The time has come to start the meeting to announce the consolidated financial results for the first quarter ended June 30, 2017, for Hitachi, Ltd.

Mitsuaki Nishiyama, Senior Vice President and Executive Officer, CFO; Tomomi Kato, deputy general manager of the financial strategy division; Ken Mizoguchi, executive general manager of the corporate brand and communications division.

Mr. Nishiyama, please.

Now please refer to the PowerPoint presentation in listening to my presentation.

First of all, I would like you to refer to Page 5, 1-2. This is the consolidated statement of profit or loss.

Now the center is the first quarter results. The revenues was JPY 2,088.6 billion compared to previous year, a decline of JPY 41.7 million (sic) [ JPY 41.7 billion ] or a 2% decline.

The reason is, because we had the portfolio reorganization, Hitachi Transport System, Hitachi Capital Corporation and Hitachi Koki have been subject to a portfolio reorganization. But if we subtract the portfolio impact and the foreign exchange impact, it has grown by 6% organically.

Now the adjusted operating income is 131.8% (sic) [ JPY 131.8 billion ], and the operating income ratio is 6.3%. This is a JPY 40.3 billion increase.

As for the portfolio, it's [ 68% ] without the portfolio reorganization impact.

EBIT was JPY 143.2 billion. And the net income attributable to Hitachi, Ltd.

stockholders was JPY 75 billion or increased by JPY 18.6 billion or [ 33% ] increased year-over-year.

Next is 1-3. This is the -- these are the factors affecting changes in revenues and adjusted operating income.

Macro analysis is presented here. In terms of revenues, portfolio reorganization impact was JPY 170 billion negative impact.

As I mentioned earlier, this is for the Hitachi Transport System, Hitachi Capital and Hitachi Koki being subject to reorganization. The foreign exchange impact was positive JPY 13 billion.

Business scale expansion impact was positive JPY 115.3 billion. Now regarding the content of JPY 115.3 billion, Bradken, H-E Parts acquisition has been included.

And Hitachi Chemical's acquisition of FIAMM is also included in the business scale expansion. So M&A acquisition impact was the JPY 37 billion, and the JPY 70.3 billion is the organic growth.

To the right, we have the adjusted operating income and with the portfolio reorganization, minus JPY 15 billion. Foreign exchange impact was positive JPY 2 billion.

Profitability improvement, JPY 53.3 billion positive, has been recorded. In the JPY 53.3 billion, Hitachi construction material (sic) [ Hitachi Construction Machinery ] as well as Hitachi Chemical's impact is also included, and overall it improved by JPY 53.3 billion.

Next is 1-4, revenues by market. To the right, please refer to the year-over-year percentage.

Japan was at 93%; outside Japan, 103%. Total is 98%.

In terms of outside Japan, 53%, increased by 2 points. Foreign exchange as well as portfolio impact is included.

Although it is not written here, let me give you the numbers specifically. For Japan, it's 101%.

Outside Japan is 110% instead of 103%. Asia, inclusive of China, this is 112%, but it will be 116%.

And in China, it says 113%. It will be 119%.

ASEAN, India, other ages (sic) [ areas ] is 113%. And North America is 103%, and Europe 102%, and then 125% for other areas and 106% overall.

So for the overseas increase, so organic increase was 10%. In particular, we saw strong growth in China.

Hitachi construction materials -- Construction Machinery as well as automotive system business grew significantly. And for ASEAN, India and other areas, Hitachi high tech, Hitachi Kokusai Electric semiconductor production equipment grew significantly.

For North America, increased by 3%; 2% in Europe; and other areas, strong growth was seen, for the acquisition of Bradken contributed significantly.

Next is 1-5. The balance sheet summary and cash flow statement is presented at the very top.

For total assets, compared to the previous trend, there has been no significant change, ended JPY 9,691.4 billion. Third line from the bottom is the cash conversion cycle, it came in at 67.9 days.

