CJ Cheiljedang Corporation (A097950) Earnings Call Transcript & Summary

Good afternoon. Thank you for joining today's earnings call. We'll begin the 2022 Q3 earnings call for CJ Cheiljedang. Today's call will begin with CJ Cheiljedang overview of Q3 performance and we'll take questions next. [Operator Instructions].

Good afternoon. I am Jun Seong IR Finance Strategy Officer of CJ Cheiljedang. We will now begin 2022 Q3 earnings call. This call is being simultaneously translated into English for foreign investors. Today, we are here with Mr. Kyoung Suk Kang, Head of Finance Strategy Office; Mr. Seong Jun, Head of Finance Planning Department; Mr. Tae-Joon Kim, Head of Korea Food Business Management Department; Mr. [indiscernible], Head of Global Food Business Management Department; Mr. [ Tae-Hong Choi ], Head of Bio Management Support Office Mr. [ Tong An-Kim ], Head of Bio business Management Department; Mr. [ Seung-Gyu Kim ], Head of Food and Nutrition Tech Business Unit; Mr. [indiscernible], Head of Feed and Care Business Management team. Mr. Kang will first walk us through Q3 performance review, followed by key strategy and outlook by its business unit. After that, we'll take questions.

Good morning. This is Kyoung Suk Kang. I'll first go over Q3 performance highlights, analysis of the performance in key indicators by business unit and key strategy and outlook. Now please turn to Page 5. In Q3, sales grew 22% year-on-year and OP grew about 20%. Our Food business despite continued pressure on margin, thanks to greater exports and profitability overseas posted a higher profit, Mandu, Pizza and other Global Key products, higher market shares also helped sales growth. Bio business unit despite the growing cost of growing ingredients, successfully diversified product portfolios to ship higher performance year-on-year. Also, with the launch of the new Food Nutrition and tech business unit, we will further speed up the Food & Nutrition Solutions business. I'll move on to the next page. Now on Q3 2022 performance. On this page, Q3 performance, excluding CJ Logistics, the sales grew 18% for food, 25% for Bio, 29% for Feed & Care year-on-year, evenly driving growth across business units, holding 21.6% total growth to KRW 5,139.9 billion even with the increase in cost pressure, all business units were successful in achieving sales growth and profit structure in perimeter to reach 20% year-on-year growth in operating profit were KRW 386.7 billion. The net profit, thanks to the higher operating profit grew 6% year-on-year to KRW 177.7 billion, including CJ Logistics, the sales grew about 16% to post KRW 8,011.9 billion with operating profit standing at KRW 484.2 billion. Now on Page 8. I'll go over each business unit first is food. The sales increased by 18% year-on-year in Korea, while inflation continues, we introduced core and new products to respond to diverse consumer needs and a strong strategy for Chuseok gift set sales have the year-on-year sales growth of 15% to achieve KRW 1,673.6 billion. Out of Korea, broader experience of GSP categories and K-food, a stronger product lineup tailored to each market that are on trend and consumer need centric and finally, focus on strategic channels have helped the double-digit sales growth rate, resulting in a 23% year-on-year growth to KRW 1,382.2 billion. The operating profit rose about 13% to KRW 209.3 billion in Korea to mitigate the unfavorable management landscape and continued pressure on ingredient prices, value chain-wide actions were taken for cost saving with pricing actions for selected products. Outside of Korea, a higher operating profit was helped by the U.S. business' robust profitability and stronger performance, GSP sales growth, country-level strategic pricing and a cost saving with productivity and cost structure improvement. If you look at the bar graph on the next page, the operating profit margin in Q3 when excluding Schwan's PPA is 7.1% and 6.8% when including Schwan's PPA. Next is on Page 10. There are details on the food business in Korea for the products stand -- from the product standpoint, core product sales grew, as we launched consumer needs based on differentiated products. From the channel perspective, we focused on online, B2B, C-store or what we call growing channels for processed food, resulting in KRW 1,673.6 billion sales for the food business in Korea. On the next page is a sales breakdown outside of Korea. In the U.S., product innovation and core competency power GSP sales growth up gains both in B2C and B2B, holding a 25% growth compared to the same period last year or KRW 1,078.4 billion. In APAC and Europe, thanks to Bibigo's brand awareness in growing