Lion Corporation (4912) Earnings Call Transcript & Summary

I am Takemori, President of Lion Corporation. Thank you very much for participating in our financial results meeting today. And I would like to express my deep appreciation for your support for our IR activities. Today's presentation has these 3 points of contents. I will explain following this order. First, consolidated financial results for the first half of 2024. This is a summary of the first half consolidated performance. As shown at the top in green, first half sales and profit increased year-on-year, and the sales and/or profit surpassed the forecast published in February. Consumer Products saw sales growth in oral care, where we launched new brands, but decline fabric care and the transfer of food with functional claim resulted in the decreased overall sales. Overseas sales increased substantially with continued growth in key countries such as China and Malaysia. Core operating income increased due to expanded domestic price increases or price pass-through in domestic Consumer Products Business and firm progress in company-wide cost reductions in addition to increased sales. Furthermore, operating profit and profit for the period attributable to owners of the parent increased substantially due to the capital gains on the sales of some pharmaceutical brand as a part of the earnings structure reform of consumer products. In consolidated financial results, net sales were JPY 198.6 billion, up by 3% or JPY 5.7 billion year-on-year. Year-on-year change at constant currency, excluding the exchange rate fluctuation, was an increase of 0.2%. Excluding the impact of food with functional claims business transferred last year and the anti-inflammatory analgesic brands whose transfer was completed in March this year, it was an increase of 1.1% on top of the aforementioned 0.2%. Core operating income was JPY 9.5 billion, up by JPY 3.1 billion year-on-year. Operating profit and profit for the interim period attributable to owners of the parent include the gain on transfer of a part of Halix brand and Guronsan and Gromonto brand as mentioned. EBITDA was JPY 18.6 billion, up by JPY 3.7 billion year-on-year, and EBITDA margin increased by 1.6 percentage points to 9.4%. Next, I'll explain the year-on-year changes in core operating income. Positive factors for the profit increase shown in yellow amounted to JPY 4.6 billion. Changes in sales, product mix and others impact were plus JPY 1.7 billion, and the changes in sales or gross profit increase were plus JPY 2.3 billion, but changes in sales mix were minus JPY 0.6 billion. Price pass-through positive impact was offset by the negative factors of manufacturing fixed cost increase and segment mix changes. Total cost reduction impact, mainly in raw material, was plus JPY 1.4 billion and the impact of raw material prices was plus JPY 0.9 billion with mainly positive factors observed overseas. Decrease in other expenses impact was plus JPY 0.6 billion as the reactionary decline from the head office relocation expenses in the last year and the improved efficiency in cost. While negative factor was the increase in competition-related expenses of JPY 1.4 billion and in total, profit increased JPY 3.2 billion. Results by business segment in net sales upper line shows the net sales and the lower line shows sales to external customers. Consumer products sales decreased year-on-year, but as shown in the middle, they were almost in line with the initial plan. But core operating income increased substantially due to the expanded price pass-through and more efficient promotional expenses and other expenses. I explain the sales by product category on the next slide. In overseas business, sales and profit increased with the continued growth in top line in key markets. Sales and profit in industrial products and other decreased year-on-year. This is Consumer Products Business net sales by product category. Total net sales decreased 2% or JPY 2.5 billion year-on-year. This decrease includes the impact of transfer of food with functional claims business in other category and some Halix brand in pharmaceutical category. And excluding this impact, actual change was a decrease of 0.7% as shown in the box below. Let me reiterate that they were almost in line with the plan. Besides the business transfer, the fabric care sales decreased substantially with the reactionary downturn from the Airis fabric softener launched last year; on the other hand, oral care with the launch of new brand OCH-TUNE and pharmaceutical with the high-priced new products, Smile 40 Premium THE ONE, which marked brisk sales secured sales increases. Total sales were down by JPY 2.5 billion, but in the second quarter from April to June, they turned to the recovery trend. This slide shows our major consumer product brands and items and their market changes year-on-year. In the Q1 results meeting, we heard the voices of concern for the balanced contraction of the overall businesses and the declining trend going forward. So this time, I will explain by brand. In oral care, as shown on the left, our key brands of CLINICA and NONIO grew beyond the market growth. SYSTEMA's 102% seems to be lower than the market growth of 106% at a glance. SYSTEMA Gum Plus Series with focused investments showed 107% year-on-year in value, marking the higher growth than the market. In beauty care on the right, overall sales of KireiKirei were below the market growth, but the high value-added products with 2 items shown below achieved the steady growth. Fabric care and living care are shown on the left. We are focused on increasing unit prices to improve profitability, and the results are steadily delivered. Year-on-year changes in price showed the prominent results, to indicate that the major consumer product brand and items in Japan have been growing steadily, including [ territory ] items. In Pharmaceutical on the right, eye drop Smile, where we launched the new product, achieved the growth higher than the market. Overseas business results by region. Both Southeast and South Asia and Northeast Asia sustained a robust performance, and their sales and profit increased year-on-year in the first half. In Southeast and South Asia, sales increased 5.9% year-on-year in real terms, excluding FX impact, and core operating income increased substantially. Lower line of core operating income shows core operating income margin, and it shows the year-on-year improvement. Northeast Asia was mainly driven by China and net sales increased 7.6% in real terms, excluding FX impact, and core operating income increased 17.7%. Core operating income ratio was up by 0.6 points year-on-year, mainly driven by Thailand, so we were able to expand the business scale and improve the profitability concurrently. Here, I would like to talk about the business status of the 4 key overseas countries. Sales represent net external sales, excluding internal sales within and among segments. In Thailand and Malaysia, sales of mainstay laundry detergents as well as toothpaste and body washes showed sound growth. As the total sales increased, the ratio of personal care products as a percentage of the total grew as well. In China, despite an overall cooling down of consumption, sales through the off-line channel or in-store sales continued to increase and maintained a double-digit growth. In South Korea, in addition to the mainstay laundry detergent, sales of pharmaceutical products such as eye drops and cooling gel sheet for feet were strong. This sheet shows the sales transitions from 2020 in 4 key countries. We have prepared this page in response to comments that we have received that the growth of overseas sales may be slowing down. In all of the 4 countries, sales growth have been continuing, and we are making steady progress in expanding our overseas business, which is one of the key themes of Vision2030. On this sheet, in the right side of the section for each country, the upper row indicated in orange shows categories with high market positions, and the lower row, blue, shows categories in which we can expect growth. We will continue to grow our business by solidifying our market positions in categories with high competitiveness and invested cash earned from these categories in the new blue category shown on this sheet so that we can realize continued business growth. Next, I will explain the progress of the measures towards the next medium-term management plan and our initiatives for the second half of fiscal 2024. As I explained in February of this year, we have positioned this fiscal year as a year of rebuilding our profit foundations toward strengthening profitability. We are promoting the themes shown here. Today, I would like to explain the status of our initiatives and future outlook with the themes shown in bold letters. First of all, I'd like to focus on our priority policies to reform the profit structure of consumer products, which you recognize as an issue. As shown here, we have set specific KPIs for the 2 themes of portfolio reforms and business structure reforms, and we are implementing measures accordingly. As announced in February, as part of our efforts to streamline nonpriority areas under clarifying separation of business fields, we completed the sale of brands of topical anti-inflammatory analgesics at the end of March and brands of health tonic drinks at the end of June. In the future, we will allocate various assets and resources, including the management resources previously spent for businesses sold, as mentioned, to priority fields such as oral care and overseas business, and we'll continue to consider streamlining, including sale or downsizing of businesses in nonpriority areas to further refine our portfolio more specifically. Next, I would like to discuss the progress of our efforts to strengthen oral care and high-end eye drops, which we have positioned as our priority areas for this fiscal year. In oral care, to stabilize our position as the #1 manufacturer while strengthening our conventional appeal marketed towards symptoms such as dental carries and periodontal diseases, we launched a new product, OCH-TUNE, which is a new proposal to select oral care products in alignment with lifestyles and values. As a result, due to the addition of OCH-TUNE since April, on top of the growth of mainstay items that address symptoms, sales of oral care products grew by 4.1% in the first half, though sales promotion of some low-end products were being revised. As for eye drops shown on the right, as a result of launching and nurturing new products in the highest price range, the high-end market continued to expand, driven by our initiatives exactly as we had aimed originally. We will continue to focus on nurturing them as our priority areas. Next, I would like to talk about the status of price increases. In the first half, we increased the prices for products, including low-end toothbrushes, fabric softeners, anti-mold products and dishwashing detergents, with a total effect of JPY 1.7 billion as shown on the left. We're expecting to carry out price increases worth about JPY 4 billion for the full year. If implemented as planned, we will be able to mostly offset the impact of the surge in raw material prices, which has been one of the factors in the decline in profitability since 2022. That is what is shown on the right of this page. In the next fiscal year and beyond, we will continue to increase prices to improve profitability in the Consumer Products Business while keeping a close eye on the market environment and customers' purchasing behavior. Next, I will discuss reducing SKUs. The basic approach is to select SKUs to be reduced in consideration of sales per SKU, profitability