[Foreign Language] We would now like to start the meeting of the financial results for the first quarter ended June 30, 2015, for Hitachi, Ltd. Let me introduce the speakers: first of all, Toyoaki Nakamura, Executive Vice President and Executive Officer, CFO; Mitsuyoshi Toyoshima, General Manager, Financial Strategy Division; Ken Mizoguchi, Executive General Manager, Corporate Brand and Communications Division.

Mr. Nakamura will explain the outline of the results.

Now please return to the material that has been distributed to you. Please go to Page 4.

This is the highlight for the first quarter. For the first quarter, IFRS basis numbers are presented, and we have also restated the year-on-year number as well based on IFRS.

The revenues was JPY 2,314,000,000,000, which is up 7% year-on-year. The foreign exchange has changed from JPY 102 to JPY 122.

So if we exclude the ForEx impact, it is 101%. In terms of operating income, JPY 115.3 billion; Social Infrastructure & Industrial Systems, High Functional Materials & Components and Financial Services, a total of 7 business segments did better than the previous year, which is up 3%.

And this is the highest-ever result for the first quarter; EBIT, next, JPY 146.4 billion, which is up 23%; for net income attributable for Hitachi, Ltd. stockholders, JPY 54.9 billion, up 31%.

The FSA template has -- is being reflected for Hitachi, Ltd. There is no parent company, but we have provided the stipulation according to the template of the FSA.

Now the stockholders' equity ratio from Manufacturing, Service and Others was 28.4%, up 0.8% from March 31, 2015. The core free cash flow, which is a source of investment for M&A, was JPY 71.3 billion, which is up JPY 21.8 billion year-on-year.

For -- free cash flow is JPY 32.4 billion. It is a positive number.

But with the Pentaho acquisition, compared to previous year, there was a reduction of JPY 33.8 billion.

Next, going on to Page 6. This is the changes in the operating income and waterfall chart that is presented on this page.

The left-hand side is the lower sales price. Right-hand side, there is cost reduction, et cetera.

And the cost reduction and the lower sales price has -- is reflecting [ph] the benefit of Hitachi Smart Transformation Project, JPY 20 billion. There was JPY 10 billion for investment in business development, the remaining JPY 10 billion; as well as the exchange gain, JPY 10 billion; and the business expansion, JPY 5 billion.

They're all -- therefore, we have been able to absorb the increase in labor cost and depreciation as a result. Therefore, compared to the previous year, it was up JPY 3 billion.

The first quarter saw the slowdown of China market, and the telecommunication suppression has occurred. And the business expansion impact was limited to JPY 5 billion.

However, given this environment, Smart Transformation Project has been very effective. That is the reason why we have been able to post profit.

However, having said that, in terms of capacity utilization has -- was not good as expected and there is increased uncertainty in the environment. Therefore, fixed cost reduction is being expedited.

Page 7. This is the factors affecting changes in EBIT.

This is nonoperating included as well. With the business structure reform is being accelerated, 3 months ago, in the first half, we mentioned that we would like to do this in the first half.

And therefore, from the first quarter -- the business structural expense last year was JPY 1 billion. And for this first quarter, there was JPY 6 billion incurred.

Therefore, it has increased by JPY 5 billion for the first quarter year-on-year basis. However, the Hitachi Tool Engineering stake has been sold, and therefore, we have a net gain of business reorganization to the tune of JPY 25 billion.

On EBIT basis, there was an increase in -- by JPY 27 billion year-over-year. So structure reform will be underway as expected going forward.

Page 10. This is the breakdown between Japan and Outside Japan.

At the very top is Japan, so JPY 1,118.9 billion, which is 102% year-over-year. In terms of transportation infrastructure as well as information, business increased at 102%.

Outside Japan, it is at 112%. The amount was JPY 1,195,000,000,000.

There was an impact of foreign exchange, a difference of JPY 102 and JPY 122, which is having an impact. That is the reason why it is 112%.

For euro, the yen is higher. As -- by offset of this, it's 100% without foreign exchange impact for Outside Japan.

Overall, it's 107%. It's our total strength in terms of taking to consideration the utilization.

Now if you look at the breakdown Outside Japan, China was 102%. For urban development as well as smartphone, related materials increased.

Hitachi Chemicals business increased as well, but Construction Machinery has declined to about half of the previous year. For the other ASEAN regions, 114%.

In India, information business sales increased. Taiwan, Kokusai Electric products did well.

And in terms of Smart Life & Ecofriendly Systems, sales increased overseas in Asia, 114%. In North America, it's 142%, a significant increase.

The Hitachi Metals have acquired Waupaca, and also, introduction of new products took place in terms of information business. Automotive Systems in North America, revenues increased.

Therefore, it was 142% year-over-year for North America. And now North America is accounting for 14% of the total.

