found to be an unnecessary expense will not be spent at all -- after all, and capacity utilization where it should have been up, but was not up in some areas.

So we're not trying to artificially make the numbers look better for the first half.

So these are not boosting factors, are they?

No, they're not.

Any other questions? The person in the front.

You earlier gave us the orders for the whole company. But excluding the impact of foreign exchange, how much would that be?

And my question is roughly speaking, you're answering compared to the previous year. Operating income went down last year, and it seems that the market worsened in the third quarter.

Looking at the current market situation, if it is flat Q-on-Q, maybe year-on-year may be going up. Do you think it will accelerate?

And even if there is negative impact of consumption tax, do you think revenues will go up next year?

Last year in the fourth quarter, there was a slowdown in the mass production items like Construction Machinery and High Functional Materials & Components. The present situation is that they're not going down, but we believe will go up.

Construction Machinery, the inventory was greatly reduced. There was excessive manufacturing 2 years ago, and they were not eliminated last year.

But now inventory in China is declining. Manufacturing is made according to demand and shipped.

For High Functional Materials & Components, if final products increase, High Functional Materials & Components are the first to start moving. So I think demand is increasing.

So last year, a decline, but this year is going up. So I think the improvement is widening.

My next question is on Page 6 of your presentation, the factors for changes in operating income. In the second half, do we have image of a breakdown for the second half?

If capacity utilization is improving and there is the impact of Smart Transformation Project, which is JPY 57 billion in the second half out of JPY 400 [ph] billion, and if revenue is up JPY 67 [ph] billion, I think this result could be higher.

In the second half, capacity utilization, I believe, will be plus JPY 50 billion year-on-year and minus JPY 60 billion in total. So on an annual basis, minus JPY 10 billion because there was a big negative in the first quarter.

So this impact will remain. But in the second half, I think is plus JPY 50 billion according to this calculation.

With regards to the decline in sales price, the sizable increase in the second half, so impact of sales price decline will be by about minus JPY 80 billion. But the Smart Transformation Project effect will be seen.

Decline in sales price and cost reduction, both together, the Smart Transformation Project impact in that would be JPY 57 billion in the second half, so the annual impact of our Smart Transformation Project may be JPY 100 billion. So improvement of capacity utilization and improvement of the Smart Transformation Project effect and minus for the raw material and the thermal power generation in the fourth quarter, with integration of these, will no longer be there.

So in the second half, income would improve by about JPY 60 billion. If we can achieve JPY 500 billion, we can achieve a record high.

I hope this could be achieved, but I don't know if we can realize this yet. So we have not changed the projections.

My final question, about SPE Tokyo Electron and Applied Materials are going to be merged, so the industry mark [ph] will change with this integration. Your SPE business, looking from outside, I wonder whether there are synergy.

This could be sold, and the cash could be used to other sectors like medicals. What are your views on that?

That is a good question, but it's difficult to answer. The SPE business, the merger of Tokyo Electron and Applied Materials was something we have not expected.

So if one company disappears, there may be a lot of impact in terms of antitrust law. Oligopoly may advance all of a sudden.

So with the integration of the 2 companies, what will happen to the business? I would like to consider that.

With regards to the previous question about the impact of foreign exchange, in the first half, impact on orders, it is 96%, in the first half year-on-year. If IEP is not included, it is 98%.

In the first quarter, there are some areas, which orders were weak. So on average, it is 96% and 98%.

Any other questions? I see a hand in the front.

I have 3 questions, if you could please answer. My first question is as follows: I would like to ask about the labor cost base salary increase.

I think the assumption for Hitachi is to have a base salary increase. If that's the case, then what's going to be the scope of base salary increase?

Will it only for Hitachi, the parent? Or will the scope be broader?

If there's going to be an increase in base salary, what will be its impact on your profit and loss this fiscal year and next? How should we look at that?

To the extent that you can, if you could please explain.

With respect to the labor cost, when corporate performance improves, naturally, we have to reward our employees with compensation for their hard work and contribution. Thus far, the Japanese market was in a deflationary spiral [ph].

So if we look at the Japanese market alone, profits were not increasing, but things are changing in the world. We are seeing signs of getting out of deflation, finally.