and production efficiency. Our SKUs for products, excluding professional use in the domestic market as of the end of fiscal 2023, a year regarded as a standard for SKU reduction, consisted of about 630 SKUs, for general products listed in the product catalogs and 270 SKUs for so-called special products, such as extra large quantities and limited edition fragrances, totaling about 900 SKUs. Our midterm KPI is to reduce them by 30% by 2027. In this fiscal year, our plan is to reduce a total of around 50 SKUs with potential further reductions being considered. Next, I would like to talk about measures to further accelerate the growth of our overseas business, which continues to perform well. First, I would like to talk about our initiatives in China, which we have positioned as a top priority country. In the first half, we continued to achieve double-digit growth. We believe it is in-store sales channel that is driving at this growth and has high potential for the future as well. We have conventionally developed the Chinese market with online sales as our strengths. In fact, however, in-store sales make up about 70% to 80% of the oral care sales in China. In other words, expanding our presence in the in-store channel will be a key to accelerating future growth. To that end, as shown in the map, we are currently expanding our presence in the large cities in the coastal areas shown in green. In addition, we will expand our sales area to the medium-sized cities in inland areas shown in blue. In order to increase the probability of achieving this, we will further strengthen our sales structure and accelerate product development to meet local needs of the Chinese people by beginning a full-scale operation of Lion Innovation Center in Shanghai with the aim of further expanding in-store sales. Next, on the second overseas theme, expansion of the personal care field. In the first half, the personal care field's share of total overseas net sales reached 43.4%, with beauty care, in particular, leading the expansion. I will explain the measures to be taken in the second half in each country to achieve further expansion. First, in Thailand, we'll add a new high value-added product with an antibacterial feature for Shokubutsu Monogatari body washes, which has a top share in the market. We'll work to solidify and expand our market position. In Malaysia, we'll continue to develop the oral care business in addition to the in-store events that have been well received by customers. In Northeast Asia, we will focus on strengthening the off-line channel in China, as explained earlier. And in South Korea, we will focus on the continued development of the personal care field, particularly of eye drops. In Bangladesh, a new country we have entered, we are still expanding our business by increasing the number of products that we handle. However, as reported, the local situation has recently become very tense. Although we have not suffered any direct damage, we have already completed moving our employees to safer areas to ensure their safety as our top priority. We will continue to take necessary measures. Finally, I would like to explain our consolidated financial forecast for this fiscal year. We have not made any changes to our consolidated financial forecast for fiscal 2024 since the announcement at the start of the year. In light of the situation in the first half, however, we did review change factors affecting the full year core operating profit, which I will go over on the next slide. As you can see, the negative impact of raw material prices is expected to increase due to the weaker yen in the first half despite the recent appreciation of the yen. Competition-related expenses are also increasing soundly from the beginning of the year due to an increase in overseas business where sales are strong. On the other hand, gains are expected to increase in factors such as changes in sales and product mix and total cost reduction due to steady progress in price increases and reduction in cost of goods. Therefore, we have not changed our forecast for the total annual operating income, and we'll continue our efforts. Regarding shareholder returns, there has been no change since the beginning of the year. We have introduced progressive dividends in this fiscal year in order to make even clearer our policy of continuous and stable return of profits to our shareholders. We plan to pay a total annual dividend of JPY 27 per share, up JPY 1 year-on-year, representing the ninth consecutive year of increased dividends. The total return ratio for this fiscal year is expected to exceed 90%, when the dividend forecast and the share buyback implemented in February this year are taken into account. Lastly, I would like to briefly touch on our next medium-term management plan. In the next fiscal year, we will start a new 3-year plan, Vision2030 second stage. Based on the results and [ inflections ] of the first stage toward the realization of our vision for 2030, with a focus on the tuning of the strategies listed here, we are working diligently to put together the plan. The details will be discussed in February next year when we announce our financial results. We started fiscal 2024 with domestic structural reforms as a priority theme, and we have achieved steady results in the first half. Of course, we are aware that there are still issues to be addressed, particularly with regard to fabric care in Japan, where we believe discussions will be necessary, including how future production structures and manufacturing facilities should be. We will continue to work rapidly on the measures that need to be taken. And after achieving this fiscal year's performance targets, we are determined to move on to the second stage. I would like to ask for your continued support. And that is all I have to say. Thank you very much for your attention.