Now compared to the end of previous term, end was 72.2; and a reduction of 4.3 days but then first quarter was 61 days year-on-year. This is because of IEP cash increase, but plan was 73 days for the first quarter.

And therefore, compared to that, in terms of operation there was an improvement of 5 days.

The stockholders' equity ratio was 31.1%, 0.4 point increase. D/E ratio, 0.3x, flat.

At the very bottom, we have the cash flow, and this is JPY 22.3 billion. And cash flow on operating activities, JPY 126.9 billion.

For cash flows from investing activities, it is a decline of JPY 104.6 billion or increase in expenditures. In the first quarter last year, Hitachi Transport System was subject to reorganization.

There was revenue. And first quarter, there was Bradken [ tier B ] expenditure and means that expenditure increased.

And however, we have been able to have a positive cash flow of JPY 22.3 billion.

Slides 1.6 -- 1-6 and 1-7. I would like to discuss the sales and operating income by business segment.

Over the 9 segments, others, because of reorganization by a subsidiary; and for Financial Services, impact of reorganization of Hitachi Capital was there. So there were declines in others and Financial Services.

All the other segments increased.

Now Information & Telecommunication Systems year-on-year sales were flat. Storage and ATM sales in Japan were down.

And system integration business in Japan continued to be robust, and there was an increase. So on a net basis, our sales were flat year-on-year.

And in terms of the operating income, there was effect from structural reform, especially for IT products. The effect of structural reform is enjoyed.

And system integration business in Japan, especially SI business, profitability was up. And so JPY 14.9 billion increase year-on-year in the adjusted operating income for Information & Telecommunication Systems.

EBIT, well on top of JPY 14.9 billion increase in operating income, EBIT also increased substantially by JPY 25.1 billion year-on-year.

one, withdrawal from low-profitable business in industry and distribution field. There was a positive impact from that.

And another factor, profitability improvement in the industrial products business; as well as profit increase in railway systems business. Because of these 3 positive factors, an increase of operating income by JPY 9 billion year-on-year.

Now in terms of EBIT, there was impact from ForEx fluctuation as well as equity method. In total, it increased by JPY 22.6 billion year-on-year.

one, sales increase in China; and another -- the other, acquisition of Bradken and H-E Parts. Because of the positive impacts, a 31% increase in Construction Machinery, in revenues.

And because of increase in revenues, adjusted operating income was up JPY 14.3 billion.

Next, High Functional Materials & Components. Sales increase in electronics and automotive-related products was posted.

And there was the acquisition of FIAMM Energy Technology by Hitachi Chemical. So because of the effect of M&A, up 12% year-on-year in revenues and, because of that, JPY 3.7 billion increase in adjusted operating income.

Next, on Automotive Systems, both in Japan and China, sales increased. So up 5% year-on-year.

In line with that, adjusted operating income increased by JPY 3.1 billion year-on-year.

Moving on to the next slide, 1-9. Smart Life & Ecofriendly Systems.

Demand in Southeast Asia was sluggish. Therefore, it was 94% of the previous year, down 6%, but on the other hand, we were able to proceed with cost-reduction efforts.

Therefore, operating income was up by JPY 1.4 billion year-on-year. As I said, in the others and Financial Services segments there was reorganization of Hitachi transport and Hitachi Capital.

Because of these reorganizations, operating income was down for the others and Financial Services.

Now moving on to 1-10, I would like to highlight some topics.

According to our initial plan, in the first quarter, we were to have a little under 20% progress rate in terms of revenues, but the actual was 21.5% at JPY 204 billion. So it was on plan or actually better than plan.

Now another topic I would like to mention is the acquisition of Sullair. As of July 12, we completed the acquisition of Sullair, in the second quarter.

And onward, we will be incorporating Sullair's sales and income into our consolidated performance. And on a dollar basis, JPY 138 billion of expenditure in the second quarter, $124.5 million.

And in terms of sales, JPY 30 billion; operating income, JPY 0.5 billion. So these will be reflected in our performance.