channels, K-Food achieved higher sales to a record of 15% growth or KRW 303.8 billion. In Q3, the food business sales outside of Korea totaled about KRW 1,382.2 billion. Next is on Bio. Page 12. Bio business unit despite the higher ingredient costs successfully diversified its product portfolio to achieve an update performance Sales grew 25% year-on-year. Operating profit grew 26% to KRW 160.3 billion. If you look at by product segment, ANH products with grain prices remaining at their highest maintained pricing higher than last year as the global grain supply remains volatile by riding on trends towards a lower crude protein, the ANH business created new demand for specialty products the HNH business, thanks to a stable nucleotide supply solidifies market dominance to generate a high profit, especially partnerships with global customers of TasteNrich enabled capturing demand. Selecta has incorporated the increase in soybean and some meal price enterprising to see higher soybean protein concentrate sales and by taking advantage of high oil prices, our soybean oil business achieved growth both in sales and profit. If you look at the next page, Q3 operating gross margin for the Bio business is 12.2% and value-add specialty products take up 13% out of total sales, maintaining a double-digit percentage contribution. Next is Feed & Care. Feed & Care has taken pricing action to respond to continued cost inflation under increasing life stock prices. We've also improved productivity such as mortality rate to maximize hog sales in Vietnam, generating top line growth and greater profitability. The sales grew about 29% year-on-year to KRW 774.7 billion. This was thanks to pricing action to mitigate ingredient cost increase. And with the overall livestock price growing higher, sales in key countries rose year-on-year. The operating profit grew 94% year-on-year to record KRW 17.1 billion, this was driven by the rebound of Vietnam hog prices and sales coming from mainly the livestock business. The Feed business has strengthened high-profit products and expanded channels to maximize sales. It has optimized in getting costs while improving the qualitative aspect of the business structure through strategic pricing. The livestock business has taken early pricing actions in Vietnam, while taking a flexible sales approach to achieve a higher profit and Indonesia broilers was the main focus in terms of productivity, such as feed conversion ratio and mortality rate to strengthen competitiveness. Turning to Page 16. If you look at CJ Logistics performance, we've stabilized the global profit and achieved a profit growth with higher ASPs. The sales industry grew 9% year-on-year to KRW 3,113.4 billion, the operating profit grew 2% to KRW 107.7 billion. Next is Page 16 (sic) [ 19 ], SG&A and nonoperating income and expenses. Excluding CJ Logistics and breakdown the labor cost increased by KRW 108.5 billion and transportation cost came down this was recategorized the items under transportation. And nonoperating income improved by KRW 9.1 billion year-on-year to negative KRW 89.4 billion. I'll skip the next page, when including CJ Logistics, SG&A and nonoperating income and expenses mostly accrued from CJ Cheiljedang. We'll move on to key strategy and outlook by business unit. First, on the U.S. business.

Hello I am [ J.B. Cho ] from Global Business Management. Despite challenging business environment, including inflation and economic slowdown, thanks to strategic sales increase based on premiumization and core competencies, the market shares of key products are constantly growing. First, the market share of Mandu in U.S. grocery exceeded 40% last quarter and reached 44% in October widening the gap with the biggest competitor. Differentiation in taste and quality and DSD competency of Schwan's has led to higher distribution and shelf presence. The CJCJ's Bibigo brand has solidified its #1 position in the market, owing to continuous improvement in brand awareness and market share. Next is the market share of pizza. Since acquisition of Schwans, its B2C pizza market share has increased continuously. Product premiumization through innovation, sales growth based on DSD competency and strategic pricing strategy resulted in YTD market share of 17.6%, which is 1.3 percentage points up from previous year, narrowing the gap with #1 brand to 4 percentage points. With this trends total market share amounts to 23%, showing constant growth. This year, the food business in U.S. achieved high sales growth in frozen food category. Okay. Then moving on to the new business unit, FNT, Food & Nutrition technology. The presenter will brief you on the overall trend and market size.

