I’m Horikoshi, CFO. I will explain the business results for the Second Quarter, FY 2023. On page four, I will explain the highlights for the second quarter, FY 2023. rates were JPY 144.2 to a USD, JPY 157.3 to EUR, and JPY 95.4 to AUD. Yen depreciated to major currencies of dollar, euro, and Australian dollar year-on-year. Net sales were JPY 923.4 billion, up 8% year-on-year. Operating income was JPY 150 billion, up 27%, and operating income ratio went up 2.4 points to 16.2%. Both net sales and operating income increased due to the improvement in selling prices and the positive effects of foreign exchange rates. Net sales were record high as those at the second quarter, and operating income was a quarterly record high. On page five, I will explain the segment sales and profit. Sales in Construction, Mining, and Utility Equipment increased 8.8% year-on-year to JPY 860.7 billion. Segment profit increased 36.6% to JPY 142.4 billion, and segment profit ratio increased 3.3 points to 16.5%. Sales in Retail Finance increased 14.2% year-on-year to JPY 24.6 billion, and segment profit decreased 7% to JPY 6.6 billion. Sales in Industrial Machinery and Others decreased 9.3% year-on-year to JPY 44.6 billion, and the segment profit decreased 66.6% to JPY 2.5 billion. I will explain the causes of difference of each segment later. Page six shows the sales by region of Construction, Mining, and Utility Equipment. Sales of Construction, Mining, and Utility Equipment increased 9.1% year-on-year to JPY 860.6 billion. By region, sales in CIS, China, and Asia decreased, but sales in North America and Latin America increased substantially. The ratio of sales in traditional market was 45%, and that in strategic market was 55%. Page seven shows highlights for the first half of FY 2023. The actual rates were JPY 140.3 to the USD, JPY 152.5 to the EUR, and JPY 92.6 to the AUD. The yen depreciated against the dollar and the euro and appreciated against the Australian dollar compared with the last year. For the first half of FY 2023, net sales increased 12.6% to JPY 1,823,000,000,000. Operating income increased 40.3% to JPY 297 billion, with income ratio up 3.2 percentage points to 16.3%. Both sales and OP increased due to the positive effects of increased sales volumes, foreign exchange rates, and higher selling prices. Net sales were the highest ever for the first half of our year, and operating income, operating margin, and net income were highest ever for a six-month period. Net income increased 26.4% to JPY 205.5 billion, which was highest ever for a six-month period, as I said earlier. The dividend at the end of Q2 is JPY 72 per share, an increase of JPY 3 from the initial forecast of JPY 69. Page eight shows segment sales and the profits. Net sales in Construction, Mining, and Utility Equipment increased 13.4% to JPY 1,707,600,000,000, and the segment income increased 49.7% to JPY 280.8 billion. Net sales in Retail Finance increased 14.5% to JPY 47.5 billion, and the segment income decreased 12.5% to JPY 13 billion. Net sales in Industrial Machinery and Others increased 1.6% to JPY 85 billion, while segment income decreased 59.8% to JPY 4.4 billion. I will discuss variance in each segment later in my presentation. Page nine shows Construction, Mining, and Utility Equipment sales by region. Sales to outside customers increased 13.3% to JPY 1,702,800,000,000. Sales in North America, Latin America, and all other regions increased, although sales in the CIS and the China regions decreased. The ratio of sales in traditional markets was 45%, while that in strategic market was 55%. Page 10 shows the causes of difference in sales and segment profit in the Construction, Mining, and Utility Equipment segment. Sales increased by JPY 201.4 billion year-on-year, mainly due to the positive effects of increased volume, foreign exchange rates, and improved selling prices. Segment profit increased by JPY 93.3 billion year-on-year, mainly due to the positive effects of improved selling prices and foreign exchange rates... The segment profit ratio increased by 4.0 percentage points year-on-year to 16.4%. Page 11 shows the status of the Retail Finance segment. Assets increased from the end of the previous fiscal year, mainly due to the effect of foreign exchange rates. New contracts increased year-on-year, reflecting foreign exchange rates and increased sales in the construction equipment. Revenues increased by JPY 6 billion, due to the positive effects of interest rate hikes and foreign exchange rates. Segment profit decreased by JPY 1.9 billion year-on-year, mainly due to the absence of a gain on reversal of allowance for doubtful accounts recorded in North America for the corresponding period a year ago. Page 12 shows sales and segment profit of the Industrial Machinery & Others segment. Sales of this segment increased 1.6% year-on-year to JPY 85 billion. Segment profit declined by 59.8% year-on-year to JPY 4.4 billion, and the segment profit ratio was down 7.9 percentage points to 5.2%. Sales of large presses for the auto industry increased, but profit decreased due to a decline in maintenance revenues for excimer laser, which have high profit