In JPY 0.5 billion, there's amortization of intangibles as well as one-off expenses, JPY 2.9 billion for amortization of intangibles and JPY 2.1 billion for one-off expenses. So JPY 2.1 billion of one-off expenses.

Excluding that, operating income, JPY 2.6 billion. That's 8.7% margin in terms of the operating income margin.

On a full year basis for fiscal year '18, sales are projected to be roughly JPY 50 billion. Operating income margin, because there's going to be no more one-off expenses, even after amortization of intangibles, we will have a margin of 10%, in terms of operating income margin.

Now moving on to the next page, Slide 2-1. Now the assumed foreign exchange rates for the second quarter and onward for the yen-dollar rate, JPY 110 to the dollar, which is unchanged from our initial assumption; and euro, JPY 120 to the euro.

As of May, our assumption was JPY 115 to the euro, but now yen is depreciating, so JPY 120 to the euro. Second quarter and onward, ForEx exposure in terms of operating income, JPY 2 billion if there's a change of JPY 1, and 1 billion in euro.

So these will be the ForEx exposures for both the dollar and the euro.

Now for the annual outlook, for every business, so our understanding is that we are off to a very good start in terms of performance. By segment, for all the segments, we have kept the forecasts unchanged.

Until the end of the second quarter, we believe that the environment will continue to be favorable, but in the second half, uncertainties still remain, so we have kept the forecast as it is. Now we changed the euro assumption, and so there's reduction by JPY 5 billion; in terms of operating income, JPY 30 billion; in the EBIT, JPY 75 billion.

So risk reflection has been increased by JPY 5 billion because of the change in the ForEx assumption for euro.

In the first quarter, we were able to have the record-high operating income. And operating income margin was 6.3%, a record high, a very good start in the first quarter, but uncertainties still linger in the global economy.

They are still there. Even under those circumstances, however, we would like to stick to the mid-term business plan.

Centering around Lumada, we would like to drive solutions business and continue to improve profitability so that we can have continued profitability improvement as well as capital efficiency.

So that concludes my presentation. Thank you for your attention.

And we would now like to open the floor for questions. Please wait for the microphone to be brought to you.

And state your name and affiliation before asking your question.

I have 3 questions. Well, first of all, from MHI, you have a litigation.

Please give us an update. Second point is the following, on Page 9 and onward.

So what is the deviation from the internal plan by segments? Please give us this information.

The third question is as follows. In terms of social infrastructure and industrial system, on Page 24, the revenues details are presented.

Now in terms of building system as well as railway as well as industrial and distribution, please elaborate further, comparing year-on-year and where there is a large deviation. Please elaborate.

Regarding the South African project, we are still continuing to engage in consultation. We have established MHPS.

This is an important joint venture for us and for MHI, have been in the past and will continue to be a very important partner for Hitachi going forward. Therefore, we would like to engage in consultation in good faith on a continuous basis.

Now you ask me about update. There has been no significant changes in terms of the consultations that are taking place at the time of integration.

And well, the South African project, there was a process outlined for adjustment, and we have received the past data to clarify this point. And we have also received further detailed data to further clarify.

So through the evaluation of data, we are engaged in consultation. Now in terms of internal plan, the deviation against the internal plan, for the first quarter, in terms of revenue, JPY 60 billion; operating income basis JPY 20 billion, improvement have been made, respectively.

In terms of the breakdown, for information and telecommunication system, in terms of revenues, JPY 10 billion increase. Operating income increased by JPY 5 billion.

Now the JPY 5 billion increase is an increase in revenues at storage. And product mix, high end was better than the original plan.

That has driven this improvement. In terms of Social Infrastructure & Industrial Systems, JPY 15 billion increase of revenues.

And operating income increased by JPY 5 billion. Now the improvement in operating income, this was driven by the revenue increase from the second quarter.

Or frontloading of the revenues from -- has been achieved for building systems. Elevator business, cost reduction has been achieved in this area, making a contribution.

