Mitsui & Co., Ltd. (8031) Earnings Call Transcript & Summary

Good evening. My name is Takakazu Uchida, Chief Financial Officer. Thank you for joining us today. I will start by discussing our operating results for the fiscal year ended March 2020 and reviewing progress on our Medium-term Management Plan, driving value creation. Then I will hand over to Tetsuya Shigeta, Global Controller, who will speak on the results in more detail. Our new Medium-term Management Plan will be explained separately by President Yasunaga at a briefing to be held next week, on May 8. Please turn to Page 3, which outlines our results for the year. Profit for the year was JPY 391.5 billion, and core operating cash flow was JPY 621.9 billion. Core operating cash flow exceeded forecast due to contributions from the Australian iron ore business, among others, and cash generation remains strong. However, profit for the year was below the full year target, primarily due to impairment losses for oil and gas development assets recorded in the fourth quarter. Looking at how the reduction in economic activity and drop in crude oil prices accompanying the spread of COVID-19 will affect Mitsui's business in the fiscal year under review. This has mainly manifested as impairment losses for assets associated with oil and gas development. We forecast that the FX will extend further into the fiscal year to March 2021 and beyond. In terms of shareholder returns, our forecast remains unchanged with an annual dividend of JPY 80 per share. Additionally, in the fourth quarter, we announced a share buyback of JPY 50 billion as additional shareholder returns, out of which approximately JPY 80 billion has been executed as of end of March. As a result, we forecast a total return to shareholder of approximately JPY 200 billion. Please turn to Page 4. A key initiative of our Medium-term Management Plan was to build a robust profit base and thoroughly strengthening existing businesses, so allow me to explain the results in this area. In our core areas of Resources & Energy, Machinery & Infrastructure and Chemicals, profit for the year was JPY 352.8 billion, accounting for nearly 90% of Mitsui's overall profit. In Resources & Energy, core operating cash flow was JPY 465.8 billion, surpassing our full year forecast. This was primarily due to strong performance by the Australian iron ore operations. However, impairment losses, including for assets associated with oil and gas development, meant that profit for the year was JPY 243 billion. In Machinery & Infrastructure, profit for the year was JPY 87.5 billion, and core operating cash flow was JPY 95.2 billion. Impairment losses on some assets recorded in the fourth quarter meant that profit for the year was below the full year forecast. In Chemicals, performance achieved previous forecast despite continued low commodity prices. Please look at Page 5. Cash flow management and strengthening our financial base was one of our key initiatives. So I will now explain cumulative results of cash flow allocation for the 3-year period of the Medium-term Management Plan. We achieved strong cash generation and, as a result, gained JPY 1.86 trillion as core operating cash flow and JPY 780 billion as cash inflow from asset recycling, both of which exceeded the target in the Medium-term Management Plan. On the other hand, as a result of strict investment discipline, cumulative investment and loans amounted to JPY 1.91 trillion, which is below the forecast in the Medium-term Management Plan, leading to JPY 510 billion in shareholder returns. As a result of those allocations, free cash flow after shareholder returns was JPY 220 billion. On the next page, we discuss the status of our financial base. Net interest-bearing debt decreased JPY 105 billion from the end of the previous fiscal year to JPY 3.5 trillion. However, net DER increased to 0.91x as a result of a decline of approximately JPY 450 billion in shareholders' equity primarily due to decrease in other comprehensive income resulting from exchange rate fluctuations. Going forward, we will continue to strengthen our financial base through our cash flow allocation framework. The detailed achievements and challenges of the Medium-term Management Plan will be discussed in the briefing to be held next week on May 8. Please turn to Page 7. Here, I will review our performance on the Medium-term Management Plan. We more or less achieved core operating cash flow and ROE targets of JPY 630 billion and 10%, respectively, due to steady progress in cash generation and improvements in capital efficiency. However, our profit for the year forecast of JPY 440 billion was not met due to impairment losses incurred in fiscal year March 2020, primarily in the Energy segment, and the profit levels in nonresource areas not meeting targets for the Medium-term Management Plan. Please look at Page 8. Looking at profit for the year for each of the 3 years of the plan, although we did not reach our target level of JPY 200 billion for our non-resources businesses, we steadily enhanced profit creation in nonresource areas, including gains realized from investments through proactive asset recycling and portfolio optimization. Please turn to the next page. Looking at core operating cash flow for each of the 3 years of the plan, although we did not reach our target level of JPY 230 billion, we enhanced cash generation, particularly in the Resources & Energy segment. Please see Page 10. I would like to conclude by talking about shareholder returns. There is no change to our plan announced at the start of the fiscal year to pay an annual dividend for the fiscal year ended March 2020 of JPY 80 per share. For the period of the Medium-term Management Plan, we plan total shareholder returns of approximately JPY 510 billion, representing total shareholder return ratio of approximately 27% against total core operating cash flow. Looking ahead, we will continue to pursue a sustainable increase in shareholder returns in alignment with improved business performance while working to optimize capital efficiency. That concludes my part of the presentation. I will now hand over to Tetsuya Shigeta, our Global Controller, to explain our results for the fiscal year ended March 2020 in detail.