In terms of vision, it has exceeded the level of China, and North America is the most significant market outside of Japan. And as a result, Outside Japan is accounting for 52% of the total.

We have exceeded the 50% mark for the first time. For this fiscal year, we wanted to achieve more than 50%, but for the first quarter, we have been able to achieve this objective, exceeding 50%.

So we are proceeding according to what we have set out to do in terms of Mid-term Management Plan.

Page 13 is the balance sheet. At the very top is the Manufacturing, Service and Others.

And total assets was JPY 9,954.5 billion. In terms of FSA [ph] basis, compared to that, there is a slight compression.

So it is below JPY 10 trillion, JPY 9,954.5 billion. That is a decline of around JPY 30 billion.

And trade receivables and inventory or working capital declined by JPY 180.5 billion. In the fourth quarter, the trade receivables were concentrated.

Now it has run its course. For the interest-bearing debt, there was an increase of JPY 22.7 billion.

Trade receivables have been collected. However, for Pentaho acquisition has been completed in May, there was payment before this acquisition made, and that is the reason why interest-bearing debt has increased.

For Hitachi, stockholders' equity is JPY 2,825.9 billion, an increase of JPY 65.5 billion. As a result, moving on to -- the stockholders' equity ratio was 28.4%.

D/E ratio was 0.41x, flat. And for our financial discipline, it is to be below 0.5x.

Even after acquisition, we have been able to maintain the discipline.

Now below is the balance sheet for the Financial Services. Let's look at the stockholders' equity ratio, 6.5%, a slight decline.

About the debt/equity ratio, it's 6.53x, inclusive of balance, which is 7.06x. And for financial discipline, it is to be operated at 7.5 and below.

We have been able to maintain this discipline.

And please refer to Page 15. The other side is capital expenditure, JPY 83.2 billion, which is a 10% increase over the previous period.

Depreciation was -- has increased by 8%. For -- R&D expenditure was 78.2%, and there was a slight decline at 98%.

But from the second quarter, it is expected to increase.

Page 19. This is the information relating to segments.

The actual numbers for the first quarter is presented. Please refer to the numbers here.

But prior to that, please note that the Power Systems environment has changed. And therefore, from April 1, 2015, the Power Systems has become part of the Social Infrastructure & Industrial Systems.

There has been a change in organization. Therefore, we will have 9 segments from this fiscal year onward.

In all of the segments, we have a profit posted. And overall, we have been able to increase revenue and earnings.

But because of the China market slowdown, Construction Machinery has been declining revenues and earnings. And as you can see on Page 20, the Smart Life & Ecofriendly business, because of the weak yen, there was an impact on P&L.

And so we had increase in revenues and a decrease in earnings.

Next, let's move on to Page 22. Next is the first half overview.

Regarding the business environment, in Japan, we are seeing an improving employment environment and increase in real wages. So we are seeing a gradual economic growth in Japan.

And likewise, in the U.S., centering around the consumer spending recovery, the economic recovery is continuing. But in the -- in China, in oil and resource-producing countries, the economy is decelerating.

And in Europe, there is a financial uncertainty. And therefore, for the first half, the outlook is, as you see in this table, unchanged.

Forecast is unchanged.

Now on Page 28, you can see the full year forecast, and this is also unchanged.

Next, Page 32, please. Because we are not making any changes, I will skip the segment information.

So this is the development of the Social Innovation Business for the next stage of growth.

First, Page 33, please. This is the business structure reform, IT platform and T&D business.

As I've been mentioning from the beginning, we are executing business structure reform, and we will accelerate -- we're accelerating this to complete the majority of it by the end of the first half. Now the progress of autonomous decentralized global management, this is what we have declared and is promoting in the U.S.

Energy, health care and security will be the centerpiece. And in China, we will be targeting health care and smart logistics fields, and business plans are being formulated for these areas.

In Information & Telecommunication Systems, as I said earlier, we completed the acquisition of Pentaho Corporation in May this year. We will utilize its data analytics-related services as big data analytics platform in Hitachi Group as One Hitachi.

Now we are also commencing delivery of private cloud services to ANA, All Nippon Airways, as the IT infrastructure. And we are accelerating the structure reform, such as cost reductions and optimal personnel assignments in the telecommunications business in the Japanese domestic platform business.

In Social Infrastructure & Industrial Systems, we received the first order for Thameslink traffic management for Network Rail in the U.K. And in Myanmar, we concluded a contract to supply and install train signaling systems.

Next page, please. In the Electronic Systems & Equipment, in the Healthcare Business, as we mentioned earlier, we planned absorption-type merger of Hitachi Medical and Hitachi Aloka Medical in April next year to strengthen the Healthcare Business.