In terms of Electronic Systems & Equipment, revenue increased by JPY 15 billion than planned, and operating income exceeded the plan by JPY 5 billion. And semiconductor and production equipment, Hitachi high tech, Kokusai Electric semiconductor production equipment have been strong, driving this improvement.

For Construction Machinery, a JPY 15 billion increase in revenues. And operating income increased by JPY 5 billion, driven by China and India revenue increase.

Capacity utilization has increased, making contribution to these profits. For High Functional Materials & Components, in terms of profit, no change from plan, but the revenue upside was JPY 15 billion.

This is -- the materials corresponding to the product has increased, driving this improvement in revenues. So in total, JPY 60 billion in terms of revenues and JPY 20 billion improvement -- in operating income improvement has been made against our original plan.

Now to your third question, regarding Page 24, the profit increase will be further elaborated. Now in terms of industrial systems, it is increasing across the board.

The industrial BU is also improving. In terms of railway business, it is improving as well.

And in terms of building system, compared to previous year, the revenues are increasing, but in China the number of units are increasing but the unit price is subject to fierce competition. And when we look at the mix, the average price has gone down year-on-year.

Therefore, there is a decline in profit for building systems. Now regarding the -- you said litigation with MHI, but that is a correction that is required.

There is no litigation yet. That has not occurred.

Any other questions?

My first question is this. Increase in revenue, 106% over last year.

It was very easy to follow, but Page 9 and onward, by segment, actually what was the case? If you could give a segmental breakdown.

So that's my first question. And my second question is as follows.

The building business in China, what is the market trend and the forecasts for the market? And what is the potential growth in the future?

According to your competitors' comments, they seem to view the market rather pessimistically, so for the elevator business, how do you see the future in China? And my third point, well, you said that it's still uncertain in the second half, but what is the market forecast for each business, if there is anything noteworthy that you can share with us by segment?

That's my third question.

So I would like to address your second and third questions. And following that, for the first question, Kato-san will give you the segmental information.

First, about the building-related business in China. Demand, in terms of demand and the number of units sold, it's on the rise, but as I said, competition is very intense.

And it's turning into a price war. And so prices are down because of the harsh competition.

And as an initiative to counter that, we would like to expand repair service and export from China to Southeast Asia. Those are the initiatives we have.

And because there is still robust demand for investment, we are offering mid-range-priced products to cover a greater part of the market, but high-end products with higher margin should also be increased. And we would like to capture more of that demand, and by so doing, we would like to secure enough profitability.

That's another initiative that we're pursuing. In terms of demand, as I said, demand continues to be brisk.

And the volume of sales will continue to rise for the time being, as we see it. And if I may move to the third question that you raised: Investment in the second half in China.

Well, it's still uncertain. Uncertainty still lingers in the second half of year '17.

For one thing, what is going to be the forecast for the building-related business in the second half? That is still unclear and uncertain.

That's one factor. And overall, Hitachi Construction Machinery, up until the second quarter, we believed the performance will continue to be quite good, but in the second half, especially in the Chinese market, well, the favorable performance continue.

We will have to continue to carefully monitor how the performance is going to evolve. So until the end of the first half, I said that the performance will be pretty good, but second half of FY '17, there are going to be geopolitical risks perhaps affecting our business, especially machinery, elevators, automotive markets.

There are a lot of big businesses that we have in China, so in the second half, we need to carefully watch how the demand is going to evolve.

So to address your first question, the information by segment, the operating income increase and the breakdown by segment -- not necessarily operating income. Revenue, I think, was the question.

Excluding reorganization and ForEx, 106%, we said, but to give you the number by segment: for information in telecom, 99%; Social Infrastructure & Industrial Systems, 100% of the previous year; Electronic Systems & Equipment, 114% of the previous year; Construction Machinery, 128%; High Functional Materials & Components, 110%; Automotive Systems, 104%; Smart Life & Ecofriendly Systems, 93%; others, 100%. So that is the breakdown.

If I may ask for supplemental information. What is the volume increase in China?

What is your forecast for the next few years? How much growth in terms of percentage are you expecting in the China market?