Hello. I am business on [indiscernible] from Business Management FNT. Looking into the mega trend, demand for natural ingredients and nutrition solution is expanding as an increasing number of consumers are keenly interested in health and nutrition. Opportunities are on the rising sustainable, eco-friendly alternative materials and solutions. Backed by the trend of personalized nutrition, the market based on personal food and nutrition data is expected to grow further. In the perspective of demographics, millennials, Generation Z and senior citizens equipped with purchasing power are contributing to the growth of food and nutrition market. Lastly, a bigger emphasis is placed on transparency in nutrients, origin of ingredients and certification, which leads to abundant opportunities in clean label additive-free businesses. Let me share growth potential of promising areas in the food industry under these changing trends. Alternative protein and cultured protein market is expected to grow to KRW 93 trillion by 2025, up from KRW 59 trillion in 2021. During the same period, Food ingredient market will grow to KRW 869 trillion from KRW 692 trillion. Nutrition market will record steady growth to KRW 612 trillion from KRW 499 trillion. Moving on to 24th page. CJCJ established food & Nutrition Technology business unit to pull our competencies and seize the opportunity in this growing market. The CJCJ's Food business unit owns competency in B2C such as trenching, consumer understanding, market communication, quality assurance and application while Bio has technology and infrastructure, including train platform, technology, manufacturing infrastructure and process competencies in safety and ESG, global footprint and analysis technique. CJCJ established a new business unit, Food and Nutrition technology in order to eliminate inefficiencies, for example, redundant investments effectively combine Foods B2C competency and bios technology and infrastructure and ultimately operate businesses in an integrated manner and secure new growth engine with agility. FNT, Food & Nutrition technology will play in promising areas, including future food ingredient, nutrition solution, alternative protein and cultural protein. Next, please update on the reshaped organization and business portfolio. Now CJCJ has 4 business units: Food, FNT, Bio and Feed & Care, which focus on competency building and development of new growth engines based on the core values of culture, platform wellness and sustainability. Food business aims to penetrate deeper into global consumers' daily life and create the value of new wellness through GSP scale-up driven by Bibigo global territory expansion and entry into new and adjacent areas. Food & Nutrition technology will run businesses of food ingredients, nutrition solutions, alternative protein and cultural protein. It plans to rapidly secure solution competency with differentiated materials and expand business step by step in key categories that are expected to grow in the future to become a total solution provider. Bio's HNH business is now placed under FNT, Bio will concentrate on former differentiation and improvement of solution competency of ANH and reinforce the growth engines of White Bio and Red Bio. Feed & Care will further develop its R&D competency and future-oriented business by focusing on high-margin feed for aqua culture, maximizing productivity based on bio security and accelerating growth with technology and new business. On the next page, we would like to share our thoughts on CJCJ's corporate value. The value of CJCJ's existing businesses has enhanced, thanks to their high performance, profitability and stability, contributing to increase in valuation. The total corporate value is expected to grow further in the long term as the new growth engine is added to the new business portfolio. Given the growth potential and competency of the existing businesses, growth in EV/EBITDA multiple as high as global companies is anticipated. Food business is seeing improvement in profit structure as well as expansion of global products such as GSPs and pizza, Bio, which is expanding the high-margin specialty product is evolving itself into a solution provider equipped