And regarding proton beam therapy, PBT, we were selected by Johns Hopkins Medicine in the U.S. and Nagamori Cancer Center in Kyoto, Japan to provide PBT systems.

In Automotive Systems, we announced the decision to establish a new Automotive Systems company that produces chassis-based products in Chongqing City of China. In Smart Life & Ecofriendly Systems, we planned the establishment of global HVAC joint venture with JCI, Johnson Controls, in the second half of this year to strengthen the air conditioning system business.

Lastly, on Page 35, this is our status of Hitachi Smart Transformation Project. The first quarter effect was JPY 20 billion, as I mentioned earlier.

Our target for fiscal year 2015 is increased to JPY 110 billion. And working towards the achievement, we are trying to improve towards the improvement of the results and the creation of cash flow.

Now our initiatives to reform cost structure and strengthen cash generation, in improving earnings, we are introducing -- Hitachi High-Technologies installed video conference system at 360 sites, and reducing travel expenses and communication costs. And so we will now sell this externally.

So we're promoting sales activities on this. And we will also expand and enhance the scope of centralized procurement.

That includes overseas business sites and utilize ESO and expand the application of global logistics reforms. Now in the improvement of cash flow, we will expand the global procurement scheme with collaboration with Hitachi High-Technologies, Hitachi Capital and Hitachi Transport System.

And for the effective cash management, we introduced a cross-border renminbi pooling system between renminbi in China and Japan. And we have already gotten this -- the license provisioned for this.

And in business process reform, we are pushing ahead with the introduction of pipeline management for the business project. And with this introduction, we started the overhaul of business process in core value chains by introducing this pipeline management.

That concludes my explanation. Thank you.

We would now like to take questions. The microphone will be brought to you.

Please state your name and affiliation before asking your question. The floor is now open.

Thank you for your explanation. I'd like to refer to Page 19 and Page 20 of the material.

Operating income growth, it seems that compared to the internal plan, is it up or down? And I would like you to elaborate on each of the segments as well.

Furthermore, Page 16 and onwards, the group segment information. Now in terms of the segments, it has been reduced to 9, but in terms of business groups, there seems to be 6.

So compared to -- for the next mid-term business plan, do you have intention of reducing the number of segments from 9 to 6?

First of all, in the segment information, what -- how do we do against the internal plan? In terms of total, JPY 3 billion was the increment.

And overall, the internal objective was around JPY 10 billion increase. A JPY 10 billion increase has occurred.

When we had the plan formulated, we felt that it is going to reduce profit. But in the first quarter, we did well and it contributed in a positive manner.

Now let me go by one by one regarding Information & Telecommunications System. It is rather granular.

About JPY 1 billion improvement has been made; for the telecommunication, declined further than expected. But the system solutions was able to increase volume.

And for Hitachi solutions, for financial and -- as well as public and social, integration has been made for this business. Of course, this had a significant impact.

Capacity utilization has increased. So the process is smooth, and we have been able to conclude contracts in an expedited manner with customers.

And therefore, in terms of system solutions, we have been able to achieve good results. In the area of hardware as well as telecommunication, there was a decline.

But solutions was able to offset -- more than offset this decline. So it's JPY 1 billion.

There's been pluses and minuses, and the result was JPY 1 billion; now in terms of industrial systems, JPY 1 billion. And fixed cost reduction measures have been followed up from April.

It has had a good impact; for the electronic system, JPY 3 billion. Kokusai Electric, a JPY 2 billion improvement was made.

Health care and the fixed cost reduction has been implemented from March of last year. And fixed cost has been reduced.

And therefore, overall, it was better than expected by JPY 3 billion. Automotive Systems, plus JPY 1 billion was achieved.

For China, there was a slowdown -- there was a decline. However, for North America, it was very strong, and volume increased significantly.

It was able to more than offset the decline in China. For Smart Life & Ecofriendly Systems, on the other hand, the air conditioning did very well.

The domestic business was impacted by the weak yen. And there was about JPY 2 billion foreign exchange impact for products returning from China, but it was offset; and the result, JPY 1 billion.

And in terms of logistics, it's JPY 1 billion. Hitachi transport was able to improve their business.

Financial Service is also JPY 1 billion. Japanese business has become lean and more rationalized through restructuring.

So overall, the impact was JPY 10 billion. Now your question regarding 6 groups for the next mid-term business plan, I would like you to wait for our response on this.

The number of segments, currently, we have 9 to -- there are some people who are analyzing that it should be reduced to 3, but we have to have a good analysis of business. To have 2 or 3 or too little in number in terms of pillars, we would not be able to meet the -- deal with the changing environment.

We need to have a good chunk in the middle and to be competitive. And perhaps 9 is too many.

So we will see reviewing this. And it will be presented to you in the time frame of May, June of next year.