We don't have the number based on volume that we can share with you at the moment. Well, in terms of new construction, last fiscal year, 490,000 units.

And for the newly constructed equipment, I think a similar growth or a similar number will be achieved this fiscal year.

Does that mean that the business is going to be flat in terms of volume, so there will be no increase in volume?

That is correct. As far as newly constructed is concerned, that is the case.

Next question, please.

I have 3 questions. My first question is related to the previous question.

In the United States, currently the automobile sales slowdown is becoming very significant. And for the second half for automotive parts, automotive system business, what is your outlook?

That's my first question. Shall I give you all the questions, first?

So let me respond one by one. Regarding the automotive system business, it remains very strong for the time being.

For Japan and China, the business is strong, but for the U.S., demand growth is not growing as much as expected. As I mentioned earlier, by region, data has been presented.

And I said that U.S. is not growing.

And this is one reason why the U.S. market is not growing for us.

China has room for growth, and in the second half, there is demand. And we feel that in China automotive system business will continue to grow.

In the United States, I don't have the volume number, but in the U.S. it's basically flat, I believe.

In terms of profit, the performance is according to plan. Revenues on an annual basis for automotive system overall, China is strong in growing revenues, and we would like to achieve the outlook of JPY 1 trillion.

That's our plan. So for the U.S.

we don't have plans for significant growth.

And I would just like to add to -- that is the case for North America. And demand is slow in the United States.

That is the reason why the forecast is flat.

Regarding the information and telecommunication system, the 6% growth in the first quarter is very strong. Now in your explanation you said that revenue has increased.

And so you also emphasized high-end storage, so it seems very -- it seems as if it's a one-off achievement. But in the area of Information and telecommunication system, what is your actual strength in terms of the first quarter which is not one-off in terms of the actual image for your profit margin?

Please comment.

It is not really onetime, but product mix was very favorable for us. And that is the reason why we had upside over our plan, but on a continuous basis, IT products, for 2014, 2015, 2016, business structure reforms have been implemented in this area because the I&D hardware has been shrinking as a trend.

And we had to deal with this prevailing trend, and there was a need to reduce cost. Various measures were implemented.

We have shifted our personnel. And we have narrowed down the type of products, the number of products to be developed.

By so doing, compared to the previous year, in terms of hardware, we were in red ink, but we have been able to recover this to the level of 6% plus. So in terms of structures reforms, we have been able to implement this, so -- and this is not just a one-off change.

Furthermore, for the SI business, which is mainly domestic, project management was implemented thoroughly. And demand is not growing significantly but still remains quite strong, and profitability has been improving for us.

Because of better project management, we have been able to realize profitability improvement. We shall be able to do that going forward as well.

My last question is information regarding media reporting. It seems that, Horizon, you are engaging in consultations to sell your stake in Horizon.

It seems that you're making progress. So I have a twofold question.

Please elaborate on the progress made, so far. And in terms of your intention, I know that you are still in initial stages, but other companies' interest in Horizon.

And is that going to be reflected in the consultation toward the establishing of the strike price? Please elaborate further.

For the individual strike price, we are going to be negotiating this with the U.K. government.

Therefore, interested potential investors, potential investors are not involved in this discussion, but in 2019, a final investment decision is what we are working for. And then construction will begin, but prior to that, the -- we would like to reduce our equity stake.

And that is the reason why we are receiving soundings from potential investors. Several power companies, utilities and other companies have shown interest in making investment.

However, the details of the discussions that are taking place will -- cannot be shared with you at this time.

I have 2 or 3 questions. Point number one, question number one, just to clarify with respect to Sullair, JPY 30 billion, JPY 50 billion.

In terms of the time line, are you going to reflect that, starting in the second quarter and onward? If you could please elaborate once again and give us details.

Well, because it's completed, I think you can share the details with us. What is your feel or assessment of Sullair's business?

And what is the performance between April and June? If you could please elaborate on Sullair's business once again.