margins against the background of declining demand for semiconductors globally. I'll explain the consolidated balance sheet on page 13. Total assets were JPY 5,404,100,000,000, an increase of JPY 528.2 billion from the end of the previous fiscal year, partly due to the weaker yen. Inventories increased by JPY 264.3 billion from the end of the previous fiscal year, mainly due to the yen depreciation and increased demand for mining equipment and parts. Shareholders' equity ratio increased by 0.9 points from the end of the previous fiscal year to 53.0%. Net D/E ratio was 0.29. That is all from me. Next, Hishinuma will explain the projection for FY 2023. I'm Hishinuma, General Manager of Business Coordination Department. Now, I'll explain the projection for FY 2023 and the conditions of major markets. Page 15 shows the outline, projection for FY 2023. From the left, FY 2022 results, current projection for FY 2023, and FY 2023 projection in April are listed. Changes are from FY 2022 results to the current projection for FY 2023. In the first half of FY 2023, sales increased in North America and Latin America, and steady progress in selling prices improvement and the depreciation of yen benefited. Net sales were the first half record high, and operating income and net income were the record high for the half year. In the second half, FY 2023, economic recession due to the future uncertainties of global economy is concerned, and the slowdown of construction equipment demand is expected, while robust demand for mining equipment will be sustained. As for foreign exchange rate, as yen has been further depreciating than our initial forecast, we revised foreign exchange rate for the third quarter onward and revised the full year forecast. Foreign exchange rate in the third quarter onward was revised from JPY 125 -JPY 135 to a USD, from JPY 133 -JPY 148 to EUR, and from JPY 83 -JPY 88 to AUD. For other currencies, also rates were revised, though they are not listed. Average rates for the full year are JPY 137.7 yen to the USD, JPY 150.3 to the EUR, and JPY 90.3 to the AUD. Demand projection was revised in Europe and Southeast Asia, and I'll explain them in detail later. Incorporating them, net sales were revised up JPY 278 billion from the projection in April, to JPY 3,660 billion. Operating income was revised up by JPY 57 billion - JPY 548 billion, and net income was revised up by JPY 41 billion - JPY 340 billion. All of net sales, operating income, profit ratio, and net income renew the records of the previous year, and they mark the record highs. ROE will be 13.0%. Cash dividends per share will increase by JPY 5 from the April projection to JPY 144, and the payout ratio will be 40.1%. On page 16, I'll explain the projection of segment sales and profit. Sales in Construction, Mining, and Utility Equipment will increase 3.3% year-on-year to JPY 3,404,000,000,000. Segment profit will increase by 17.9% to JPY 523 billion. And segment profit ratio will improve to 15.4%, up 1.9 points.... Sales in Retail Finance will increase 10.9% year-on-year to JPY 95 billion, and segment profit will decrease by 23% to JPY 21 billion. Sales in Industrial Machinery and Others will increase by 5.3% year-on-year to JPY 201 billion, and the segment profit will decrease by 24.7% to JPY 17 billion. I'll explain causes of difference in each segment later. Page 17 shows projection of sales by region of Construction, Mining, and Utility Equipment. Sales will increase JPY 99.4 billion - JPY 3,386,100,000,000, with substantial increase in North America and Latin America, despite a decrease in CIS and Asia in FY 2023. Sales in traditional market will account for 47%, and those in strategic market, 53%. Page 18 shows causes of difference in projected sales and segment profit of Construction, Mining, and Utility Equipment. Sales will increase by JPY 107.4 billion year-on-year, due to the positive effects of foreign exchange rates and improved selling prices. Segment profit will increase by JPY 79.4 billion year-on-year, due to the positive effects of foreign exchange rates and improved selling prices, which will more than offset increased production and fixed cost. Segment profit ratio will improve to 15.4%, up 1.9 points year-on-year. Page 19 shows retail finance projection. Assets will increase by JPY 7.4 billion from the end of FY 2022, mainly affected by foreign exchange rates. New contracts will increase by JPY 17.8 billion year-on-year, mainly affected by foreign exchange rates. Revenue will increase by JPY 9.4 billion year-on-year, due to higher interest rates and foreign exchange rates, and segment profit will decrease by JPY 6.3 billion year-on-year, mainly due to the absence of the gain on the reversal of allowance for doubtful accounts recorded in North America for the last fiscal year. ROA will be down by 0.7 points year-on-year to 1.9%. Page 20 shows Industrial Machinery and Others, projection of sales and of segment profit. Sales are expected to increase 5.3% year-on-year to JPY 201 billion, due to an increase in sales of large presses, mainly to the auto industry. Segment income is expected to decrease 24.7% year-on-year to JPY 17 