LIXIL Corporation (5938) Earnings Call Transcript & Summary

It is time for us to start LIXIL Corporation's first half financial results for the fiscal year ending March 31, 2026. This briefing is streamed live online. The material for this briefing is on our website in the Investor Relations page. First, I would like to introduce to you our presenters. Director, Representative Executive Officer and President and CEO, Kinya Seto. Next, Executive Officer, Executive Vice President and CFO, Mariko Fujita; Senior Vice President, Leader of the Investor Relations Office, Aya Kawai. I will be serving as the moderator. My name is Setoguchi from IR office. Next, I would like to explain how we proceed. First, Fujita, the CFO, will give you the overview of the financial results. It would be followed by a Q&A session. During the Q&A, CEO, Seto, will join and entertain your questions. We expect to conclude at 3:45 p.m. Ms. Fujita, the CFO, will give you the overview of the financial results. Fujita-san, please.

Hello, ladies and gentlemen. My name is Fujita. I would like to give you the financial results for the first half for the fiscal year ending March 31, 2026. This is the overview of the results. Revenue decreased while core earnings and EBITDA increased year-on-year. As for the Japanese market, in Q1 there was a surge in demand. So in Q2, we saw reactionary slowdown. However, the renovation sales of water-related products remained solid. LHT's core earnings remained flat due to additional costs associated with the ceramic siding business. Because of this, the core earnings were flat, but renovation sales were trending upward from September onwards, driven by promotional efforts. As for the international market, the revenue decreased, but the profits substantially improved. Europe and Middle East and India has seen strong performance. As for Americas and China, housing markets remain sluggish. As for others, in Germany, there was a change in the corporate tax rate. Because of this, the tax expenses decreased. The full year earnings forecast remains unchanged. We are now scrutinizing various elements currently. There is no change in the full year dividend forecast. So resolved interim dividend remains JPY 45 per share. Next is business environment outlook for fiscal year '26, the Japan business. So the new housing starts remain sluggish, but renovation sales is driving strong performance. Each business is facing different situation. But as for LWT in Japan, showroom visitor numbers saw upward trend in August and September. As for LHT, we have conducted the promotion for products eligible for the window renovation subsidy and the sales is expected to increase from quarter 3 onwards. In the Living segment, we are focusing on the higher-end products. So next is the international market. There is a global trend of interest rate cuts. But in Europe, because of the instability in the government in Europe, there has been delays in policy decisions to promote housing construction. So I would like to go one by one in terms of the region. First is the U.S. U.S. will be entering an interest rate cut phase. Mortgage rates are declining somewhat compared to peak levels. However, the tariffs and immigration policies is slowing down the housing market recovery. So we believe that the difficult circumstances to last through this fiscal year. However, we have worked on the price optimization as well as structural reforms, and we expect the result of that to materialize gradually. And we believe that the situation, the sluggish situation has bottomed out in the first half. Next is Europe and IMEA regions. In Europe, we expect the full market recovery to happen next year onwards. Sales improved and the color products have improved and the sales improved by 5% year-on-year. So you see in the bottom graph, the composition ratio of color products to total faucet sales and the revenue grew 32% year-on-year. As for Asia Pacific and China, I would like to talk about China for this region. China sanitary ware market remains challenging due to weak economic condition and intense competition. However, growing products are a strong point, and we are focusing in that. And we saw improvement of the sales of the growing product by 25%. This is the performance highlights for the first half. Revenue was JPY 735.9 billion, core earnings, JPY 16.9 billion. So there was revenue decrease and core earnings increase. EBITDA and profit has improved as well. Next is the consolidated business result for the first half of the year. The numbers have been explained on the previous page, but if you look at the gross profit ratio, it has picked up by 1.6 percentage point year-on-year. And this is a point that I wanted to highlight on this page. Next page is the business results by segment. For LWT, both for Japan and international business, we saw profit increase. And this was due to high profitability, the Europe and Middle East showing recovery in sales making contribution. LHT, the sales did come down slightly, but price optimization and renovation increases has enabled profit to remain flat. Living, the sales for renovation has progressed strongly. As a consequence, we were able to see both revenue and profit increase. This page is essentially, the previous page described based on the previous reporting segments. So allow me to skip this page. Next page is the situation concerning our balance sheet and consolidated financial position. For total assets, this increased slightly. And this is due to the assets held in Europe increasing due to foreign currency translation. The impact of -- the foreign currency impact is JPY 46.6 billion. And the final page, and this is the cash flow and the cash balance. As for the free cash flow, we have been able to remain positive. As for the operating cash flow, this did come down year-on-year. However, this was due to the increase in inventory assets. So we consider this to be only temporary. And that completes my explanation for today. Thank you.