As I said earlier, fiscal year '17, we will be reflecting their performance into our performance in the second quarter and onward, so 9 months worth of performance equaling JPY 30 billion will be incorporated. And JPY 23 billion in sales, and profits 0, that was as of May.

And we have a clear understanding of income; in terms of operating income, JPY 0.5 billion or JPY 500 million. And amortization of intangibles, PPA is still to be calculated.

It's a temporary calculation. JPY 2.9 billion of amortization of intangibles; and fiscal '17 one-off expenses, JPY 2.1 billion.

If we exclude one-off expenses, 8.7%. Well, Shimada-san, you criticized about this business rather harshly, but on a closer look, we disagree.

I think the business is not all that bad. And not that I have taken a direct look personally, but I think the management of Sullair is quite solid.

We believe people who are good still remain on the management. And as we have discussed with Sullair, eventually IoT and Lumada can be brought to 4,000 clients of Sullair, eventually.

But first and foremost, the air compressor business that Hitachi operates, we would like to cross-sell. We would like to achieve a cross-sell between Hitachi's business and Sullair's business.

And we have high expectations for achieving that in fiscal year '18 with the air compressor business of ours. Included the sales on the order of JPY 40 billion that we have at Hitachi and JPY 50 billion in sales in Sullair, with the two combined, we would like to achieve JPY 100 billion in sales.

And industrial or IT-related Lumada business, with that, we would like to generate synergies with Sullair, with Hitachi's BUs. And we have set up the industrial equipment management division.

Mr. Aoki became the head of the division.

A new division has been set. And Industrial BU CEO Ugawa and Water BU Head Urase, they are co-heading the division.

And of course, [ Araki ] of Hitachi Sanki will also be joining the team. So industrial cluster, the broad industrial group, synergies with the broad industrial group are to be aimed at.

Now this fiscal year, we will be incorporating their business. And following that, PMI to follow is worked upon by the whole team.

Mr. Aoki himself is leading the effort.

And in early August, next month, he will be making rounds among the facilities and sites, organizing town hall meetings. So PMI efforts have begun.

On a full year basis, amortization of intangibles, that's JPY 3.5 billion. Is that correct?

And the amortization period is about 5 years. Is that correct?

Well, the amortization period differs, depending on the item. We have not done PTAs (sic) [ PPAs ], so I cannot give you an accurate answer, but what we have factored in as of today is JPY 3.5 billion on an annual basis.

For fiscal year '18.

JPY 3.5 billion annually for fiscal year '18.

Amortization period is usually 5 years or 8 years? How long is it?

It's over 10 years, but then it varies from one item to another. And so purchase price allocation will be done in detail, but according to the current simulation, JPY 3.5 billion of amortization in FY '18.

And inclusive of that, the operating margin of 4.6 -- or 8%, yes.

And what about the performance between April and June?

We don't have the answer for that.

Next question.

Especially Social Infrastructure & Industrial Systems, there was an increase in revenue quite substantially. Up until last year, you were still implementing structural reform.

So in the attribution analysis, it was unclear. So for information and telecommunication as well as Social Infrastructure & Industrial Systems, what was the result of the cost reduction, especially in fixed costs?

How much of that is reflected and has contributed to increased performance? So if you could please elaborate on those 2 points.

So Social Infrastructure & Industrial Systems year-on-year, compared to the previous year, in terms of operating income, improvement of JPY 8.9 billion was achieved. Now JPY 0.5 billion in ForEx; and review of portfolio as well; scale increase, JPY 4 billion, expansion in business scale.

And in terms of investment, fixed costs, JPY 4.5 billion. And cost-of-production reduction, JPY 0.5 billion, but of this number, there's a structural reform impact.

That's JPY 1.5 billion. So mainly for the industrial systems.

That's for the industrial systems mainly.

What is the impact from withdrawing from low-profitable business?

The impact from that is reflected in net cost reduction, which is about JPY 1 billion. There are some overlaps in the numbers.

And what about Information & Telecommunication Systems?