with enhanced growth potential and stability. In Feed & Care the share of high-margin aquaculture feed is going up and downstream value chains are expanding. In the long term, CJCJ aims to achieve EV/EBITDA multiples equivalent to global players based on aforementioned efforts and performance. Now the company is developing into a solution provider of food ingredients and nutrition, the Second, CJCJ can expand the alternative protein business based on existing competency. Third, we can grow supplement business leveraging specialty category and personalized solutions. Fourth, the White Bio business will start in forcing. And fifth, the Red Bio will be expanded. All these factors serving as new growth engines will contribute to the growth of total corporate value. Next page is about CJCJ ESG initiatives. In spite of unfavorable conditions, CJCJ is making efforts to establish a sustainable financial system. In October 2021, CJCJ issued ESG bond for socially responsible investments for the first time in the food industry. We were able to save financial costs as the number of investor paid attention to CJCJ's bond issued for small and medium-sized suppliers part of the fund was used to create the shared growth fund for suppliers and financially support them by shortening the building cycle. This contributed to building an ecosystem of win-win relationship and collaboration. A total of KRW 390 billion was raised since last year through ESG loans and bonds. This fund is based on CJCJ's High Score in DJSI and qualified for extra interest drop if additional ESG KPIs are achieved. CJCJ will continue on making efforts to lower the interest through sustainability-related funding and achieve ESG goals. Our subsidiaries will also be capitalizing on ESG loans. The company established a sustainable financing framework for sustainable management. By setting up the framework in advance related to assessment on sustainable and social purpose of funding and calculation methods, funding management and follow-up reports CJCJ has now secured financial competitiveness to raise sustainably related funding in a timely manner when in need. The CJCJ gained credibility of its framework by acquiring certification from a global evaluation agency. Now we will brief you on Q4 outlook. Performance and outlook under the reshaped business portfolio will be announced from 2023. The Q4 outlook is based on the existing business units. Food business in Korea is expected to respond to change in consumer trends through product expansion, focused on growing channels and lead solid growth based on price normalization. Costs will increase due to challenging external environment, but the company will maintain its margin through strategic profit-driven operation and efficient resource allocation and by targeting expanding for eating at home during economic slowdown. U.S. is anticipated to grow steadily based on strong position in the pizza market. Increase in penetration of GSP such as Mandu, chicken and P-rice and sales growth of B2B following Asian menu expansion. Japan aims to grow further through rapid sales growth of GSPs, including Bibigo Mandu and Kimchi and diversification of SKUs and channels for Micho. China will operate online promotion events in high season focused on growing channels and increase new product trials in order to continue one growth. In Bio animal nutrition, the growth of specialty amino acid will make up for the stagnant performance of listing and margin drop due to SPC market circumstances and raw material cost increase. In Human Nutrition, the performance will be back on track, thanks to the recovery of nucleic acid demand and the overall industry. TasteNrich is likely to show continuous growth. Feed & Care is expected to bounce back, thanks to the improvement of key indices, including feed sales, spread and livestock productivity. All in all, the CJCJ's sales growth in Q4 2022 is expected at high teens with the OP margin around 5%. This is it for the presentation. We'll now take questions. In case of Korean question, it is going to be interpreted simultaneously, but English questions are going to be interpret consecutively. Please speak slowly when you ask a question for the interpretation.