Thank you very much, Ms. Fujita. We will move on to Q&A session now. But before taking your questions, Mr. Seto, the CEO, will give supplementary comments about the financial results. Mr. Seto, the floor is yours.

Middle East, near East and India, excluding those regions, the situation was not so good. But even facing that situation, we were doing relatively well. In Japan, there was a last-minute demand in April and the new housing starts had deteriorated after that. April to September, there was a decline by 18% in the new housing starts. This was the record high decline. However, we were able to improve our profitability. We were able to grow both revenue and profit. That was good news for us in the area of renovation. The only weak area was a window renovation but from September, we are seeing a very speedy recovery. So in Japan, the situation overall is bad, but we were able to do well. In the international market, the biggest concern is the U.S. In the first half, we are confident that we have bottomed out in that market. Towards the second half, we would be seeing the results of our structural reform materialize and the structural reform in the backup that we have conducted as a significant reform, we will see fruitful results in the second half. So we believe the situation has bottomed out in the U.S. market. As for Europe, the color products have seen increase in the share. Compared to the first half, the one concern that we have is that -- so we had expected the interest rate will be cut and the policy decisions will be made for the construction area, but we are seeing delay in the policy decisions made by the government. In the European countries, there are a lot of instability in the government. There are right wing governments, left wing governments. And because of this fluctuation, there has been no decision -- policy decision being made. However, what we can say is that the demand is high. However, because of the increase in the cost of supply has been insufficient the customers in the mass segment to below, they cannot buy the houses. And this applies in the U.S. as well. So there needs to be some policy decisions made by the government in this area. As for China, we believe that they would -- the market will face difficult situation for quite some time. However, even in that situation, it is growing 25% year-on-year. The high-end products have been faring well even under difficult circumstances. As for the IMEA region, we have been doing better and the market share is growing. The second half concerns, if we look in the longer term, will be the policy decision made by the government in Europe and U.S. So we want to see a better situation for that.

Thank you very much, Mr. Seto. So we'd like to receive questions from the participants. [Operator Instructions]

[Operator Instructions] I would like to go to the first question from Nomura Securities, Fukushima-san.

This is Fukushima from Nomura Securities. Can you hear me? I have 2 questions. So now the first question. For Japan to begin with, so as the CEO has explained, the -- from April to September, 18% decrease in new housing starts and the impact of this, would this be reflected with a delay to your sales? Should we consider this as a risk or not? Also, in terms of the window renovation, the advanced window renovation, if we look at the government, the web page, only 43% of the budget has been consumed thus far, it's quite low. And so I am somewhat concerned as to whether budget will be provided for this purpose next year or not. So please comment on that as well. That's the first question.