JPY 14.8 billion increase in operating income. JPY 0.5 billion is ForEx, the remainder portfolio review or restructuring.

And the greatest impact was brought about by cost reduction, JPY 13 billion. Of that amount, structural reform impact, JPY 3.5 billion; other than that, increasing business scale JPY 1.5 billion, development costs and other cost reduction JPY 1 billion.

My last question, with respect to Information & Telecommunication Systems. Well, you said that there is increase in volume.

And what is the business sentiment surrounding IT business in Japan? There's quite a bit of increase in the operating income this time, so what is your forecast or outlook?

Well, you said that it's not going to either increase or decrease too much going forward. And I do understand that, looking at [indiscernible] survey, the business sentiment or the market conditions are pretty favorable.

And margin is improving, so in terms of the orders received and the performance outlook, how do you see the IT market here in Japan? My last question.

With respect to IT products, structural reform has been beneficial and contributed. SI business, this is something that we have forecast since before the peak of financial services industry.

We thought that the investment would peak out, but as I said, there are quite a number of financial institutions who are making global investments. And they are quite proactive in making investments overseas; and public sector clients, social and public sector.

The SI business, for the SI business, for that sector, we thought that they peaked out in terms of the [ my ] number system, but actually we're seeing derivative business continuing. And so in that regard, the SI business continues to be quite brisk.

And however, we don't foresee a substantial growth, at least in the Japanese market, but we do hope that such steady growth can continue. There are clients who are looking to make investments overseas.

And they are quite proactive, as I said, in making investments overseas, so business related to that can be expected. Application of AI; application of fintech, for example, that is emerging as a business as well.

So inclusive of that, we do hope to achieve growth.

So low-profitable business, non-profitable business, that's not happening.

SI business, its contribution to profitability, well, they're making contribution to profitability. That's because unprofitable project and unprofitable business is being eliminated.

And we're not seeing unexpected losses from such loss-running projects. They're being eliminated.

And in that regard, the trend has been improved, and that has contributed to increase profitability.

Next question, please.

I have 3 questions. Regarding Hitachi Kokusai, I would like to clarify the assumptions.

There was JPY 61 billion in terms of revenues and JPY 9 billion in terms of operating income is the contribution. And you're assuming that there is going to be a reduction in terms of revenues as well as operating income.

Is this as of September end, or December end? Please clarify.

Regarding the Hitachi Kokusai Electric, how it is being factored in, in terms of our performance. The original was through factoring 9 months.

Now there was a [ tier B ]. And in August, the conditions are likely to be set, but after [ tier B ] price is announced, it seems that the price, stock price, is still increasing.

So against the JPY 1,710, which is the selling price, is there room for change? Or is it fixed?

Regarding the details of stock price, it's something I'd like to refrain from commenting on. Currently, based on, I think, agreed contract agreement, we will be proceeding with the necessary arrangement.

And it is true that in terms of the stock price there is some deviation, as you have referred to, but I shall refrain from making any comment in that regard.

Question number two is regarding free cash flow. You said that the assumption for this year is 0.

Is this because of the M&A plans? And Hitachi Kokusai Electric's sale cash inflow, is that included?

For -- and regarding the reserves for MHI, the cash outflow is 0. So in terms of cash outflow or free cash flow, you have set that as 0.

What is the breakdown of this?

For Kokusai Electric, Hitachi Kokusai Electric, in terms of reorganization of this entity, the revenue is included.

Regarding Sullair, it's being factored in. Cash outflow is factored in.

In the second quarter, for Sullair, the fund expenditure is factored in.

Is that very significant?

In terms of Sullair, it's JPY 1,245,000,000. And that will be expenditure out, cash outflow in the second quarter.

So there is inflow and outflow in terms of cash with respect to reorganization. There is proceeds from reorganization.

And M&A expenditures, there are inflows as well as outflows. However, even with the expenditures, I believe we can -- we will aim for black ink, breaking even in terms of cash flow.