Any other questions?

I have 2 questions. First is a follow-up from the last question.

In the social infrastructure system, you had upside on the first quarter, but in the material you gave me, if I subtract the plan of first half, the operating income is practically 0. So what is the background of that?

And in the Social Infrastructure & Industrial System, our potential concern is that the projects -- there are some uncompleted projects in the Middle East. So how is the progress and the risk management on that?

What is the second question, please?

So the Middle East infrastructure project risk management, please.

The Social Infrastructure & Industrial Systems, first quarter, did a good job. And in the second quarter, yes, I share the concern, Middle East, in Southeast Asia, the projects in these areas.

Initially, when I talked to you 3 months ago in May, there are still some projects that are of concern and we are working on this with the customers. And those are included in the second quarter, and therefore, this will not totally go away.

But last year, we enjoyed high revenue for the social infrastructure. In the second quarter last year, sales was high.

But Middle East -- plans in the Middle East and chemical plants, we are trying to refrain from taking the overseas projects. And therefore, the capacity utilization is down.

But if we have higher-capacity utilization and suffer from loss in the end, it's better to do what we are doing now. So compared to the second quarter last year and this year, we think the revenue will go down this year.

Now the first quarter, the positive good news in social infrastructure was the escalator, elevator business. This is still enjoying higher sales and profit in the April, June quarter.

There is still a big backlog, and so overall, we are in a good situation. However, in terms of capacity utilization, order has been declining, dropping in China from the first quarter, and this is in line with the statistics.

And so this will push down the capacity utilization, and we are taking measures to deal with that. Of course, the base is to reduce the cost, not the high, expensive condominiums on the coastal side.

It will be the inland side. So we will have volume, but the price will go down.

So we are developing these new models, and we started selling these new models in May. However, we need to increase these.

And the impact may start showing in the second quarter, and this impact has been factored in. And therefore, in the Social Infrastructure & Industrial System, second quarter is dropping.

But if this does not turn out to be true, we will enjoy better results.

First quarter, so the unprofitable project, the cost from the project; and second is the lower-capacity utilization; and third is escalator, elevator will be lower in the second quarter. So those 3 reasons?

Yes. So we are trying to take measures in China so that they will not be materialized.

This will not be the case, but in China, cost reform is becoming a focus. Until now, their top line was growing, so they were enjoying both sales and profit growth, but now they are focusing more on cost reduction more seriously.

They are more serious about cost reduction, and they need to avoid generating loss by having good credit management. So we are trying to use good credit management system.

My second question is -- so in your social infrastructure business and other businesses, the appropriate accounting is drawing attention. In your company, in order to avoid inappropriate accounting, what are the measures you have in place?

From CFO's standpoint, how can you say and ensure that, that problem does not exist? And if you could share with us your structure and mechanism on what you are doing, please?

For long-dated projects of -- in the Information & Telecommunications Systems, some projects are as long as 1 year; and the contracts, may be 2- to 3-year contract. It's not the case.

It's usually 1 year. So the contract is concluded every year, not 2 or 3 years.

And so this kind of case that we saw will not happen with us. But in the infrastructure type of business, we do engineering and manufacture products and then export and then install and -- under one contract.

So the contractor term may be 2 to 3 years. So how we manage these projects is very important.

Now when we get orders, sometimes, we have strategic orders where we get the orders for a loss. For example, if this is the first relationship with the customer or if we want to make an entry into a new market, we need -- may need to do that.

So in order to gain track record, we may make strategic decisions, which may generate loss. But we manage loss and try to reduce the loss and lead to the next investment.

Usually, we get orders with our strong products in the particular market, and so the price estimate and the customers' spec, the understanding of customers' spec, we need to be able to evaluate the technological side. If we misread the specification and think that we can do it at low cost and submit the estimate, then this leads to a problem.

And this is something that was pointed out last year and the year before that, the loss being larger than expected, especially 2 years ago. In the new market that we are entering, if we are taking up a challenge in the new market, if we make a mistake in the evaluation of specification, this leads to a problem.

This is dangerous. And that is why we are trying to enhance the frontline capability, and that's what we are saying.

That's what we are trying to do right now. So first of all, we need to appropriately evaluate the specification and then, say, we need to do cost reduction to beat the other competitors.

However, the resource to be able to do that; human resources and the technological capability and the production capability of the companies and the installation capability overseas. If we do not take a look at that and if we only calculate on the tabletop, then this leads to a mistake.

So we do internal evaluation. We do phase-gate management and submit the estimate.

That's what we do. After we submit the estimate, the risk is 80% covered, and so that is the big part.

Now after we submit the estimate, we -- the next key is how we can manage within that, cost and the selling price and the delivery timing. So that requires the management tool and the technological capability.