In regards to the new housing starts, there have been delayed. Well, from our perspective, we don't expect that to appear with a delay because we are planning based on a low level to begin with. So in that regard, even in this type of situation, the fact that we have been able to generate this level of sales means that we have been able to strengthen our position inclusive of our renovation business. And so I don't think you need to be too concerned about this. And the market overall is showing demand decrease, but we feel that we have been able to increase our market share. Now in terms of window renovation, true, in the first half of this year, it was quite challenging. So during the summer, we've conducted a campaign targeting the Tokyo Metropolitan area in general, particularly for the Tokyo, window renovation, in addition to the national program, there is a Tokyo -- the Metropolitan Government and the 23 Wards, they all provided separate subsidies. And so in the Tokyo, you can undertake window renovation at a very low cost. So we've conducted the campaign. And so we have had a very strong demand from September to November. And so we have recovered to a level greater than what we saw last year. But what will happen to the national policy? That is not something we can really make comment on. But what we have heard is that the related, the ministries and agencies -- so we're thinking about the carbon neutrality policies and what they can count on is the housing area, particularly the impact of window is quite high. And so whether it be METI or the Ministry of the Environment or the Ministry of Land Infrastructure, Transport and Tourism, they all share that view. And so the government changing their support for window is not something that I'm expecting at this point in time. So we now have the new government. So we are not able to talk anything specific in this area, but our expectation is for the program to continue. So that is our hypothesis.

So I'd like to ask the second question. And so the sanitary ware business in the U.S. Previously, I think you've mentioned that for yourself in U.S., what you are selling, the sanitary ware is produced in Mexico. And so you are competing against China and the Asian companies, but it seems that the tariff is going to be applied to China and the Asian companies, but no tariff is applied to Mexico. So that would lead to enhancing your competitiveness leading to potential increase in the market share. I think that was what you have said previously. But are you really seeing that right now? So if you can explain the current situation in that regard. So that's my second question.

What has happened in practice is that we are expecting tariff to increase in April. And Asia and China, the sanitary ware, the manufacturers, they actually consume a lot of inventory. And so as of September, the rush or the last-minute demand has kind of disappeared. And we stopped importing from Asia as well from ourselves. And so the number supplied is being reduced, but we have changed the portfolio to increase pricing on average. And that was kind of an initiative that we have implemented and that the pricing impact will be shown in November, and we will see a lot of these materialize in January. And again, another materialization in April next year. And so October, January and April next year. And so the restructuring of the business that we've done last year will show result because the transition service agreement will be disappeared at this point in time. So we will see the improvement in 3 stages going forward. In other words, the market share has not increased right now, but you're expecting the share to increase going forward. And you're going to see that increases even with the price increase. And so essentially, the economics will also improve. Well, we are not expecting market share to increase because in regards to those with a low profitability towards the low end, we are not going to continue with those. And U.S. overall, when the China or Asian product come in, the retail sales for lower-end product, when you look at the market overall, the market share of the low-end product kind of increase. And so if the Asians are not providing the low-end product and for us not coming up with too much product there, we want to change the market structure in U.S. overall to that, which is a little bit more higher end. And so we're not going to go for market share at the lower end. So volume-wise, what we brought from Asia, we do have some portion of that we will be reducing those. So the market share for the market overall is not going to increase necessarily, but we want to increase the average price. That's what we want to target.

Understood. By the way, what is the level of price increase? Do you have any quantitative benefit of that?

Well, sorry. And so we have a number of our customers and distribution. We have a confidentiality agreement with them. So I'm unable to speak about those numbers. And there are different timings for that to be implemented. If I mention these numbers, then from the customers' perspective, they understand what we are doing. So please allow me not to refer to that. So a different perspective. So that's already reflected in this -- the guidance. It is included in the forecast, but April to September, and if we look at the balances, the first versus second half of the year, larger weighting towards the second half of the year.

The next question from Goldman Sachs, Okada-san.

This is Okada from Goldman Sachs. I have 2 questions. My first question related to LWT business in Japan. In the first quarter, the renovation products sales had gone up by 11% year-on-year. In the second quarter, plus 7%. So there is an increase. So compared to competitors, I think that this ratio of increase is higher. So have you been able to gain market share? Or are the competitors doing something to counter that?