And so the Japanese economy is showing such signs of consumption taxes to be hiked or corporate taxes are to be reduced and deregulation may take place, so there could be the fourth area from the government. So considering that the Japanese market could become a growth market, again, that is what we are expecting.

So considering that, Japan, among the global advanced countries, may finally become a country where its GDP can grow again. So here in Japan as well, those who are performing very well should be properly rewarded with compensation.

So that foreign direct investment can be attracted, our corporate taxes will be changed as well. So considering that, those competent personnel should be rewarded with proper compensations, and we're thinking of changing our compensation systems to ones based on global grading and based on performance.

So given those considerations, we have to think about changing our systems internally, and increase in base salary could be one of such approaches. But that is not to say that we will change that for Hitachi group as a whole.

Because within our group, each company has its own performance. If the company's performance is up, then those who are performing well within that company should be rewarded with increased compensation, so that they would be motivated to work harder.

So we're not saying that we have made a definite decision about base salary increase. There are still 6 months to go.

And even today, people are saying that there are still risks, potentially. So if we can achieve a record high operating income, and we hope to achieve it, there could be demands or requests for salary increase.

We haven't received such a request yet. We haven't even closed our accounts yet, so we have not yet been able to have specific discussions on that.

My second question has to do with Information & Telecommunication Systems. In the first half, there was an upside in the performance.

And on a full year basis, I think profitability will be improved year-on-year. Well, your conventional explanation is that considering the business mix in your pipeline, gross margin should be improving.

So is that understanding still valid today? And what about the gross margin of new orders received on average year-on-year, is there a sign of improved gross margin?

Well, we made efforts last year as well. In the Information & Telecommunication Systems segment, in the fourth quarter last year, income was JPY 6 [ph] billion or more.

It was a record high. Prior to that, in the first half of last fiscal year, large losses were disposed of.

And so for the full year, the performance was JPY 110 billion. This fiscal year, if we can improve on and build on what we achieved in the second half of last fiscal year, we will be able to be on plan.

But as I said earlier, fiscal year 2013 is not the last business year for our midterm business plan. We are trying to expand our customer base.

We are taking orders strategically. So the number that we have presented, JPY 120 billion, will be more or less the number that we will be achieving this fiscal year, I believe.

But that is not to say that on average, gross margin is worsening. That is not the case.

But we are seeing less and less additional costs being incurred in projects that we take on. So with the projects that we acquire, we believe that we can accumulate profits.

So is there any improvement at all, is my question?

Yes, there has been improvement. It's become better compared to last fiscal year.

Understood. My third point in relation to the earlier questions.

Well, today, you've mentioned many times about the Japanese economy exiting from deflation. Does that mean that downward pressure on unit price will weaken?

Well, in the real estate or construction industries, that seems to be the trend, less downward price pressure. That seems to be the case for the IT industry as well.

So as Hitachi, within your group's business, are you seeing such trends? This downward price pressure, I don't think you've yet to reflect that in your plan.

But once such trends become manifest, what kind of positive benefit will you see in your performance, if you could please explain?

There are not many business segments where price hikes can be reflected in their performance. Of course, there are some segments where that is the case, one being Construction Machinery.

In Construction Machinery, when new products come out, they are quite different. Therefore, on average, I think prices are up.

But then as far as our business is concerned in the global market, prices are not being hiked or raised all that much. But then we stopped doing the kind of business like the one typical to digital appliances where there are substantial price reductions.

So the price reductions that we are seeing are well within our expectations. Price reductions are worth JPY 52 billion in the first half.

That's roughly JPY 50 billion. In the second half, because revenues are larger, we're expecting JPY 80 billion of effect from price reductions, so for the full year, JPY 130 billion.

That's what we have factored in. Well, if such price reductions are eliminated, it would be much better, but that's not happening.

But then in the past, new electric appliances were launched every 3 months. When that's the case, the pace of price reduction becomes much faster.

We would like to avoid that. If it's a good product, we hope users will keep it for at least a year or so.

We hope to do a business like that of automobiles, but we have not been able to implement structural reforms to that extent yet. Thus, we will have to continue to factor in price reductions in our forecast.

Any further questions? If not, then it's past the time.

So at this moment, we would like to bring this meeting to a close. Thank you for your attendance.

Thank you.