First question is from Ms. Kuwahara of JPMorgan Securities.

This is Kuwahara of JPMorgan Securities. Do you hear me?

Yes. [Operator Instructions]

Not to focus on number. But I'd like to know the change factors in the first half profit, and the cause of the upside. And you revised the plan for the full year. So what are the major changes?

In the first half, the slide shows that within changes in sales, product mix and others, the changes in sales were plus JPY 2.3 billion, and the changes in segment composition, et cetera, were minus JPY 0.6 billion. Changes in sales were JPY 1.7 billion in Q1, as I remember, and Q2 seems to be steady.

Would you comment more in detail as to whether you had the upside in price impact or not? And changes in segment composition, et cetera, were plus JPY 0.8 billion in Q1, but this time, they are minus. So would you comment on this along with your strategy? For example, your strategy to reduce commodity products, how was its impact? And for the full year, changes in sales, product mix and others impact were revised up by JPY 0.5 billion. So would you explain more in detail as to your price strategy? And whether this is more attributable to Japan or overseas?

First, on changes in sales, product mix and others, I think your question was to request more detailed breakdown, right?

Yes.

Major part of changes in sales is a gross profit increase with the top line growth in overseas business. Changes in segment composition is minus, and let me try the deep dive. Price increase, mainly in Japan, was plus JPY 1.7 billion, but it was mostly offset by segment mix change with the increase in overseas resulting in plus/minus 0. And remaining minus JPY 0.6 billion was caused by the manufacturing cost increase for the fixed cost or the increase in wages. These are the components of plus JPY 1.7 billion. Does it make sense to you?

Yes. How about the full year?

This is Fukuda. In the presentation material, Page 26 shows the revisions of the full year forecast. Changes in sales product mix and others in the second half will be equivalent to the first half. Price increase has been steady, and due to this, we revised up slightly compared to the initial forecast. On the other hand, in the first half, due to the depreciation of yen, raw material costs in Japan did not decline. And the raw material cost risk was incorporated in the forecast for the second half. They were the major causes of revision.

I have one follow-up confirmation. I'm sorry to see the positive impact of price increase is offset by the mix deterioration. I understand the increase in overseas business, but I think their margin is improving. Going forward, when the weight personal care increases in the next 1 year and 2 years from now, do you expect the slowdown in mix deterioration? Or do you think it will continue to happen? If the profitability in Japan improves, I have a concern that it will continue to happen. Would you elaborate on this point, please?

It is related to the calculation method. Increasing raw materials multiplied by volume is a raw material cost impact. Cost reduction impact is also based on the volume though it is based on the cost reduction initiatives. So in a sense, it is a theoretical number. And the gap between these 2 is shown as changes in sales, product mix and others, therefore, this includes the wage increases in manufacturing and utility cost increases, including electricity cost. So in future, I'd like to update this so that we can explain more properly.

understood. Now labor cost or the fixed cost is on the uptrend. You said before that you're going to review the detergent product lines. Do you plan to improve the profitability of consumer product based on this fixed cost in your assumption, so that you'll be able to announce them in the next midterm plan announcement?