billion, due to a decrease in sales of high-margin excimer laser maintenance service to the semiconductor industry, reflecting a global decline in semiconductor demand. Page 21 shows Construction, Mining, and Utility Equipment, actual and projected demand for seven major products. The chart shows actual demand for seven major products, including mining equipment. The figures for Q2 FY2023 are preliminary estimates. Demand for the second quarter decreased 11% year-on-year, or 9% excluding China. In traditional markets, demand in North America and Japan was firm, but demand in Europe was negative compared to the same period last year. In strategic markets, China and CIS continued to experience a significant drop in demand due to the economic stagnation, due to the real estate market slump, and Russia's invasion of Ukraine, respectively. Latin America and Southeast Asia saw a demand for construction equipment decline year-on-year, due to uncertain outlook for the economy and delay in the execution of public works budgets and uncertainty about the future of the economy, respectively. The outlook for unit demand in FY 2023 has been revised from the July forecast to 10%-15% below the previous year's level. The forecast for the region, excluding China, is also 10%-15% below the previous year level. Although sales of mining equipment are generally firm, we need to monitor sales of construction equipment, because they may be affected by slowdown of the Chinese economy and inflation of higher interest rates in many geographies. I will explain the situation of major markets on next page onwards. Page 22 shows the demand trend in the Japanese market. Demand is down 3% year-on-year during Q2 and up 1% during the first half of FY 2023. It was strong both in public sector and private sector construction projects. Demand forecast for FY 2023 remain unchanged from the April forecast. Both public sector and private sector construction is expected to have strong demand. Page 23 shows demand trends in North America. The Q2 demand is up 4% year-on-year in terms of volume. Although demand for housing construction is on a downward trend due to the rising interest rates, demand for rental, infrastructure, and energy-related applications remained strong. Forecast for FY 2023 is unchanged from the April announcement at 0% to -5% year-on-year. We believe that the decline in demand for housing construction will be offset by firm demand for rental, infrastructure, and energy-related applications, but we will closely monitor future machine utilization and demand trends. On page 24, I will explain demand trends in the European market. Demand is down 4% year-on-year in terms of volume. Demand for construction equipment declined in the U.K., Italy, and other countries due to the impact of rapid rising interest rates, as well as persistence in high inflation. We have revised our demand forecast for FY 2023 compared to the July announcement to 10%-15% below the previous year level. We will closely monitor the situation, given that the GDP growth in Europe has been revised downward due to the downward pressure on the economy caused by the tighter monetary policy and a continued decline in demand. I will explain the demand trend in China on page 25. This page shows demand trends for hydraulic excavators, excluding mini shovels. The demand trend, including Chinese manufacturers, is also available in the handout. The growth rate here includes foreign manufacturers only. The Q2 demand is down 60% year-on-year. The total demand, including Chinese manufacturers, seems to have declined by 50% compared to the same period last year. Demand remains depressed due to a stagnation of economic activities caused by sluggish real estate market and other factors. FY 2023 demand forecasts have been revised down from the July announcement to 40%-50% below the previous year's level. The forecast for total demand, including Chinese manufacturers, is 30%-40% below the previous year level. We cannot find any upside factors in the demand environment and expect the negative trend to continue for the time being. Page 26 explains the demand in the Southeast Asian market. Demand in terms of the number of units in the second quarter of FY 2023 appears to have decreased by 21% year-on-year. While demand for mining equipment remained steady, mainly in Indonesia, demand for construction equipment dropped sharply in Indonesia, Thailand, and Vietnam due to delayed implementation of public works budgets and uncertainty about the future of the economy. The demand forecast for FY 2023 has been revised from the April forecast to be 15%-20% decline from FY 2022. For Indonesia, our largest market, we expect demand for mining equipment to remain strong, but demand for construction equipment to decrease due to rising interest rates and the presidential election to be held in February 2024. Page 27 explains the demand for mining equipment. Demand in terms of the number of units in the second quarter of FY 2023 appears to have increased by 12% year-on-year. Demand increased mainly in North America. The demand forecast for FY 2023 is unchanged from the April forecast as an increase between 