Thank you. My name is Tetsuya Shigeta, Global Controller. And I will now provide details of our operating results. Please look at Page 12. First, I will explain the main challenges in profit by segment compared to the fiscal year ended March 2019. Profit for the year decreased JPY 22.7 billion to JPY 391.5 billion. Mineral & Metal Resources profits increased JPY 16.1 billion to JPY 183.3 billion amid an increase in sales price and volume at Australian iron ore operations and despite a decrease in the sales price of coal and an increase in costs as well as impairment losses for Mozambique coal and infrastructure projects. Energy segment profits decreased JPY 36.0 billion to JPY 59.7 billion. The main factors were a decline in crude oil and gas prices and impairment of oil and gas development assets. Machinery & Infrastructure profits increased JPY 9.1 billion to JPY 87.5 billion due to contributions from gas distribution and automotive businesses and the sale of interest in C2C, a wind and solar power generation business in Canada. This was despite impairment losses at our overseas railroad business and offshore support vessel business. Chemicals segment profits increased JPY 17.1 billion to JPY 22.3 billion, mostly due to the absence of losses at the U.S. terminal business recorded in the previous fiscal year and despite lower earnings at businesses amid an economic slowdown and weak trading performance. Iron & Steel Products profits decreased JPY 5.2 billion to JPY 4.7 billion. The main factors were the absence of a gain on sale of land by affiliated company, which was included in the previous fiscal year, along with lower earnings at businesses amid an economic slowdown. Lifestyle segment profits decreased JPY 4.3 billion to JPY 32.0 billion due to the absence of gain on reversal of provision related to withdrawal from Multigrain business and absence of gain on deemed sale of IHH, including the same period of the previous fiscal year, and impairment of fixed assets at Xingu. These negative factors offset a decrease in corporate income taxes resulting from the partial sale of investment in Recruit Holdings and profit from the sale of our interests in Columbia Asia. Innovation & Corporate Development profits decreased JPY 7.4 billion to JPY 14.6 billion, mainly due to FVTPL losses. Other factors were a loss of JPY 12.1 billion resulting from expenses, interest, taxes, et cetera, not allocated to business segments. Please turn to Page 13. Core operating cash flow was JPY 621.9 billion, a year-on-year increase of JPY 51.4 billion. Now I will provide explanations for the segments in which factors outside of change in profit for the year influenced year-on-year changes in core operating cash flow. In Machinery & Infrastructure, core operating cash flow increased by JPY 21.2 billion to JPY 95.2 billion due to project development fees and the effect of changes in lease accounting standards. In Lifestyle, the core operating cash flow increased by JPY 12.6 billion to JPY 37.3 billion due to the effect of changes in lease accounting standards. In others, core operating cash flow decreased by JPY 40.4 billion to JPY 25.9 billion due to corporate pension contributions. Turning now to Page 14. We will look at the main factors influencing year-on-year changes in profit. Base profit was a factor in a decline of approximately JPY 31 billion. Despite strong trading, our trading businesses such as Mitsui Energy Trading Singapore and increased profits in gas distribution businesses and IHH, there were negative factors such as FVTPL valuation losses associated with the decline in the price of listed securities and a decrease in profits from trading businesses across each segment resulting from deteriorating market conditions. Resource-related costs volume was a factor in a decline of JPY 2 billion, mainly due to an increase in the cost of coal associated with unfavorable mining conditions and despite increased production volume at Australian iron ore operations. Asset recycling contributed to an increase of JPY 46 billion, mainly due to the sale of equity interest in Colombia Asia Healthcare and a decrease in corporate income tax due to the partial sale of investment in Recruit Holdings. Commodity prices/ForEx contributed to an increase of JPY 16 billion, mainly due to a strong iron ore market and despite a decline in crude oil and gas prices. Valuation gain/loss and special factors contributed to a decline of JPY 52 billion due to the recording of impairment losses at Mozambique coal and infrastructure projects and in assets related to oil and gas development and despite the recording of deferred tax assets associated with Mozambique Area 1 FID. Please turn to Page 15. Here, I will provide an explanation on asset recycling, investment and loans during the period. In asset recycling, cash inflow for the period was JPY 250 billion. Main items included the sale of our equity interest in Colombia Asia Healthcare and the sale of Sogo Medical Holdings; the sale of the C2C power, wind and solar power generation business in Canada; and the sale of the logistics facilities development business in China. Investment and loans accounted for JPY 420 billion in cash outflows, influenced by factors such as the integrated block development of Mitsui & Co. head office. Looking ahead, we'll continue to employ strict investment discipline, pursuing a balanced allocation of cash to realize medium- to long-term growth while also strengthening our financial base. That concludes my presentation. Thank you.