We have a project management tool, and it differs from business to business. Large business or a small-sized business, the tool differs.

So this project management tool is appropriately used, and this is linked to WBS, the work breakdown structure. So it flows from one process to the next and to the next.

So the duration term and the cost is closely monitored, and the costs -- our direct personnel do the work or the designers may do the work. Or sometimes, we may outsource.

We may purchase products. We may purchase parts or have the outside people do it for us, so the part we order.

And then we validate and then we post it as our cost. The timing differs.

And so how much progress for the parts that we order, we have to monitor that. The ones we validate and inspect and post cost as the work in process, we have to be able to see all of that.

But we cannot wait until the end, so we need to be able to see how much progress is made in the project. So sometimes, we need advance money or we need certain amount of work to be able to get the upfront.

So this kind of project management, not just in the P&L, but we need to do this from a cash flow point of view and from accounting point of view, percentage of completion basis is used. So if this -- rather than thinking that this percentage of completion basis is dangerous, we need to utilize this in the management and receive upfront money and abide by the construction timing.

And that -- and the accounting method is put together, and that is what we do under the percentage completion basis. So we want to utilize this.

But if it's a black box and if the designers manage it or if the local installation, the construction people, manage this, if it's a black box like that, then the data will not be valid or trusting. And therefore, we have project management office.

We have an outside independent people who do that in the manufacturing, procurement people or the inspection testing people or -- and of course, finance people are involved to look at the progress. For example, if the material is ordered and if it's not included in the future cost, that's not -- that should not happen.

That cannot happen, and so that is what we want to utilize for cash flow management. So as far as I can see, we should not have any large accounting irregularities.

I am taking a look at this, and I can say that we do not have such inappropriate accounting. We have been doing the accounting for about 4 years now.

We have the board and the Audit Committee. They do the management check.

And the head of the business units or the business, if they seem problematic, then our internal audit office will receive the instruction. And we do the consolidated auditing.

And so we do the vertical-connected audit, not the regional audit. And so we have a consolidated business auditing.

And so if there is a problem with the management, then the internal audit will check that. And also, the basic task of the accounting is being checked.

And so the result is handed to the accountant, and they do the year-end accounting and the quarterly review. So the information is shared with the internal office -- audit office and the auditors.

And if one problem is identified, it will be watched for a very long time. So until the problem is resolved, the issues will remain and will be watched so there will not be any overlooking.

So a tripartite cooperation audit, this is what we are trying to do between the board and CPA. So it's not formalities.

We are sharing information and checking, utilizing this to check each field, each part in charge. So we just -- we don't say it.

We do it. We are sharing information and following up on the improvement so this percentage of completion basis can be utilized in a positive way, I believe.

We'll take the next question, please.

I have 2 questions. One question is similar to the previous question.

I felt that in Hitachi, it's -- cost of goods sold and appropriate accounting and the continuity have been emphasized for Hitachi. When the Toshiba scandal occurred, I felt that the quality of the numbers presented must be evaluated fully.

In terms of pension in your company, the discount ratio is different to other companies. And apart from window dressing now your policies, your very stringent policies, if that is to become lenient, how far can you push out the profit of Hitachi?

That is what I'm interested. The JPY 600 billion is what you have for this fiscal year.

But if you become lenient, do you think you will be having an upside of JPY 200 billion? Or is it the upside limited to around JPY 100 billion or JPY 50 billion?

I would like to know that. If the assumptions become more stringent compared to others, of course, it can't be outrageous, but if -- I just want to know how the numbers will differ if you were to become lenient as the other companies in the industry.

Before I became the CFO, when I was in charge of the finance department, we were super conservative. That was before 2000 in Japan.

The audit report legend issue had occurred, but after that, whether it be super-conservatism or super-optimism, not permitted in terms of accounting. Therefore, I don't think there is much latitude.

There is not much leeway. In the past, when we closed our accounts, we were rushed for time.

And therefore, we have to close an account at a certain juncture, but a customer could pay us and that means that we have to pay incremental tax because we had to make a revision. But in -- so there was a change.

There was difference between the accounting period and the taxation period. But nowadays, we are requested to close the gap.

Even if it's not possible on a parent company basis, we have to do this on a consolidated basis. More accurately, internal control audit will be conducted.

And if there is a major defect, it will be written in the internal control report by the audit parties. And therefore, JPY 100 billion difference cannot be the case because in the audit report, there is audit difference, but that's in the range of several percentage point of the profit.

It's limited to that level. And therefore, I don't think there could be a significant gap.

In terms of project management, for one, there is technology impact. Let me give you a simple example.

For semiconductor as well as LCD don't do this now, there could be a certain yield. And currently, it could be 60%.

Next year and the year after, when you put forth the forecast, the 50% to 60% this year becoming 100% is inconceivable. But if it's 70%, with the steadfast effort, it could be achievable.