0% and 10% from FY 2022. Same as in the first half, we expect the market to remain generally firm. Page 28 explains the sales of mining equipment. In the second quarter of FY 2023, sales increased 18% to JPY 411.8 billion. Excluding the effect of foreign exchange rates, it was 14% increase. Sales increased, particularly in North America and Latin America. Sales for FY 2023 are expected to increase 11% year-on-year to JPY 1,575,900,000,000. Page 29 explains the sales of parts. In the second quarter of FY 2023, sales increased by 12% to JPY 249.6 billion year-on-year, excluding the effect of foreign exchange rates, it was 8% increase. By region, sales increased in all regions except CIS. In FY 2023, sales of parts are expected to increase by 4% year-on-year to JPY 916.3 billion. That is all for the explanation about forecasts. Now let me explain major topics from page 40 onwards. Please refer to page 40. Komatsu and Asunaro Aoki Construction Co., Ltd. will present underwater construction of the future to the world at Expo 2025, Osaka, Kansai, Japan, featuring cutting-edge technologies such as super remote control, unmanned construction, and underwater electric drive. The two companies are working together to demonstrate an electric underwater engineering robot that can be operated even by unskilled operators, using automatic control and ICT capabilities up to the depth of 50 m, aiming for the underwater construction of the future, for which underwater robots are controlled remotely from the office. Please turn to page 41. Komatsu and Hitachi, Ltd. provided technology to Denyo Co., Ltd. to develop a 250 kW hydrogen co-firing generator, and we have successfully commercialized it. This generator is capable of generating power with up to 50% hydrogen mixed in the fuel, reducing carbon dioxide emissions by up to 50% compared to the case using only diesel oil as fuel. Komatsu has installed the first generator of this type at its Oyama Plant as one of its efforts to achieve carbon neutrality. Please turn to page 42. In September, Komatsu published our integrated report, Komatsu Report 2023. In addition to the message from CEO and CFO, this report includes a special feature on the growth strategies of the mid-term management plan, sustainability initiatives, and corporate governance initiatives. Please turn to page 43. Komatsu has launched an electric micro excavator, PC05E-1, in Japan market in October, which was jointly developed with Honda Motor Co., Ltd. Komatsu has positioned FY 2023 as the first year for the market introduction of electric construction equipment, and this is the third product in that plan. That is all for my explanation. Now we will take your questions. I will take the first question. First question is from Mr. Sano of JP Morgan Securities. Thank you for your presentation. I'm Sano of JP Morgan Securities. Do you hear me? Yes, please go ahead. First, I'd like to ask about the results of the second quarter compared to the forecast of three months ago in terms of sales and operating income. When we compare the first half and the second half, the foreign exchange rate assumption seems to be conservative. Though Mr. Hishinuma commented on the slowdown, I think you can expect a bit more addition, mainly in terms of the price. So I'd like to have your comment on the projection of three months and six months from now. This is my first question. This is Horikoshi. Looking back, the first half results vis-à-vis the announced projection in April, sales were above the April projection by JPY 152 billion. Foreign exchange rate impact was JPY 166 billion due to the depreciation of yen. Volume impact was -JPY 22 billion, and selling price impact was +JPY 8 billion over the April projection. When all combined, sales were above the plan by JPY 152 billion. Profit was above the plan by about JPY 34 billion, as yen depreciated since April. Volume impact was about JPY 7 billion, which corresponds to -JPY 22 billion in sales. Sales in construction decreased compared to the April plan in the first half, and the mining equipment continued to be robust, and the mix impact was about +JPY 7 billion in profit. JPY 8 billion addition in sales due to price impact resulted in profit above the plan by JPY 42 billion in the first half. For the full year projection, we expect the price impact to be JPY 126.6 billion. Compared to the April projection, price impact will be higher by JPY 9.8 billion. Profitability in the second half will be slightly lower than the first half, because in the first half, we had a very strong sales in parts. But in the second half, especially in KMC, the sales will be more robust in equipment rather than parts, and we expect the profit ratio will be down by about 0.8%. In the second half, the sales in Indonesia, which has high profitability, will be proportionally down compared to the first half, and that will drag down the profit ratio by 0.3%. Higher fixed cost in the second half will squeeze the profit ratio by 0.9%. And another thing, Russia-related expenses didn't make much loss in the first half, but we expect some in the second half, and that will push down the profit ratio by 0.3%. Putting