As for the fixed cost, I think there is a room for improvement further the efficiency from this year and next year. As Takemori said at the end of the presentation, we are examining how we can consolidate the manufacturing structure and improve efficiency in fabric care business. So we are not based on the current level of fixed cost in our assumption. Kuwahara-san, one more comment to add. May I add on the overseas business? Latest overseas business mix in personal care is 43% and year-on-year growth is 110%, achieving double-digit growth. Of course, we will strive to improve the mix of personal care business to increase the profit of overseas business. But in the fabric care business, we have been changing the formulation from the conventional powder type to liquid or, in Northeast Asia, to capsule type in which we can earn better margin. So in personal care and fabric care as well, we are deploying more high value added products to improve the profitability of the entire business. Presumably, it is related to your second question, our price strategy. By changing the formulation, we can raise price, meet the customers' needs and respond to the competition.

Next, Miyasako-san, over to you.

This is Miyasako of Mizuho Securities. One question per person, right? You said that sales in Consumer Products Business were in line. But how about the profit?

Compared to the plan?

Yes.

You can take that it was in line.

Well, both sales and profit were in line?

Yes, of course, in consumer products, they were plus and minus by category and brand, but for the total consumer product, you can take that way.

Would you comment on the plus and the minus?

On the next page, you see the sales amount plus and minus. The trend in the profit is similar to the trend in sales.

How about the fabric softener in fabric care?

Fabric care year-on-year amount change is shown as minus JPY 2.1 billion. This is mainly due to the reactionary downturn from the fabric softener, Airis, launched last year. In detergent market, for example, NANOX' growth of 116% was above the market growth of 112%. So the major reason for the weak top line in fabric care was the fabric softener Airis.

Do you have any countermeasure for this in the second half?

As Fukuda mentioned before, manufacturing structure revamping in the fabric care is one thing. And as explained in the Q1 results meeting, we are shifting from the mass production, mass supply to the focus on our strong category, where we can earn the appropriate margin, and we will continue to shift.

I appreciate you take a stance as such. Then fabric care includes not only detergent, but also fabric softener as well, right?

Of course, yes, fabric care includes this.

Understood. Finally, I had an impression that the consumer products were weak in Q1. And can I take that recovered in the Q2, and in the first half, it was in line with the plan, with the accelerated momentum?

Are you asking about our company, not the market?

Yes, your company.

That's right. You can take that way. In Q2 onward, we are trending to recover. And in terms of market competitiveness, we cannot say that we are prominent by far, but we are not declining toward the balanced contraction.

What are changing now?

As I said before, SKU reduction is one thing, and we identified brands to focus to concentrate our resources, and they deliver the results.

Next, Sato-san, over to you.

This is Sato. Do you hear me?

Yes.

Sorry, this is a simple question about numbers. But core operating income in the initial plan was JPY 8 billion, and the result was JPY 9.5 billion. And you said that it was in line, though, I'm not very sure about the range of it in line. But do you mean that all the upside of JPY 1.5 billion was in overseas business?

This will be taken by Fukuda.

This is Fukuda. Takemori said before that the core operating income in domestic consumer product was in line, but profit was higher than the forecast.

You said in line. That is a matter of range of in line, sorry.

I see.

I also thought that you exceeded the forecast. Profit had the upside across the board. Tell me the breakdown of the upside of JPY 1.5 billion between domestic and overseas. And in the year-on-year profit change in the first half, competition-related expenses were minus JPY 1.5 billion in Q1, but in Q2, it was controlled to minus JPY 1.4 billion. So I think the domestic business mix improves with more focus on profit compared to the Q2 last year when you spent more on fabric care. I expected such explanation, but you didn't say so. What's your take?

As you said, in this Q2, spending in competition-related expenses in Japan is less than last year, and that's pushed up the profit in this quarter.

What is the breakdown of the upside of JPY 1.5 billion between Japan and overseas? And tell me the breakdown of JPY 1.4 billion, the increase in competition-related expense between Japan and overseas?

In terms of the profit difference from the forecast, roughly speaking, 2/3 and 1/3.