Thank you very much. Now we would like to begin the Q&A session.

I'd like to confirm any questions regarding Medium-term Management Plan should be asked next Friday, but can we ask questions about the financial results and the plan for '21?

Yes. The Medium-term Management Plan, the new one, any questions regarding that should be asked next week. However, if you have questions for this year, you may ask such questions.

Then I'd like to ask to questions for this fiscal year. First of all, about the impact of COVID-19. At the back, you have a business plan, and you have a graph showing the increases and decrease factor for the business performance. And as a base profit, you have JPY 95 billion in nonresource areas coming from COVID-19. Can you be more granular? Can you talk about different segments or different businesses and talk about how much impact you are expecting from COVID-19? And of course, can you talk about the existing businesses that are impacted by COVID-19 in resource areas or any development that may be impacted by COVID-19? That is my first question. My second question is also regarding the March '21 plan. Regarding the market condition and the FX impact, the negative impact from oil and gas price decline comes to JPY 63 billion. Looking at the consolidated oil price against the previous year, it will go down by $29. And if we multiply that by JPY 3.2 billion, that is going to exceed the JPY 63 billion easily. So where does the difference come from? For example, the S-curve information of LNG, it will not be easily calculated sensitivity-wise. Can you tell us where it is coming from?

Thank you very much for your question. CFO, Uchida, will answer your questions.

Thank you very much for your question. In the current environment, in compiling the Medium-term Management Plan and our business plan, the uncertainties are high, and it is very difficult and I hope to have your understanding. From the start of March, the COVID-19 impact has been increasing, and we only had limited information. And based on that information, we had to make some assumptions. First of all, the impact of COVID-19, the details will be given next week. But we are seeing about JPY 200 billion impact on the profit. As for resources, with the oil prices going down and also commodity prices going down, we are looking at JPY 90 billion to JPY 100 billion impact. And when it comes to demand, demand has disappeared in Mobility and Healthcare, and there will be about JPY 70 billion impact. When it comes to materials, for example, automotive materials, steel products and chemicals, there will be an impact of JPY 20 billion. Business recycling or business sales, these may be delayed going forward, and we may have to see costs related to the delay of JPY 10 billion to JPY 20 billion. When it comes to operations, of course, the situation is changing by the minute. But in the many operations that we have, we are seeing impacts in operations. For example, you talked about Resources & Energy, but we do not have any businesses that are stopped by the COVID-19 impact. And as for the impact of the oil price, we have been conducting analysis, and it will come to JPY 63 billion. So what you have indicated is included. So it is not going to be a linear formation as we have seen so far.

In addition to the first question, you talked about disappearance of the Healthcare demand. Can you be more specific, please?

Yes, of course, we see the operation rate going down in the hospital groups. Of course, with the request from the government, they are putting many of the resources on COVID-19. And in addition, test and medical practices -- the capacity for test and medical practices are decreasing in the backdrop.