all together, profit ratio will be down by 2.1% in the second half, half-on-half basis. Thank you very much for the detail, Mr. Horikoshi. Second question is for CEO, Mr. Ogawa. Demand toward FY 2023, of course, contains some uncertainty. Considering the communication with customers over demand, new innovative products, and regular price increase, do you have a sense of upside for the next year for some areas and for mining equipment prospect? Or, as Mr. Horikoshi mentioned now, do you think the second half trend will be lingering on? Would you give us some colors based on the current projection? This is Ogawa. As just mentioned, construction equipment seems to be slowing down. Each region is affected by the higher interest rate and inflation, and in some areas, economic future visibility is poor due to political instability. And in Asia, election was held, for example, in Thailand, and the situation there is not yet stabilized. So construction equipment shows sign of a slowdown, and the European situation was described before. On the other hand, mining equipment is very robust. If the current resource price is sustained, we don't think we have to have much concern. We need to monitor the situation toward FY 2024, but this is a trend from the first half to second half of this year. As contracts data shows, mining equipment is utilized at high level, so parts and services business will continue to be strong next year. Looking at the CapEx plan for the next year of major companies in mining sector, we were informed that they will expand further. CapEx of four major companies, BHP, Rio Tinto, Vale, and Anglo, in the next year is set to be almost flat from this year and next year, so this continues to be robust. A concern in mining business is small and medium-sized users, especially in Indonesia. Recently, the price of thermal coal has been falling, and we need to have a close watch. But the price of thermal coal began to recover slightly currently, so we continue to monitor. What we need to be watchful in Indonesia is a new regulation on deposit related to coal export, and the demand is expected to decrease amongst small and medium-sized users. The regulation mandates to pool 30% of coal export revenue for three months in Indonesia, and in 2022, Domestic Market Obligation required to keep 25% of coal production in Indonesia. Because of this, small and medium-sized mining contractors take wait-and-see stance for investment. And of course, monitoring the impact by the presidential election in the next year, they are watching how it goes, and we need to take that into account. When we see the Indonesia mining business, as there is a close coal relationship with the coal price of 4,200 quarterly, we monitor the development. The price has been increasing slightly to around $60 in October. We need to keep an eye on it to see whether that trend is sustainable or not. So put simply, construction equipment will be tough next year. Mining will be robust, and the parts and the services will also be robust. Understood. Thank you very much. That's all from me. Thank you. We'll take the next question. From Mr. Maekawa of Nomura Securities, over to you. This is Maekawa of Nomura Securities. Thank you for your presentation. I have two questions. First question is on page 18 of the presentation, which describes the causes of upward revision of profit in Construction, Mining, and Utility Equipment. As explained before, the selling price impact was revised up, and foreign exchange rate impact was also revised up. I think the negative impact of volume, product mix, and fixed cost expanded from the initial plan. In the volume, product mix, et cetera, were there any impact by product mix besides volume impact? And would you comment on the increase in fixed cost from the initial forecast? Please let us know these two points. This is Horikoshi. As you mentioned, compared to the projection in April, volume product mix, et cetera, worsened slightly. For the full year, volume product mix is deteriorated by about JPY 6.3 billion. As for the regional mix and product mix, on regional mix front, it shows a minus due to the decline in high-margin areas such as Indonesia, as mentioned. But on the product mix front, despite the decrease in construction equipment, mining equipment is very strong, and this shows plus. And when these two factors are offset mutually, it shows -JPY 1.3 billion. And other factor included in volume, product mix, et cetera, is a negative impact by Russia-related factor. Selling price is up by JPY 9.8 billion compared to the projection in April. Production cost is worsened by about JPY 6 billion compared to the projection in April. Fixed cost is also worsened by about JPY 8 billion. This explains the overall. What is the major cause of the increase in fixed cost, JPY 8 billion? With the volume decline, I think that the cost reduction might be necessary. What's your take? We are growing more active in our business performance, and we enhanced the development cost more than our plan as well. So we think the fixed cost will be heavier by about JPY 8 billion. Going forward, are you going to change how you spend the fixed