Overseas, 2/3?

No, overseas 1/3. 2/3 of the upside is in Japan and overseas 1/3. Breakdown of the competition expenses. Sales promotion costs increased JPY 2.4 billion, and its mix between Japan and overseas is, in Japan, down by JPY 0.2 billion and overseas, up by JPY 2.6 billion.

Understood.

Advertisement cost is down by JPY 0.9 billion for the entire company; Japan, down by JPY 1.6 billion; and overseas, up JPY 0.7 billion.

On expenses side, were they in line? Or were you able to reduce more than the plan in Japan?

Some were intentional and others were as a result, and they decreased.

But in the competition-related expenses in Japan, the total cutback was more than expected and resulted in the upside. In terms of the balance with sales, it was successful in the Q2, right?

Exactly. Our initiatives to improve profitability started to deliver results.

Did you [ line ] that to compete in fabric is efficient?

Takemori already answered that question.

Sato-san, sorry, my previous explanation was not sufficient exactly. Your observation is correct. Yes, rather than competing squarely in the fabric care, we'll compete in the [ forecast ] small domains to pursue profitability in fabric care. And in oral care and eye drop, there, we have competitiveness. We focus and enhance sales. And we believe that this is the right way of doing businesses.

I'm glad to hear this. I expect you to increase earnings in oral care.

Next, Mr. Hirozumi, please.

Hirozumi from Daiwa Securities. Can you hear me?

Yes.

I wanted to ask the same question as Ms. Miyasako and Ms. Sato. I'm interested to know the sales of the consumer products in the second quarter. Page 8 says actual rate of change was minus 0.7%. My calculations may be incorrect, but I believe in the first quarter, the actual rate of change was minus 3%. Then I wonder if you have actually achieved a positive growth in sales in the second quarter? Could you please tell us whether the net sales of consumer products turned into a clear positive growth?

Yes.

Okay. Which segments made contributions? There may be positive and negative segments. But was oral care positive for instance?

You're asking about which segment turned positive in April to June compared to January to March, aren't you?

In January to March, it is now clear that sales decreased year-on-year. I'm asking about the April to June of this year and last year. Which segments are particularly better?

Well, I'm repeating myself, but they were oral care and pharmaceuticals.

Do you feel your strategies and measures are working?

We believe the measures that we have in mind are working.

Once again, how much percentage actual year-on-year increase did you achieve in the domestic business in April to June? What would be the second quarter figure equivalent to the actual rate of change for the first half of 0.7% minus, a percentage shown on Page 8?

Let me ask Fukuda to answer the part of the question. The year-on-year growth rate of the consumer products in the second quarter was minus 0.6%. If we take into account the transfer of business for foods with functional claims last year and sale of topical anti-inflammatory analgesics business this year, they would be about an impact of about 0.9 percentage points. Therefore, net sales turned into positive growth for April to June in terms of actual rate of change. We achieved slight increase in net sales.

Can you expect this trend to continue in the second half?

Yes, we believe we can maintain this trend. But the efforts to clarify business fields are still ongoing, so there will be impacts from those efforts as well as from consolidation and reduction of SKUs. So if you make year-on-year comparisons of the same brands, we would probably see trends of positive growth.

[Operator Instructions] Now Mr. Ohana, please.

Ohana from Nomura Securities. Can you hear me?

Yes.

My question is about oral care and consumer products. As compared to the total market, you are still behind in sales growth, I believe. Including OCH-TUNE launched in April, how are we supposed to foresee the sales trend of Oral Care Products going forward? Could you share with us how OCH-TUNE is performing against the plan?