There are 2 questions. Firstly, it's about the previous fiscal year. On Page 6, FVTPL or FVTOCI, at the end of the fiscal year, the assets has decreased JPY 300 billion, declined. And LNG assets may have been reviewed. But for the capital, it's equivalent to the impairment loss. And JPY 300 billion is a huge amount. So what happened and what were the contributors, main contributors? And how did you assess and review the asset about -- to come to the conclusion of JPY 300 billion or JPY 490 billion? And the second question about the plan of the new fiscal year. There are impacts from COVID-19 that you mentioned. But by segment, for Machinery & Infrastructure, JPY 35 billion decline, which is significant, was seen. What constitutes this? IPP and infrastructure are producing a certain level of profits, so Mobility will not generate any profits. Maybe that was the assumption that you incorporated. Or have you even assumed the deficits? So is there any factors that you can disclose in this regard? I would appreciate that.

Thank you for your question. For the first question, Shigeta, Global Controller, will answer the question. And the second question will be answered by Mr. Uchida, the CFO.

Mainly, as you said, the crude oil price declined. And fair value was reviewed. And LNG project-related valuation profit or gain was declined. And also listed as securities like Vale in Brazil, because of the decline in crude oil, has declined in the fair value and that would total JPY 300 billion.

Now for the machinery. In IPP business, there's a stable profitability, to some extent. But in the Mobility, automotive-related sales and automotive financing business and airplane-related businesses, especially in the first half, we assume that there will be no demand whatsoever. So to the extent there is a probability for that assumption, we believe that there is a high degree of probability. Especially for April through June, the lockdown will continue. That is our assumption. And as probably the assumption that you just estimated is what we have estimated or assumed.

Then in the fourth quarter, the crude oil, impairment losses were included to a significant degree. And so maybe futures are used. But the prices are going up and down, and there is additional impairment that is included. So in LNG and in the fair value review, if there's any more that you can comment?

Thank you. For crude oil, the prices or impairment loss assumption at the end of March are in line with the forward curve. The impairment test was done, and we have posted impairment losses. Therefore, at the end of March, if there's a huge decline from the forward curve, then there's a possibility that there's more impairment losses to be posted. But we have not incorporated that because at the end of March, we have done the impairment test but to a deeper degree and posted impairment losses. And going forward, as we improve the disclosure level, the pricing system using impairment will be disclosed as much as possible. Thank you.

Yes. I'd like to ask 2 questions, please. The first question. For fiscal year 2019, on Page 4, you compare the results against the plan. So from the plan, what were some of the areas in which you saw differences from the plan in the fourth quarter, especially for Machinery and Energy? Can you talk about the impact of impairment as well? And also for the new fiscal year, there will be a decline in profits in Metals especially. What is the assumption for Vale, for example? Are there factors that will increase profit for Vale, for example, dividends or increase in volume? Would that happen in Vale? Can you talk about the assumptions for Vale and explain how the plans were drawn up?

Yes. Thank you very much for your question. As for the first question, I'd like to answer the question. And second question will be answered by CFO. For the first question, about the fourth quarter, Machinery, Infrastructure and Energy numbers, of course, valuation special factors. Machinery & Infrastructure, for example, overseas railway, there was an impairment of JPY 3.7 billion. And also, it was not disclosed. However, we have the offshore support ship impairment as well. And also OMCS ships impairment was also recorded in Machinery & Infrastructure. And other than that, in the base profit, of course, there was a refinancing with FPSO. In Energy, in the fourth quarter, as was explained earlier, we saw impairments. For example, MEP Texas and Eagle Ford and Greater Enfield and Tempa Rossa and Kaikias, these are the areas in which we saw impairment being recorded. As for your second question, Uchida, CFO, will answer your question.

When it comes to Vale and the production forecast, this 310 million or 320 million was announced by Vale. And they are looking at 375 million to 395 million in volume. So they are looking for gradual recovery in the production. In the previous year, the dividend, the recorded, of course, was shown. And this was like a capital investment. How it was created? That is not disclosed as of now. Does that answer your question?

In the second question, the previous year, of course, it was similar to capital investment. And dividend was recorded as profit. But in the New Year, are you going to look at something equivalent? And it will not be disclosed? Is that the correct understanding?

Yes, that is a correct understanding. Thank you.