Therefore, you can -- if you incorporate the factors of new technologies for the future, there could be some diversion of views of engineers. There is attitude.

There is difference. And for major projects, I believe that it could be very significantly different whether it is conservative or if you're optimistic, taking into consideration innovation as well.

So it's not just accounting difference but whether you are going to incorporate the 2 technologies, a new innovation, may have an impact, which is different from company to company.

Regarding your forecast or setting up -- formulating the mid-term business plan, the technological advancement could -- taking into consideration yield, can increase from 50%, 60% to 80% or 90%. That is conceivable, but currently, for this term, the yield of 60% becoming 90% is impossible in a business like semiconductors.

So what is conceivable is when there is a mistake in process, there could be a mistake in terms of the frontline. But in terms of design level, a sudden improvement of yield is not possible because if it's a difficult process, the front process could be 3 months.

In the mid to long term, there is impairment test that could take place. How should we evaluate such an impact?

That is a future plan issue. Therefore, in terms of if you have an impairment test, if there is a significant number for the future, now there could be a significant collection.

Therefore, impairment will be limited in certain cases. But the forecast of red ink, there is a phenomenon size before that.

So if you have red ink and if you're going to have a significant profit thereafter, you need certain initiatives or measures. Otherwise, there is no reliability in terms of the calculation method.

So it will not be adopted. So for 3 terms, red ink becoming positive from the next term is not acceptable because the evaluation is made according to the past track record.

And if you consider -- if you continue to have red ink, further improvement may not be reliable.

But if there is a red ink and with new technologies, if you're going to improve the business, is that possible?

It could be backed by technology, and we are -- if we are developing new products, development cost could be significant. Once it is completed, they will become better.

And when the order is placed and -- for the customer, if we have a phase-gate management, it is possible.

But would you say that the difference is not so significant?

In 2007, 2008, the fixed assets have been extinguished. That has taken place in the past.

So if red ink, loss-making is continuing, it cannot improve.

Regarding the economic risk in China and Hitachi High-Technologies, orders received is declining. It seems that the smartphone business is declining.

But for this term, you had a conservative outlook for this fiscal year. So are you -- is it within your expectations?

Or for China, what is your expectations for the fiscal year in terms of revenues? So please elaborate.

In terms of China, we are -- have a conservative evaluation. What is going to be impacted the most is Construction Machinery in this area.

In terms of tolerance expectations, we are in the -- within the expected range. But if you ask me whether we're going to see recovery in the second half, that does not seem to be the case.

Therefore, it is within our expectations, but we want to deal with excessive inventory. There might be some displaced.

In terms of the year, there is 2% increase for the first quarter. But full year, it could be negative, do you think?

There is a possibility, but yen, it remains weak. And 1%, 2% -- dollar, yen, the renminbi are linked.

So it is around 86%. So even at 1%, 2%, the capacity utilization is down by 14%.

This is most apparent in Construction Machinery. Second is automotive parts.

And therefore, for automotive parts, North America remains very strong. Therefore, it will be positive because of the offset.

Any other questions?

I have 2 questions. First question, the first quarter confirmation, so JPY 10 billion above the plan when the assumed rate is JPY 115 per dollar and JPY 120 per euro.

So rough calculation shows this already goes up to JPY 10 billion upswing.

No, JPY 5 billion.

Okay, JPY 5 billion. So you had an improvement of JPY 5 billion?

Yes, it's JPY 5 billion, JPY 5 billion.

On the other hand, these corporate eliminations, it is positive again, JPY 2.7 billion in the first half was 130 -- JPY 13 billion negative?

First quarter -- the previous fourth quarter sales was large in our case. And the intersegment of the internal sales, the corporate elimination, that part was big.

And so that was the unrealized profit, unrealized gain, and so we eliminated internally in the fourth quarter. And in the first quarter, the ones that A bought from B, then it will be an inventory on B.

And so this is eliminated on the corporate level. However, the -- B sells to the customers.

And so this accumulated unrealized gain will be released. And so this becomes posted in the first quarter.

So that is positive.

How much is that?

I don't have the absolute number, but on a quarter -- on the adjusted basis, it is minus JPY 5.6 billion. And the majority is the difference of this unrealized gain.

My second question is about the -- how you look at the first half. Now looking at second quarter, if you do the calculation, the social infrastructure, you mentioned earlier, but on the -- company-wide, last year second quarter was JPY 150 billion down to JPY 104 billion.

So it is down significantly. So it seems like you are saving a lot or not.

In oil and gas and telecommunications, you said you will follow through. But with the amount JPY 5 billion or JPY 6 billion, were you able to secure some buffer, including the corporate eliminations you mentioned earlier?