So it's like prisoner's dilemma. The demand overall is coming down, and it would be better not to go for a race to the bottom. And we decided to increase the price first. So this kind of message not to compete to get to the lowering of the prices. So lowering of the price will be digging the gray for all the players in the industry. So the industrial understanding of that is improving, but there are some companies who would still try to capture the customers by price. I would not be naming them. But there are several companies like that. They would decrease the price once their market share would even slightly go down but this is not a game that we are playing on our own. So it's very difficult to navigate through this industry, but LIXIL has differentiated products. And LIXIL has digital services, inclusive of the retail industry. And we have been received well by the construction companies as well as the builders. And we believe that we can increase our market share through those initiatives.

My second question, I would like to know your prospect for the U.S. business. You said earlier that through structural reform that you have conducted in the past, you expect improvement in the profit. The interest rate in the mortgage is decreasing, but there has been declining in the employment, for example. And I was wondering if those things would negatively impact you? And how do you see the market situation from the next year on?

I wanted to talk about that myself. Last year, in the fall, around the same time of last year, there was builders conference at Harvard University. The builders had expected at that time that 2025 will be a good year for them. However, in reality, 2025 was not a good year. And 2 weeks ago, the same conference occurred and the builders had expected that next year will be even worse year. So the bad situation will continue into next year. The supply shortage had remained in the market for a long time. The high-end customers are building, but mass to low-end customers have not been able to buy the houses, and there has not been new housing starts for the rental housing as well. So the U.S. is facing very critical situation. There are 1 million homeless people. In Japan, there are only 1,000 homeless people. So the significance of the homeless problem is very big in the U.S. And the loan -- the mortgage rate is not coming down so much. And also the timber, the aluminum, steel all of them are seeing increase in the price because of the tariffs. So the affordability of the housing is significantly coming down. So 5 to 6 years ago, the housing average price was about 3x more than the average income. Now it's 5x the average income to buy a house. So frankly speaking, everyone wants to buy a house, but they cannot buy homes. So this -- so if you try to change the situation around for the better, the central government, the Trump administration should do something or the state government should do something that would enable the middle to low-income people to be able to buy housing. And this problem is happening in Europe as well. The interest rate cuts have been happening in Europe already. And in Europe, there is also inflation. And another issue about building a house is that there are many policies related to environmental friendliness, and it's very difficult to build a house. In spring of this year, in Germany and France, in bigger markets, we had expected that there will be a policy implemented to promote the buying of the houses. However, in Europe, the ruling parties are very weak now because there are many small the small parties, which are going against the ruling parties, and it's very difficult to implement policies. So what we see in the U.S. and Europe is that there are a lot of demand, but supply is small. And even if there are supply, the price tends to be very high. So the actual supply in the market has been very difficult. So the situation in the U.S. is more severe in the U.S. than Europe, and there's not been a policy solution for this. And this is related to Fukushima-san's question earlier. But rather than going after the market share, we should be improving our portfolio position. Toto, our competitor has been doing very well in this area. They had very good portfolio position. So compared to us or car, I think they are having a very stable business. So what LIXIL has to do in the U.S. market is to pursue improvement of the portfolio position rather than increasing the market share.

So I'd like to proceed to the next question from SMBC Nikko Securities, Kawashima-san.

This is Kawashima from Nikko Securities. I have 2 questions. First question is simple. So the ceramic findings, the additional cost was something that you have mentioned. Could you explain the details of that? So I think this was booked as some other expenses, but is there something that will have impact on the core earnings? And the second question is to do with the core earnings in Japan. If we compare the first quarter to the second quarter, and from a seasonal perspective, you should generate greater profit in the second half of the year. But LWT and Living, that wasn't the case on this occasion, it seems. And the factors were the rebound to the last-minute demand or the expense timing of SG&A, but renovation increase rate was a lot slower in the second quarter versus the first quarter. So was the first quarter too good as a result? Was it more the competitive landscape that has having impact? Or is there other factors where we are seeing some slowdown in the second quarter? So if we look at the situation on a Q-on-Q basis, could you give some explanation of how that had occurred?