I have 2 questions. First is the previous question on LNG. Related to that, LNG FVTPL, isn't there any impairment loss risk in equity method applied? If there is no such sale at Tangguh and Cameron, I think FVTPL is used, not on OCI. And we -- I understand that there's no impairment loss in this fiscal year. But there could be impairment loss risk because it is linked to oil. That was my first question. And second question is also related to Energy. The crude oil prices were in a negative territory, which is quite rare. But even without COVID-19, there could be oversupply possibility for crude oil. So in terms of strategy, how do you position E&P in your company? I think this has been the strength of your company, and this -- you were intending to increase that. But is there any change in your strategy? That was my second question.

Thank you for the questions. To the first question, Global Controller, Shigeta, will answer the question. And second question will be answered by Mr. Uchida, CFO.

For LNG and oil and gas development business FVTPL, you process the increase and decrease in fair value in P&L, but there's no significant funds, but equity method applied affiliates. If there's any impairment loss, then we post the gain or loss in P&L in terms of equity method applied affiliates. And for -- there's no cases where this is applied in this fiscal year. And we have the assumption of the equivalent of crude oil prices and have reached that conclusion.

For the second question, Uchida speaking. I'll answer the question. Going forward, what will be the supply demand prospect for crude oil even after COVID-19 impact is ended? Is there any recovery in demand? What will be the progress rate in Energy demand? Well, renewable energy prices and crude oil prices, there's an arbitrage that you have to consider and balance -- consider the balance and could be accelerated. Therefore, actually, even before COVID-19 outbreak took place in the previous fiscal year, what should we do with the Energy portfolio? That was the discussion that we had internally. And depending on LNG development that we're working on, how we should position E&P that is what is still being discussed internally. And for the moment, last year, we had FID for Mozambique and Russia Arctic 2. For those projects, in terms of strategical significance, well, the OpEx scale will have to be reviewed in this current environment. But we will be promoting these. But for the entire E&P business and especially crude oil business, for the oil liquid projects, how we should handle this is something that we will continue to discuss and study. Does that answer your question?

Yes.

I have 2 questions. The first question. First, on impairment in Energy. As you explained earlier, at the end of March, you used a forward curve for LNG businesses and also for upstream. You mentioned that you use a forward curve. How far have been looked at, 3 years or 5 years? And of course, when it comes to the midterm prices, how were you able to come up with the forecast? And the second question about fiscal year 2020, you talked about Machinery & Infrastructure to show a decline in profit. But when it comes to Lifestyle, I'm sure that is going to show decline in profit as well. Lifestyle segment, what kind of impact will it have from COVID-19? And when it comes to asset recycling, what is the assumption?

Thank you very much for your question. The CFO, Uchida, will answer both your questions.

The first question about the forward curve for impairment, of course, we took the forward curve as reference. And for the mid- to long term, there are many financial institutions that have announced the outlook. And these are what we base our perspectives on when it comes to prices. And of course, we do talk with our accountants to come up with the prices. So it is not merely the forward-looking curve that we take as a reference. I mentioned earlier that, of course, we need to improve the disclosure level of impairment. What prices we'll be using is a factor in the disclosure that we'll be contemplating going forward. So I hope you will give us some time. Next on Lifestyles. The Healthcare is included in the Lifestyle segment. And IHH, the operation rate has gone down. And that is a big impact that we'll be seeing in the Lifestyle segment. When it comes to food and distribution, of course, the impact is not that big. However, eating out -- raw materials for eating out, I think their distribution will be impacted negatively because of COVID-19. But people will be eating at home. And that is going to be a positive impact. However, negative impact will come from eating out or dining out. When it comes to asset recycling, of course, the business model that we have is that we will sell businesses after developing that business. And that is a main stream of our businesses. And we have been working on it in many different areas. But the sales of businesses that is planned for this fiscal year may be delayed because of COVID-19. And IPO may be delayed because of COVID-19. So positive impact that we were factoring in may be delayed because of COVID-19 for this fiscal year. Thank you.

So to confirm, you talked about Lifestyle segment, and you have seen that the profit may decline further. When it comes to asset recycling, the assumption March '21 may be very conservative. And when it comes to IHH, the operation rate and the food distribution or dining out, these areas will see impacts between April and June of this year. Is that the outlook?

This is Uchida. I hope I did not cause confusion. But not only in Lifestyle segments, but we may see delay in sales and IPO also in Machinery & Infrastructure as well. Of course, when it comes to Lifestyle segment, Healthcare factor is the biggest. And of course, dining out, the raw ingredients for that, that may be impacted with COVID-19.