In fact, we do not share your view of us being behind the market in oral care products. The slide on the screen represent what I said. The total oral care market, consisting of toothpaste, toothbrushes, dental rinses and dental care products, achieved 106% year-on-year. Our total Oral Care Products business was mostly on par with the market. Exactly because we are a leading manufacturer in this space, the year-on-year growth of sales value of big companies like us would not affect the market in a significant and direct manner. That is because we are the #1 manufacturer if I may put it that way. By brand, we achieved 107% for CLINICA, 107% for high value-added products we focus on for SYSTEMA, as I said earlier, 113% for NONIO. And for White&White, because of price increase, the unit price went up to 106%, which we regard as positive. Therefore, we do not believe at all that our oral care business as a whole is inferior to the market. That is how we view our business. With regard to OCH-TUNE, honestly speaking, compared to what we had assumed for this year, the actual performance has been around 65%. For this, since the product is based on the concept of new lifestyles, we believe it will take time for product to be widely penetrating to customers. Therefore, while taking our time to develop our brand, OCH-TUNE, by enhancing the mainstay brands listed on the left with appeal to address each symptom, we hope to further solidify the business in the third and fourth quarters and next year.

It is not that it doesn't make sense for you to say this is because you are a leading company. But isn't it the case that total market usually expand led by its leading company?

Our shares are more than 30% or 40% and exactly because we have large market shares, even if it grew by 1% or 2%, the impact will not be reflected in the market directly. That is a fact. But as a mission of the #1 manufacturer of oral care products, as you said, we hope to achieve a higher added value and higher quality growth of the domestic oral care space.

Understood. The detergent market has been expanding, driven by Kao among others, so I do hope that the oral care market will expand led by your company.

Now next, Ms. Yamanaka, please.

Yamanaka from Nikko Securities. I have a follow-up question from qualitative perspectives. As you work on various initiatives such as portfolio reforms, more focused on oral care products where you have strength and raising the share of personal care products to the total overseas business, the resources you previously spent in Fabric Care Products and others will be now reallocated toward oral care, including domestic businesses. Will there be any changes inside your company going forward, such as internal organizational reforms, changes in the split of R&D resources or reinforcement of [ organizational ] more oriented toward oral care business for the mid- to long term?

We have already started specific studies for that purpose. If you consider Lion Group as a whole, not just domestic oral care products, let's take an example of R&D. From the perspectives of in what roles research centers in Japan, overseas should be positioned and how to allocate resources between foundational, developmental and applied technologies, we are working out the structure that will accelerate the business of Lion, especially of oral care products by reallocating resources in research centers not just in Japan but also those in the rest of Asia. In particular, in the second stage, starting from next year, we would like to start the initiative on a full-scale basis.

If there's something more specifically you can share with us, that will be appreciated. For instance, in oral care field, you told us that you had been enhancing value added by further digging into medical use. But with OCH-TUNE, your strategy is reversed and now targeting at customers with lower awareness. As you have been spending more resources on fabric care products, were there any opportunities you may have missed because you could not follow through despite the potential for more growth? And are there any categories, either in Japan or overseas, you can now expect more growth in?

I will explain about oral and fabric care with Asian business as a denominator. First of all, when you said medical use, you were talking about oral care products, weren't you?

Yes.

Were you asking about products for dentists?

I don't know if it is for dentists, but I thought you were saying you had been promoting products focusing on treatment of dental carries.

The core of our oral care products has conventionally been to address symptoms related to oral health, including dental carries, periodontal diseases and bad health -- bad breath. Then if we expand our business to include various oral functions such as the ability to chew and swallow, what kind of business we'll be able to do and how we can develop business in Asia? We want to accelerate the initiative from both business and technology perspectives, and we are now trying to work out the specific structure to make it a reality. That is about oral care business. Now turning to Fabric Care Products. We have various technologies such as highly concentrated liquid laundry detergent where we launched products in Japan ahead of other countries. As I said currently, in Southeast and South Asia in particular, there is a shift toward higher value-added formulations from powder to liquid, liquid capsules and higher concentrations. The way we can win are not competing in commodity products, but as I said in the example of laundry detergent, it should be by leveraging higher concentration technologies while capturing the changes in demand for formulations so that we can achieve growth overseas in an appropriate manner. That is what we are hoping to do, and we would like to study technologies in Japan as well. That will be the basis for such businesses. Now we're running out of time, and it seems that there is nobody who's raising their hand. We'd like to close the Q&A session. Thank you very much for the questions.

With that, I'd like to end the briefing on the financial results of Lion Corporation. Thank you for your attendance. [Statements in English on this transcript were spoken by an interpreter present on the live call.]