Well, the fact that if we had continued with the ceramic business more, LHT would have achieved a stronger growth in the second quarter. And it's not -- what will have impact on the core earnings rather than the other expenses. So if we were to discontinue with the business, of course, the orders will come down. And so the business will become more difficult. So it may be difficult to secure the fixed cost. And if it is inventory, long-tail inventory, of course, so if we expect to be able to sell that in the future, then it's the inventory. But if we are going to discontinue with the business, we may have to dispose of those inventory, write them off. So more difficult. And of course, capacity utilization rate will come down as a consequence, too. But there is a responsibility to supply. We need to continue for a certain period. So it's quite a tough environment under which we need to conduct our business and also from the customers' perspective, so there could be a complaint if we don't address this immediately. So inclusive of those in the second quarter for quite a large portion, inclusive of what could occur in the future. Maybe we didn't have to actually take so much into consideration now, but we've actually expensed some quite excessively. So we did see quite a significant drop in terms of our core earnings. And so we want to discontinue the ceramics business by the end of this fiscal year. So we've actually took quite a full sided view in the second quarter as well.

And this is Kawai from IR Department. Please allow me to respond to your second question. And as Kawashima-san has explained, in comparison to the first quarter and the second quarter, LWT, Living in both segments, the new housing so there was a rebound decline in the second half -- second quarter vis-a-vis the first quarter because of the last-minute demand there. In terms of renovation growth rate, if we make the Q-on-Q comparison, the second quarter was slightly slower than the first quarter. As a consequence, the business -- the core earnings did come down slightly. And in terms of Living, so we saw a strong performance for the kitchen in the first quarter, particularly the high durability product, but there was a slight slowness in the second quarter vis-a-vis the first quarter.

So the first point, so ceramic sidings, is there anything that you can share quantitatively? And the renovation growth slowing down somewhat. Are you saying the level in the second quarter that is a more normalized level or meaning that the first quarter was too good?

Roughly, about JPY 2 billion, so more than expected overall in terms of ceramics in the second quarter. And this was as a result of quite a bold the response that we have implemented. Comparing first and the second quarters, the last minute demand in April was, of course, quite notable. And of course, it is quite a sizable business that ends up reducing cost, SG&A ends up being lower as well. So if you say that the first quarter was too good, then I certainly cannot negate that.

[Operator Instructions] So I would like to ask Mochizuki-san from CLSA to ask their question.

This is Mochizuki from CLSA. I have 2 questions. The first question is more of a macro question. On 27th of October, the corporate tax expenses you said would be decreased. And because of the corporate tax rate change in Germany, there will be a decrease of tax expenses by JPY 12 billion. And there was no revision in the plan. So I don't think that you had reflected it. And I would like to know why you did not revise your plan? Core earnings is better than planned. So you were uncertain how much improvement to the core earnings there would be. And you didn't know much -- and you didn't know much about how the cost would be going forward. But I would like to know how the impact of the JPY 12 billion decrease in the tax cost would be. And also, in the second half, you would be improving the business in the U.S., for example. So when do you think that U.S. will turn profitable? I understand that the red ink will be decreased, but when will the situation turn around to be in the profitable side?

In the next disclosure, we would be able to say something more clear, inclusive of the revision in the plan. It was very difficult for us to foresee. We have many entities around the world, and we have to review how the balance of the corporate taxes would be for the various entities that we hold. Deferred tax liabilities had decreased. So because of that, the profitability had improved, but there are some deferred tax assets that we have to think about, which fluctuates year-by-year. So it's very difficult to foresee how the concrete situation would be. I am not able to say anything concrete, but we want to create a situation where we would be able to make more accurate prospects inclusive of the tax costs. We want to create a more predictable situation, and we want to optimize the payment of our corporate taxes. To that end, we want to have some time to consider what would be the optimal way to go about this. Anything from you, Fujita-san?