Understood. And so the impact will be biggest between April to June, is that correct?

Of course, the lockdown or the suppressed activity may give the biggest impact between April to June, and activity may recover. And of course, we may see recovery in the second half, maybe after October, and that is where we will make adjustments. Thank you.

I also like to ask about the plan for the new fiscal year. In the waterfall chart, resources volume and cost, there was a detailed explanation. And iron ore and Energy, there's a negative figure. And because of lockdown, there are mines that cannot ship the products out. And in the steel industry, there's a decline in production. But you seem to have included very little change in the numbers. So how did you incorporate those factors? And secondly, the JPY 95 billion impact in total was mentioned. And as was mentioned in the previous question, basically, you are assuming that there will be recovery in the second half. But on a quarterly basis, how are you looking at the performance? Minus JPY 95 billion, would that be reflected in the first half alone? And in the second half, that will be gradually phased out? So the first half and second half balance may be significantly different from the average year. So what will be the proportion, the share between the first half and second half? And what will be the timing that you expect the recovery to happen?

Thank you for the questions. Uchida, the CFO, will answer those questions.

As for March 2021, the increase and the decline factors, the resource-related cost volume, for this item, since March, the resources cost have been dropping significantly. And this may not have been reflected fully in those numbers. And you have to look at each project to strictly review the cost and CapEx. And we're in the process of doing that. And that has not been reflected fully in those numbers. So depending on the progress going forward, we may have to do the updating and then give more explanation. And also for the second question, the COVID-19 impact, as we estimate the total, in the first quarter, there will be no demand. And then there'll be second -- recovery in the second half. So you may want to just cut out the first half. And then we have not add to the second half the amount that has been declined in the first half. So there will be a big decline in the first half. And depending -- it really depends on how soon the recovery will take place. But in the second half, we are just assuming the average number. But there are different projects in different countries. And depending on the countries that they are located, the situation is really varied. So there's a higher degree of uncertainty compared to other years. Thank you.

I have one question. About the assumption of oil prices, $33 was mentioned. Of course, the COVID-19 impact will recede in the second half. And the oil price from the first half to the second half, it may rise. Is that the assumption that you have at the moment? What are the considerations that were given to come to $33?

Thank you very much for your question. CFO, Uchida, will answer your question.

Thank you for your question. For March '21, we talk about consolidated oil price. Of course, there will be delay in the reflection of the oil price. So of course, there will be some delay in reflecting the oil price in the financial results. And consolidated oil price is set at $39 at the moment. And of course, this is Brent-based. In the past, if it is set, we will use that price. But if the prices are not set in some of the portions, Brent basis, it will be $30 in the first half. And in the second half, it will be $35. That is the assumption that we'll be using. Of course, we will be looking at the differences. And JCC, $33 is something that we have calculated and come to. But that is the assumption that we have used for the calculation. Thank you.

I'm asking the question second time. First question, in your earlier explanation, you talked about development sale and recycling could take more time. And as we see more normalization, in March 2022, could we expect more profit? And secondly, the President earlier talked about LNG. And even if the oil price declines, there could be a floor. I think he said that, if I remember correctly. But in your LNG projects, if the oil price -- even if oil price goes down to $30, you could sell LNG at a slightly higher price. Is that correct based on the contracts that you have for the short term? If you can disclose any more information, that will be appreciated.

Thank you for the question. Uchida, CFO, will answer the question.

Thank you. As for development sale and asset recycling, of course, if the environment recovers and once the situation fits, then even in this fiscal year, if not the next fiscal year, we can expect that or in the next fiscal year, if the recovery happens and if there's a favorable condition, then we will promote that. So it really depends on how has -- the market recovers. And for the second question, for the LNG selling price. I'm just saying this in general terms. But in the pricing of LNG, there's an oil-linked part. So conventionally, the long-term portion for Asia is oil-linked. And there's a S-curve in here. So referenced oil price had a range, and there's a ceiling and floor. And if that is the case, then the oil -- the linkage with the oil is not linear even if the prices go down and the same goes for the upside. And that's how the contract is. And so earlier, we talked about different contracts with different forms in our company. And at the end of the fiscal year, we calculate the sensitivity across the contracts. So that is how I would like you to understand. Thank you. [Statements in English on this transcript were spoken by an interpreter present on the live call.]