cost? In Komatsu, the fixed cost from 2017 - 2021 have been kept flat. Despite inflation and wage hike every year, they were absorbed by structural reforms, and for five years, fixed cost has been kept almost flat. In 2022 and 2023, for these two years, we have been increasing the fixed cost, as you know, especially with the progress of inflation that happened. As for the structural reform, as explained in the midterm plan meeting, the target of JPY 17 billion in 2022 and JPY 21 billion by 2024 was announced, and it was achieved about one year ahead of the plan. But the inflation and wage hike were more than this. Next fiscal year, how much we can increase the price additionally will be the background factor for the fixed cost decision. Understood. Thank you. Secondly, I'd like you to comment on the geopolitical issues that you touched on it in the presentation, and China. Probability of these two may be different. China market is now further deteriorating, and you may think that the change is not due to the immediate recent change, but due to the shrinking market. But Chinese makers may shift more to export, not staying in China. So would you comment on the risk of the change in competitive environment in China and Southeast Asia? And what is your take on the Middle East situation of the very recent period? I think that is also the risk. What is your current response or your thought? Please let us know as far as you can. As for China, as you know, China is only 2% of the consolidated sales of Komatsu. And the direct impact on us is not material. However, that said, on coal, because coal-fired thermal power plant and the coal import volume of China affects Indonesia, so they affect our business. In China this year, there was a drought in Northern China, and some accident happened in thermal power plant, and they increased import. Therefore, as Ogawa said, prices of coal in Indonesia and in Europe as well are increasing. In the Middle East, there are some very large projects in Saudi Arabia and UAE, and the business is robust. Unless a conflict between Israel and Gaza spreads to other regions, I think the robustness in the Middle East will be sustained as of today. This is Ogawa. The China market is, as Horikoshi mentioned, not in good shape, but as Chinese makers have abundant excess production capacity, they are applying them to overseas demand, especially for Russia. As Japanese, American, and European makers cannot supply to the Russia market, Chinese makers are prominently exporting their equipment, which is clearly shown in the import statistics of Russia. In Asia, the competition has been intensifying since 2019. Komatsu has been differentiating ourselves through the two model line strategy and the launch of hybrid products and Smart Construction, as explained before. In the Chinese market, we are promoting the structure reform. We are cutting back the production capacity from 17,000 - 10,000, and with the relocation of the plant, the capacity will be reduced further to around 8,000. Four local companies in China are consolidated to two companies. Through the structural reform up to this April, we laid off about 300-350 employees, and we may have to have further layoffs additionally. So in Chinese market, we'll continue to promote structural reform. In Asian market, where Chinese makers are expanding, we'll promote the differentiation strategy, as mentioned. Thank you very much for the comment, for the detailed explanation. Thank you very much. I'll take the next question. Next question is from Mr. Ibara of Morgan Stanley MUFG Securities. Hello, this is Ibara of Morgan Stanley. Do you hear me? Yes, go ahead, please. Thank you. First, Mr. Ogawa explained the prospects for the next fiscal year, but he didn't comment on North America. Can I have a comment on North America? I'd like to know the construction equipment inventory level of dealerships, not only in North America, but in other regions as well. In the United States, at the beginning of the year, it was in short, but now is it being filled? How should we see the end market demand? As for the restocking of dealerships, was it almost completed to the full in the first half, or is there more room for further restocking? In Europe, with the market slowdown, is there any need for adjustment? Would you explain your view for North America and your thoughts on dealers' inventory, please? Regarding the U.S., for this fiscal year, the housing-related business is negatively affected by higher interest rates, which is, however, offset by rental, infrastructure, and energy-related applications, as I explained earlier. As for distributor inventory, for this year, it has not gone back to a normal level yet. For the entire year, however, let me see. Distributor inventory for this year is expected at around 1,400 units additionally, and we expect this to be realized around the end of the fiscal year. That's what we expect. So for this fiscal year, as you can see from the numbers, our net sales are higher in comparison with the demand, with the wholesale demand getting closer to the retail demand. And, this year, the difference between the demand and the net