Regarding M&A, JPY 1 trillion has been earmarked. I know that there are variable factors, but in terms of the financial structure, what is the maximum risk you can take in terms of net D/E?

0.5, below -- under 0.5. Growth in debt-to-equity ratio is less than 0.5.

That is what we would like to preserve. You mentioned JPY 1 trillion in terms of the amount that is earmarked.

It isn't as if we have to use all of this up. We don't have to exhaust it.

So depending on case by case, we shall make the appropriate evaluation and make sure that we can augment the missing parts of our business. So we have to make sure there is alignment in terms of the total strategy.

And the -- each of the cases will be scrutinized accordingly on the appropriate timing on a case-by-case basis.

Question three, regarding the U.K., the FID in terms of Horizon. What is the time limitation?

What is the deadline for FID? So if you cannot reduce your stake below 50%, you said that you could forgo this.

So please clarify the timing of the FID.

According to the current process, in 2019, we want to start construction. Therefore, prior to that, the FID should be made.

That will be preceding the construction. Therefore, prior to construction start, various criteria for business will be for the decision criteria for business continuation.

So these are criteria that we have to consider. And as we proceed with the business, we have to make sure that all the permissions and approvals are obtained.

And we have to have a strike price which will be viable in terms of business continuation, inclusive of considering costs and finance scheme. And taking the stake -- taking the business off balance sheet will have to be considered as well.

That will be the criteria for business continuation decision. Therefore and against this backdrop, we will be discussing this matter with the U.K.

government as well as the potential investors. And we will continue with the consultations, receiving soundings, and by so doing, by 2019, prior to construction beginning, we would like to take this business off our balance sheet.

That is our plan.

So by this time next year, you should have a good guideline.

Yes, that's our plan. We hope that, that can be achieved.

It's almost time to close. We would like to take one last question.

My first question, regarding Lumada. On Page 13, you have disclosed the performance.

Thank you. Last fiscal year, I don't think you have detailed numbers that you can share with us, but in terms of change year-on-year, in the first quarter, against the internal plan of less than 20%, you were able to achieve something better above 20%, but year-on-year, Lumada core -- Lumada -- so how has Lumada business evolved?

Just to give us a feel.

Last fiscal year, in terms of KPI, we discussed only use cases. That was how we presented the performance.

And in terms of core business, we did not have the details to share with you. So quarter-on-quarter, it's very difficult to give you a comparison, but up until last year, what we have accumulated over the years, the use cases, Hitachi Group cases that we have accumulated have been reflected in PoC and are entering further stages.

We are seeing increasing number of such projects. And the number of inquiries we're receiving from clients is also on the rise.

Increasing number of customers are interested. And as we wrote in the material, Omika Works in Ibaraki Prefecture, there's a model that was completed, high-efficiency production model.

And together with one of our clients, Okuma, we have started a joint demonstration experiment. And so Lumada application, the model, applying Lumada is being viewed by a number of clients.

Clients come to our works to watch the model. And that has translated into actual business, and we're feeling quite a bit of traction there.

My second question is as follows. On Page 6, increase in operating income.

Well, by segment, you gave details, information on telecom system and Social Infrastructure & Industrial Systems and cost reduction, development investment. If you can give us more breakdown and details.

Overall, of the JPY 53.3 billion, the breakdown is M&A contribution, JPY 3 billion by construction and Koki. And the remainder is organic growth.

So just to give you the breakdown: Expansion in business scale organically, that's JPY 29 billion organic growth; and reduction in fixed cost, well, increase in HR cost or business incubation costs, business development cost, if netted against those, plus JPY 4.5 billion. So business development cost was not as large in the first quarter compared to last fiscal year, in other words.

And loss-making projects are eliminated, and the effect of that is JPY 1 billion. So positive JPY 1 billion because of elimination of loss-making projects, and the remainder is cost reduction net off against a reduction in prices.

That's JPY 16 billion. And so those are the -- that is the breakdown of JPY 53.3 billion.

And so the time has come to bring this meeting to a close. Thank you very much for your attendance today.