In the German entity, DTA and DTL, there -- we have conducted a recalculation of the costs, et cetera. And in each entity, there has been some tax movements. So we need to review overall of the tax payment structure. So that's why we had not conducted the revision in the plan at this point in time. So in that sense, we are lagging behind. But DTA and DTL, these are not impacting the cash. We have been paying taxes each year. And this will be about the adjustment on the balance sheet. And if it looks like there has been a significant change because of that, it would not be convenient for the investors. So we want to be -- we want to have more predictability in the cost, and we have started the project on that. And to your question about the profitability in the U.S. market. In October, we made price optimization. And in January, there will be some improvement due to the structural reform, and there will be a structural reform to occur in next April. And the timing of turning to profitability, we believe that it would be somewhere around quarter 4 of next year. That's our hope. So the structural reform results as well as the price optimization, if we are able to see the results, we would be seeing something in January or February. So January or February, and the number of days in January will be small, so probably sometime in February.

So the next question is Teraoka-san from Daiwa Securities.

This is Teraoka from Daiwa Securities. I have 2 questions. First is in regards to price increase in U.S. I wanted to understand your thinking there. In terms of the sanitary ware, it is produced in Mexico, so no tariff. But the grower product, I understand that you're importing some which is taxed with tariff. So in terms of price increase, so the tariff portion, inclusive of sanitary ware overall, you're going to pass that on. Is that the kind of thinking that you have adopted? Or is it that you're looking at the price increase of the competitors? And because of the price increase as to whether there will be negative impact on the quantity. So your thinking in this regard, please?

Of course, increase in cost will be reflected in price increase. But apart from that, the biggest factor for us to see price improve is changing the portfolio. In other words, low-income product to high price range product -- sorry, from low-priced product to high price, we are making that shift. Why can we do that? Because low prices product from China and Asia, if they don't come in, then the distribution channel will have to change the type of product that they sell. So specifically speaking, from our perspective, entry class product, we have a certain product called cadet. And we also have a champion product, which is a relatively higher price. And so cadet reduced and champion volume is increased. So that's kind of offer that we have come up with. And so the distribution has essentially accepted that. And for us to do this, to begin with what we've done in Asia. So that's maximum of 9.7 million pieces per year. But based on the production capacity in Mexico right now, we can supply more than 8 million pieces. So rather than increasing the volume, but we are making improvement in portfolio, that would lead to enhancing the profitability on per piece basis. So that's a retail example. But for trade as well, so providing premium toilets. And so about 1 million is called -- the units is called the commercial grade, but we're also trying to change that pricing format as well. And for commercial grade, we are increasing prices as well. And so overall, in terms of pricing increase, so it's not the case that we're going to increase prices significantly as of October. So the portfolio changing will start from January and so for October and January. And also what I mentioned before, as of April, there were Asian product that came in last minute, and they are now disappearing as inventory. So in April, new addition is something that we can expect to see.

And the second question, so color product selling well in Europe right now. So is it what the competitors are not offering? And if they're not offering those products right now, is there a risk of the competitors also coming up with similar product? And to what extent can you continue the share -- market share gains with the color product, your thoughts in this, please?

Well, no, but there are companies who do color product in the color product area, the competitors, and they're also succeeding. And there are products that we are succeeding with and there are products we are not really succeeding with in terms of color product as well. So we need to ascertain what are the and the product. But the right image is that the color product supply capacity. So we are more than 3x the level that we were at around this time last year. But still, we haven't sufficient the supply yet. We have also outsourced some. So we are actually addressing this gradually. So what is the bottleneck right now is not the demand. It's the supply that is a bottleneck right now. So there is still room for increasing color product, but it does involve facilities as well. So at the next timing, maybe April next year, it's going to be difficult for us to increase the volume all at once until April last year. So in order to meet the supply, the delivery line, then we have narrowed down on the product supply. And so when the supply increases and the increase in the SKUs and whether we will see similar type of growth or not, this is something that we need to try to identify. And as to whether this is only one time, it's difficult to really ascertain. But from the customers' expectations that was us, not the same type of product, but high-end product with greater design. If we consider that there is that type of expectation from the customers, then this certainly is going to be an area where that we need to increase going forward. And also another positive thing. And so we're quite strong in middle and near East and India. They like color in those regions, particularly certain colors that they tend to really like. And so there, we have been able to more or less dominate that part of the market.