We'll start taking questions from now. If you want to ask a question. [Operator Instructions] First question is coming from Mr. Park Sang-Jun from Kiwoom Securities.

One is on the U.S. sales, the quarterly sales actually cited KRW 1 trillion so I know there have been pricing actions and a strong dollar and increased the sales in overall. So the quantity sales actually excited KRW 1 trillion. So how do you project your target sales going forward because we -- because the strong dollar will not persist to continuously. So how much of an organic achieved the top line growth are you expecting? And how much pizza and K-food would contribute to top line sales -- top line growth? And then the second question is on market share. And so on Page 37 I see there are market share data, but I feel that there has been declining market share. And then I know that there has been to growth of market share, but is there any specific reason why you see a decline in market share? And then third is on SG&A and then I see that Q-o-Q, Y-o-Y labor cost has been on the rise. So has there been any specific reason why there's been such a hike in labor cost?

So regarding global sales, yes, third quarter, we've seen a great performance, especially in the dynamic phase, especially in the U.S. and Europe, especially the U.S. have seen great performance in CB and Food Services, both double-digit growth. The rhythm behind this is that in the endemic phase despite the pricing actions pizza's growth has been strong. And after the acquisition of Schwan's, we've been able to drive K-food synergy using DSD of CB Schwan's. So we've been able to actually expand our presence using DSD. So that has been the reason behind our great performance in the third quarter. So going forward, in the U.S., key retailers will struggle with delivery, but despite that the Food Service segment and our consumer brand and B2C, we'll be able to keep up with the current momentum for growth. So we believe that we will be able to keep up with double-digit growth. Especially in the Asian category, we are #1 in terms of the market position, just so we want to actually enlarge the -- or narrow the gap to #1 market shareholder in the pizza market as well. We believe that we will be able to keep up with the current [indiscernible] performance going forward. And on your second question, regarding Korea, key product market share. So for some selected products, we've seen a declining market share and this was actually -- this is actually off-line market share data so we actually manage offline market share from a fair share perspective. So for example, Mandu and offline, we've seen some products that have recorded slightly lower market share, but we've seen greater market share in online segment. So while the market itself is not growing, but our Mandu performance is growing. So online and export, channel-specific strategies that have been able have been powered such growth. And so plain rice, when we look at online channels, like coupon has seen a greater -- higher performance so most of the online performance has exceeded the offline performance. So if you look at the all channels, then we are actually growing and for Soup and Stew quarter 3, Chicken Ginseng Soup still has been our area of focus. So we actually had to manage different menu items. So if we divide a soup and stew and chicken ginseng soup that we still see a moderate performance of our soup and stew, but the porridge has a [indiscernible] . So we want to go ahead for differentiation rather than just remaining like the pricing action. So we're trying to expand our profit with our differentiation for porridge product. So regarding your third question on Q-o-Q and Y-o-Y labor cost increase for business expansion, we've recruited more to expand our business. And also there has been the salary increase to incorporate inflation so overall, the base salaries have increased. And CJ Bioscience, Batavia, last Q4, we welcome to new businesses. So that's been incorporated in our Y-o-Y data Y-o-Y data. So that's why there has been increase. And also with that, there has been some more cost for employee benefits. And especially when we look at Schwan's, higher performance, there has an increase in incentives. Of course, there has been a hike and cost labor. So both fixed expenses, but there has been an increase in variable expenses as well.

Next question is coming from Paul Hwang from Citi Securities (sic) [ Citigroup ].

This is Hwang Paul from Citi Credit (sic) [ Citigroup ]. I have a question on the FNT and the Q4 guidance. First, on FNT so I've seen the press release, and I see that by 2025, the sales target is KRW 2 trillion. So there are many different part of FNT business nutrition solutions, alternative protein. So what do you see as a growth driver for FNT sales and FNT performance. And also in the same article that I read, I saw that you need to expand value chain that you're reviewing strategic investment to ensure that there's a base feed for FNT. So I wonder if the 2025 sales target KRW 2 trillion when includes organic only or inorganic as well. So if -- are there any specific plans of our investments and M&A for FNT? And second question is on Q4 guidance. So obviously, you predict about 5%, but the last Q4 I believe that was about 5.2%, but your Q4 OP projection is 5% does this include incentives as well?