sales, excluding the impact of foreign exchange rates, is about 9%. Out of the 9%, about 5% is attributable to price hikes, and the remainder is attributable to sales mix. Well, sales mix is hard to explain, but this year, regarding the demand, we have disclosed the unit sales numbers earlier. The mining-related sales is quite significant in the United States. That's the reason for larger sales compared with the demand. Going back to the inventory question of about 1,400 units, there was a similar trend of distributors stocking up their inventory last year as well. So in that sense, there is not so much change on a year-on-year basis. May I ask for a clarification? For next year, we thought that the demand would go down due to the weak investment in construction, but it was covered by other areas to stay stronger compared to expectation, at least until this year. However, how about next year onwards? How about distributor inventory? Are there any surprises, positive or negative, for North America? Well, this is Ogawa. North America has favorable job market and a strong housing demand, mid to long term, at least. Domestic orientation in semiconductor and carbon neutral initiatives is also in the U.S., and a newly signed infrastructure bill would also help manufacturing sector and the modernization of transportation networks. So, so far, we believe that, that we have a strong North American market, except for housing. So the decline in the housing market is offset by other areas, and by the end of this year, we believe that the ongoing stock up operation would be completed. Though at the moment, some distributors are postponing acceptance of inventory. ... at the moment, it is because of their rental business. They don't want to keep a stock of the same model year so much. That's what they want to avoid. They are waiting for the next fiscal year to a certain extent. So that's another trend. As for Europe, the distributor inventory has been steadily increasing. We will reduce production going forward of finished goods little by little. That's the plan at the moment of our plans going forward. Thank you very much for the explanation. Next is about the variance analysis, where you said pricing was better than expected. Some competitors, when we look at other competitors, they are faced with a tougher situation than their expectation, not being able to raise the, or even lowering prices in some cases. That's the comment we are hearing. Whereas for Komatsu, what was the reason for success in raising prices? How about the second half? Is it going to be more difficult in the second half? I just want to make sure with numbers, so if you could talk about the price hike going forward. Another question I have is about FX sensitivity, which you shared at the beginning of the year. Since the gap with the actual rates is widening, could you talk about the sensitivity for the second half, for example, for JPY 145 or JPY 150? Yen's depreciation trend at the moment, would it push some orders into next year? So instead of your assumption of JPY 135, when we consider actual rates, what sensitivity should we be prepared for? This is Horikoshi speaking. Regarding price action, it is turning out to be just as we had expected. Earlier, we talked about an upside of JPY 9.8 billion, compared with the announcement in April. It is going as well as we had expected. Though, what we are talking about is difference from last year. More specific expectation for price hike is 4.7% for Q1, 4.1% for Q2, and 3.5% for the second half. We told you the net effect, compared with the expectation without price hikes and FX rates, it was possible with the ongoing improvement in supply chain this year. But we had started giving instructions well before this year, although we started to see outcome this year. The instruction is being implemented now. As you are aware, we had started the action in the second half of 2021. Two years and six months on, we have finally caught up with the increase in raw material costs. We have almost no raw material price hike for the second half anymore, so higher pricing should generate a net effect. What was your second question? Sorry. So it took 2.5 years, but it is exceeding. For the cost, there is almost no raw material price hike, so we should have a genuine benefit from the price action. So what was your question? Well, I asked about the sensitivity with the ongoing FX rates. I see. Given the higher volume at the moment, our current sensitivity per JPY 1 change to the USD should be JPY 14.4 billion in sales and JPY 4.8 billion in OP. And for EUR, it is JPY 2.8 billion in sales and JPY 0.6 billion in OP. For AUD, it is JPY 3.6 billion in sales and JPY 0.4 billion in OP. Our FX assumption for the second half is JPY 135. You may call it conservative, but if we put another JPY 10, OP may go up by JPY 20 billion. That's a rough calibration we have. Some products have long lead time, such as mining. Shipment would probably take until next year. Is there going to be some lingering effect or price hike next year? For this year, let me see. If you could take a look at page 18, for example, the FX rate factor for sales is JPY 40.5 