We would like to move on to the next question from Morgan Stanley, MUFG.

My name is Yagi from Morgan Stanley, MUFG Securities. I would like to ask 2 questions. I would like to talk about core earnings about Europe. How you see the future core earnings in Europe. If we compare first quarter and second quarter, second quarter has seen a deterioration in the core earnings. I would like to know why that was? So after second quarter, considering the seasonality, I think that last year, there was an improvement. And I was wondering if the same thing happened with this year -- will happen with this year with the improvement of the color products.

So the color products had increase in supply from April. And because of this, there was a huge chunk of improvement. But there was a limitation in the capacity. And the color products had improved. But in the past 6 months, the supply had not increased so much, and we were selecting the higher-end products to sell to our customers. One of the things about cost that we are worried about is that there are increase in the cost. So we need to conduct price optimization flexibly. So that's one concern. As Mr. Fujita has explained, inventory is being accumulated because there are various types of product because of the difference in the colors. And this adds to the cost. So we need to be very careful in managing it.

My second question is related to the U.S. market. In the first quarter, what you have said in the presentation is that the -- in the first quarter, there was bottoming out. And you are saying that you bottomed out because you are seeing some light at the end of the tunnel after conducting the structural reform. So I would like to know what you meant by the bottoming out in the first quarter.

In the first quarter, we had seen the bottom to be lower than that we had thought. And because of the system issues, we were not able to make shipment as much as we wanted. In the first quarter also, there has been some competition with the overseas competitors' products. We had made a decision to decrease the supply on our side. 9.7 million is our shipment capacity, but we discontinued the Asia and China markets. And so we had reduced the capacity to 8.2 million, and there was an impact from that. And we changed the portfolio there, and I think we can change for the better because of this. I have said that we have bottomed out in the first quarter, and I would like to explain the reason why I say that. The structural reforms results will be seen starting from November as well as in January and the bath business structural reform in terms of the labor as well as the distribution structure, we have sorted those things out as well and the structural reform impact will be seen in -- from October, January and April. And we would see the portfolio impact as well as the price optimization impact in January, and there would be no product coming in from Asia. So we believe that we can further improve the profitability. Teraoka-san asked this earlier. Well, he asked whether we will be breaking even in January or February. But our original plan was the April at the latest to break even. But if we look at the situation now, because we have bottomed out at the lower point, maybe we would be able to get there around January to February.

Next question is from Mizuho Securities, Nakagawa-san.

This is Nakagawa from Mizuho Securities. I have one question for Living and also the water-related business in Japan. And based on the material, so August and September, the showroom visitors have increased. That's what you have explained. So what is the type of product that you're seeing stronger demand? If you could just give some commentary on that, please?

Well, until July, the visitors were decreasing, but we started to see increases in visitors from August and September. And the visitors are increasing both for the new houses as well. And no particular product, but timing-wise, in April and September, and I mentioned this earlier, we actually done the energy conservation, the campaign for windows. And so we did actually see increases in the window related. But apart from that, not any specific products showing any strong growth.

We have been able to respond to all of the questions that has been brought so far. It seems that there are no other questions. So we would like to conclude the Q&A session here. We would like to now conclude the first half financial results briefing for the fiscal year ending March 31, 2026, of LIXIL Corporation. Thank you very much for your attendance. [Statements in English on this transcript were spoken by an interpreter present on the live call.]