[indiscernible] FNT business unit. So to answer your first question, that as you've seen on news, to achieve our 2025 KRW 2 trillion sales target, there will be a specific portfolio. So food ingredient nutrition solutions, which we already seen sales from and alternative protein and culture, the meat or culture protein. So all of them would contribute to the KRW 2 trillion sales goal by 2025. So regarding our investment plan. This is a new organization. So we want to minimize the CapEx investment arising from new business you need the launches. So we want to actually minimize overlap the [indiscernible] Investment with bio business unit and then do we want to actually maximize synergy. So we are actually detailing our plan as to what we're going to do with investment, but we want to ensure that we build growth engines through some CapEx investment, but this is still under review. And within our planned CDMO and the M&A, these are some of the things that we're taking under review right now. On the third question, for Q4 operating profit margin forecast. So as you mentioned, 5% as including incentive payouts after taking into account of incentive payout or so. We believe that Q4 will be better than our anticipation. So this outlook and our forecast will be updated later on when we see some visibility.

Next question is from Kim Jungwook form Meritz Securities.

I have 3 things to ask. In food business, after the price raise following the overall inflation, was there any price resistance from the consumers? And next year, because of the inflation and high price what kind of changes are you expecting in the food business? And what is the strategy of your side to differentiate your company? Second question is about bio overseas. The share of the specialty is stagnant 13%. I see some changes in license sales as well. So how far -- what is the room for improvement in the sales of Lysine and also the margin is over 10% constantly. In the past market, the normal margin is around 10%. Is it right judgment to make the 10% margin rate. And in FNT, the third question is about FNT. The feed that achieved and the food additive, if there were no synergy between these 2, then now we have the new business units then was is there any worry or concerns about reducing the existing sales and performance of the existing businesses?

Let me answer to your question about food business. In case of Korea business in food, in the third quarter of 2022, we saw 10% growth Q-o-Q year-on-year. And this is thanks to the GSP growth. In case of Food Ingredients, we saw 24% growth. And this was thanks to the ASP growth and the sales was slightly decreased. In the fourth quarter, ASP is going to contribute to the overall growth. And about the resistance from the consumers. We are seeing some inelastic demand and the headband, DASIDA, Cheong, all these products are -- have shown constant growth in volume. We are going to respond to the changing trends with new products and expand our channels in the CVS and online. In B2B, we are seeing less consumers are spending and if the consumption demand for restaurants decrease, of course, it is going to influence our business, but we believe that we can handle this with our portfolio change. And in -- we have -- in B2B, we have [indiscernible] the brand [indiscernible] which can -- which can make us outperform the existing businesses in the food market. I guess you couldn't share the phone part because of the audio issues so let me summarize. In the third quarter, yes, we saw 10% growth average. And this was thanks to 90% of ASP and this was overall -- of course, we are seeing some decrease. But overall, this was thanks to the ASP increase. And looking into the anticipation about the inflation, we are seeing an elastic demand in the market, especially in the third quarter, [indiscernible] Mandu, Dashida, our core products have shown steady growth in volume. In consideration of these factors, we are going to drive future growth and respond to the changing trends and focus on growing channels such as online channel and CVS convenience stores. so that we can deal with the inflation and minimize impact from the consumer sentiment deterioration.

Let me answer to your question about bio business. Our OP margin of bio business in the past was mainly focused on 1 or 2 SKUs and that was why we were vulnerable to external environment changes. Yes, that was true. However, we continued on sales growth of specialty products are [indiscernible] and this has contributed to the OP growth, not only sales growth. Now it is equivalent to the license growth in the past. In the first half of 2022 because of the high price of grains and overshooting, yes, the margin was a bit deteriorated. However, in the fourth quarter, we are seeing a drop in sales price and considering the economic situation, the OP -- the profit might drop a bit. However, we are going to continue on 10% OP margin based on our portfolio diversification and balanced portfolio.

Let me answer to your question about FNT. As I explained before, the FNT is established in order to handle and address the market change in the events. That's why the strain manufacturing technology of Bio is going to synergize with B2C of food business to catch up with the recent trend and marketing communication. This means that we can create synergy of bio and food at the same time. This means that we are going to create more synergy rather than deteriorating the synergy between the 2 business units. Moving on to the next question.

The next question will come from [ Pak Sang Jun from Kim Securities ].