So how you look at this first half, I would like to know, like will you have an upside of JPY 30 billion or JPY 40 billion like you had last year?

This time, the first quarter was pretty good. Order was strong.

But looking at China alone, elevator order is declining and the price competition is becoming more intense. So the numbers each department is looking at is becoming more stringent.

Now the ones I said we need to secure is about JPY 8 billion. We cannot foresee the market environment.

So this time, we did not change the numbers. When we announced our results in May, I mentioned JPY 220 billion.

So on a year-on-year basis, this is down in operating income. There is geopolitical risk [indiscernible] risk as I mentioned in May, but I did not have a good traction or a good grasp.

And in that sense, first quarter was not as bad as I thought. It was better than I thought.

However, second quarter, Shanghai Stock Exchange is like that, as we see. I think North America will be okay.

However, Australia, China, Southeast Asia, especially Thailand and Malaysia and Indonesia, these areas, countries are sluggish, weak. And so I hope that it will not be worse than now but...

This China, 86%, was this better or worse than you thought?

It was worse than we thought, but the biggest factor was Construction Machinery. It was 60% or less than 60%.

Inventory is coming down, but we wanted to reduce the inventory more, but it did not go down as we wanted. So China, in a long-term perspective, it will improve in the long run.

But this first half, we are taking a close look.

Last question. I may have asked you before, but as you mentioned, Nakamura-san, you said that profit goes down in the first half and improve in the second half.

But it seems the opposite given the foreign exchange situation. Now second half, you will increase your operating income by double digit.

What is your current forecast, please?

I would love to say with 100% certainty, but we're not there yet. In the information and telecommunications segment, hardware sales is down as planned, as we thought.

And so how we can -- with system solution service, how we can cover this with system solution service is the key. And it is a big target.

The profitability will be better and the size is becoming better, bigger. So what's different from the past?

Project management is significantly better. It's improving.

Usually, right around now, when I talk with you, around April, we have some concerns on some projects, but we don't have such project of concern. So we are improving.

It's because the projects are becoming larger in size and customers are doing bigger. And the customers who are -- there are not too many first timers, first customers.

And we have some failure cases and experiences, and customers have failure experiences. And so we separate the projects in phases and move in a steady fashion, and the customers have deeper understanding on moving in phases.

And so in finance and public, we are starting to make improvements. I think we are making progress in Japan.

So in that sense, system solutions, I want them to do better. And closing the order contract is the key.

In the first quarter, we concluded contracts earlier than normal. And so with that, we will be able to check and reduce the risk.

What about other segments in the second half?

The one I am concerned the most is social infrastructures -- infrastructure. However, the projects that we are working on now, we are avoiding risks.

We are not taking risks. For example, the Middle East construction and the overseas chemical plants, there's much construction.

So they are not good. And so we are not doing them, and that is why we're seeing low-capacity utilization.

However, last year, we did the ones we knew. We did not have much surprises.

And so those projects are being managed so that they will not deviate from our plan. For infrastructure, the water, environment and the industrial plants are our focus going forward.

So what we are doing, what we can do is Japan. So we will focus on projects in Japan going forward.

And this, we should not see much deviation or surprises. But as always, in the fourth quarter, infrastructure team -- it's Japan.

So government and others, they tend to concentrate in the fourth quarter, and so that's my concern -- a bit of concern. It's not the ones that we have already secured the orders.

They are ones the project that we want to get but the contract has not been decided, and there is no percentage of completion basis. If it's tens of billions of yen, then it will become percentage of completion basis, but they are smaller and there are many like that in Japan.

And overseas, motors, inverters, inverter compressors and inverters, large ones, are made and installed, and that's the end, no construction. And with Aramco, we are working on them on securing these projects.

So we have the basis, the foundation. But in the fourth quarter, there are some orders that we have not captured yet.

So in the second quarter and onward, we would like to manage the orders, order taking and secure them. Thank you.

Any further questions? Please.

Now I just have 3 simple questions. First question is regarding what you have talked about, the fixed cost measures that will be implemented according to your explanation.

What is within the scope? Is it telecommunications?

Is that an area that you're going to make further efforts? Or is it Construction Machinery where new areas, new measures is being contemplated?

Is that the case? Please elaborate.

That's my first question.

Regarding fixed cost measures, reduction measures, from the very beginning, what was visible, the structurally problematic areas as well as the businesses where the market has changed. So that is the telecommunications side, the carrier side.

Investment is being curtailed for. So there is -- has been a decline.

So that means that there is more significant measures that will be required in this area. We have to expedite this process.

And for infrastructure, similar situation occurs, and for Power Systems as well. The necessary area and the -- otherwise exist within the Power System business.

Therefore, measures are being implemented accordingly for this business as well. For health care, we have advantage [ph] costs and in fact, compared to what we have expected, more -- there were more volunteers.