Thank you for the opportunity to ask questions. I have a question about the Pizza of the U.S. business. After -- since the M&A, we saw increase in market share. So from your perspective, what were the achievements that you made to widen the gap with the competitor. And from now on, if you are to increase -- further increase the market share, I believe that you have planned a lot of strategies. What should CJCJ do to catch up in the market to widen -- further widen the gap with the #2 brand -- with #1 brand -- narrow the gap with the #1 brand. Please elaborate on the strategy about the channel as well? And what's your target market share?

In case of Pizza of Schwan's, we have Red Baron and Freschetta and Tony's we have 3 brands under Schwan's. These are the major brands and Schwan's divide the brand into mass premium, mass and various segments. Our focus is Red Baron And in order to narrow the gap with the company, the #1 brand, we are -- we have about 2% gap with the #1 brand. But this year, Schwan's has launched fully loaded which is the innovative new products as it was able to premiumize its brand and products, thanks to this fully loaded pizza. And in order to deal with the competition with the #1 brand. Schwan's has the direct sales competency. ESG. So this is the differentiation strategy of Schwan's. Of course, the competitor is running pricing strategy under the inflation circumstances. And it is also implementing a lot of strategies to handle the inflation. However, Schwan's also executed strategies to -- about its price adjustments. And in Red Baron its market share in the B2C frozen pizza is growing constantly. In 2019, right after the M&A, it was 14% of market share, but it increased to 16.3%. And in 2022, September YTD, it's 17.6%. In October, it's 19%. And we have been narrowing the gap with the #1 brand continuously. Our expectations about the future market share in the short term. We told you that it was -- we have 2% gap with the #1 brand. I believe that we can catch up with the #1 brand within 2023. Once we achieve this target, then yes, so we are going to have the #1 pizza brand under Schwan's.

Next question is from Kim Jungwook from Meritz Securities.

So despite volatile effect, I see that there has been no significant losses when we look at nonoperating profit and then also second to feed, I see there has been improvement. And how do you project the improvement for feed business going forward for Vietnam and Indonesia? And the third question. I know Schwan's has been recording solid performance and -- but has there been any reaction or response from the #1 pizza brand that we're talking about or Nestle?

So first, on your second question on Feed & Care. So our food business, the most of our business is affected by imported ingredients business that I know you've asked questions separately for Vietnam and Indonesia. So in Q3, we have seen that ingredient cost has remained stable and which -- with a cost increase before Q3, we've been actually taking pricing actions to mitigate that. And I think we could actually maintain the current spread level by Q4. So for Vietnam and Indonesia in Q4. I believe that spreads will improve. So compared to Q4, we believe that spread will be higher. And that's it for a question two. So as I mentioned before to answer the perfect question, we see that Schwan's is growing, but it's true that at the same time that we are actually capturing the market share from the #1 brand. So in 2021, 2022, these 2 years were the pandemic period and there hasn't been any meaningful reactions or responses that we've seen of the #1 brand, but maybe there have been promotions possibly with the lower pricing, but we actually haven't seen any promotions as such from the #1 brand. And usually December is the season for pizza with a lot of promotions, but with the current market landscape, the #1 player hasn't actually shown any reactions or actions to go for more aggressive promotions. And regarding your first question on nonoperating profit, but there have been many variables and also there have been different factors taken into account. So we cannot actually -- we're careful in deciding on trends for certain quarters specifically. But looking at the third quarter, we've seen the KRW 9.1 billion of improvement. But previously, with benchmark rates going up, we know indoor cost. But we've been able to add hedge against FX related to risks. But with a strong dollar, we have different tools or different actions in place. But they are having improvements in other areas. So compared to last year, nonoperating profit has been at the less loss because there has been -- we've been able to steer clear of some of the losses that we experienced last year. So at the time, is almost up, so we will take the last question.

There is no question to waiting, [Operator Instructions] There's no further questions. So that will be the end of the CJ Cheiljedang's Q3 earnings call. Thank you, everyone, for joining.