And therefore, the fixed expense reduction has made headway in health care. We have implemented the headcount optimization earlier than others.

That is the reason why there was a significant decline in this area, but the expected areas are not doing well. Therefore, the measures have been implemented from March onward.

It is not expanding. So what is being planned are being implemented in a steadfast manner.

You talked about the China elevator orders are declining. Has it declined from April onward?

And what has been the magnitude on the decline? Is it one digit or is it more than that?

Or you can just give me the image, please.

It has declined from April to June. January to March, it was looking rather tight, but what is the timing in which it has become apparent is from April, June onward.

Now in terms of the magnitude of decline, I don't think it's double digit. However, having said that, it -- isn't this market is going to do this appear?

We don't have that sense of crisis because after all, it has the size of 6x more than in Japan. So in the inland area as well as west, if anything, it is increasing.

And the coastal area business is mainly luxury construction. So there has been a change.

Regarding plant area [ph] in the second quarter, there were some loss-making projects existing as well. What is the scale of this?

Is it several billions? What is the level?

It's about -- so what is the level? For Social Infrastructure & Industrial System, if you refer to Page 25, this is the accumulated total for the second quarter.

Now from the very top, the Social Infrastructure & Industrial System for EBIT as well as adjusted operating income is around JPY 13 billion to JPY 14 billion below year-over-year, where there is less capacity utilization. And when the prices are struggling in terms of elevators and escalator, JPY 4 billion to JPY 5 billion is about minus 1 -- minus JPY 4 billion to minus JPY 5 billion.

That's both. Inclusive of Middle East for the overseas project, the risk is such that JPY 10 billion is being earmarked.

And that is where there is a significant decline year-over-year, but we are hoping that this will not occur. This will not be realized.

But it isn't as if I can control this, but the project management is being strengthened so that this will not be incurred.

So last question, please?

One question, please. The way you look at the capacity utilization.

In the past, when the macro economy dropped and when you had lower capital capacity utilization, it impacted the profit. Now in the elevator, escalator, the risk of lower capacity utilization, you are trying to cover this with volume and the number of models.

But in other divisions, other businesses, some divisions, where the profit can be impacted from the capacity utilization from April, June to July, September or October, December quarter, a direction or your view, please? And if it will decline, then what countermeasures are you taking?

And what is the impact on the profit?

Capacity utilization decline impacting the profit, that means there will be shortage of recovery -- of fixed cost. So if this becomes a big impact, if it seems like it will be a big impact, we need to reduce the fixed cost.

So from March, we have been working on that. And the biggest portion was the telecommunication carriers, switchboard, switch machine equipment.

This was large, and that's what we had last year. We were impacted negatively last year.

And we said, "Why didn't we know this earlier?" But now we know.

So we are trying to thoroughly change the structure. And in other areas, we will be doing the same.

In the past, a big capital expenditure was done and then made some estimated production and then did the write-down or impairment. And the biggest one was hard disk drive and TV and panel, flat panel.

So these 3 were big. The market was something we could not capture.

We could not grasp or have good control of the market. So if the capacity utilization is going down, then we need to reduce the cost beforehand.

If it's people, then we can lay them off. But equipment, if we make an investment after making JPY 50 billion, JPY 100 billion investment and then the capacity utilization declined, then we cannot do anything about it.

So we've been taking steps up to 2009. In the past, when we saw the capacity utilization decline, the profit was heavily impacted, but now our structure has changed.

And so the escalator, elevator capacity utilization is dropping, but is this dangerous? This business model is such that maintenance is already secured.

Maintenance business is already secured. So this gives us stable profit source.

Until then, it was not the case. In China, there was a big demand for new buildings, and therefore, it's free of charge.

Maintenance is free of charge for the first 2 years. And so during the 2-year free period, we end up doing so much free work, free-of-charge work.

But as we saw the decline in the new building demand, the proportion of maintenance, the stock is up. And so we are starting to have a more stable business model.

So what we are doing in China now is to brush up, improve our maintenance capability. And we need to work on the technology, too.

So this is what we are doing beforehand in an upfront fashion. So we have changed the structure.

So we will not be heavily impacted when the revenue drops. So what we can see, we are trying to take measures quickly and change the business model accordingly.

We are working towards that.

So first quarter order was strong, but looking at your current situation, you are not seeing a significant slowdown. You have some buffer towards the second quarter.

I don't know if it's a significant buffer. I would like to ask people myself, but first quarter order was good, strong.

But we are following up on a quarterly basis. And second quarter is still slow, conservative.

And so we are looking at the numbers on a monthly basis and see how the first half will be like so that we can avoid big surprise. Thank you.

With that, we would like to end today's briefing. Thank you very much.