billion, and that for segment profit is more than that at JPY 41.1 billion. This is because of the unrealized gain on work in process. Work in process that were sold in FY 2022 were mostly procured in FY 2021, one year earlier, when the yen was more expensive. Due to the long procurement process for parts and components, that is the case. Work in process sold in FY 2023, this year, they were procured in FY 2022, when the yen was cheaper, leading to a higher profit beyond just FX. Work in process we had today was also procured when the yen was cheaper, so when they are sold next year, profit should be higher. I can say that with certainty. Is it difficult to give numbers? Yes, it is difficult to give numbers, and it's too hard to do so. Thank you. That's all. Thank you very much. Let's move on to the next question. Next question is from Mitsubishi UFJ Morgan Stanley, Mr. Sasaki. Hello, can you hear me? This is Sasaki from Mitsubishi UFJ Morgan Stanley. I have two questions. One is about pricing. I have some follow-up question. With price hikes, the company has finally recovered cost increases. My question is about future price strategy for mining equipment and construction equipment separately, if possible. With inflation subsiding today, can we expect that the company can take further price action to increase profit next year onward? That's my question. Thank you. As for price hike, yes, it is true that for FY 2021 and 2022, you know, so this year, the environment was relatively easy for us to implement a price action due to the tight supply chain and need for customers to secure inventory, even at higher prices. The supply chain situation this year is as tight, and the situation is a little bit more relaxed this year. However, as we told you in the previous briefing, the year's price hike, which is about 3.2%, is less than half compared with the price hike or price action taken by our competitors, especially in the United States. So it's a question of how much more we, our sales and marketing people, can increase going forward, being aware of the situation. In addition, we had high inflation for the past two years as well. So now that inflation has subsided, with no more increase in raw material prices, how much more we can raise will depend on the relative pricing with competitors who have increased much more than we did already. So we have to think about the two factors, the inflation, that is one factor, and the other factor is the comparison with the competitors. We have to take a good balance. This is Ogawa speaking. Regarding price hike, as Mr. Horikoshi mentioned, we had a supply chain and production capacity issues in FY 2021 and 2022 that made it difficult for us to meet the demand. Another factor, which made easy for us to raise prices this year. Now, in FY 2023, when the supply chain is being normalized, it may be more difficult for us to raise product prices. On the other hand, on-site utilization of equipment has been very high at the moment, especially for mining, so we believe that we can continue to increase prices for parts. It may not be as much as this year, at 5%-6%, but we should be able to continue raising prices for parts next year. Thank you. The second question is about earnings structure. So my question is, well, this time, regarding the environment, construction equipment has slowed down for now, except for U.S. and Japan. But if you think about earnings for this year, it shows only 30% decline in sales volume mix. So despite the sluggish sales of construction equipment, high margin is maintained. I suspect that this is supported by high-margin mining equipment and parts sales in construction equipment. Compared with the past, does the company have more resilient structure against macroeconomic fluctuation? Could you comment on earnings structure, please? What is your view of the sustainability and the resilience? If you could refer to page 32 of the handout. At the bottom of the slide, there is sales mix information for Q2 this year; the share of parts sales is as high as 52%. One of the reasons is KMC, who still have some supply chain issue at the moment. Despite the delay of product shipment, they had brisk sales of remanufactured products from used equipment, which is called a Reman product. That's the reason for high parts sales and high margin for this year, especially with KMC. Because of that, the parts sales were relatively high. Especially for Q2 this year, the operating margin was higher. But the overall trend is also inclined towards higher parts sales. Little by little, it's been inching up, so meaning that, we have more resilience in earnings structure. A higher ratio of parts sales, as you can see in the top chart of the page, this means that the profit margin increases only gradually, not so sharply. Only little by little the margin will change. So whereas in the past, there was much more fluctuation due to economic cycles or cyclicality, and so you are right in saying that our earning structure is more resilient or stable today. Thank you very much. Thank you. Next question? Next question is from Mr. Adachi of Goldman Sachs. Hello, this is Adachi speaking. Can you hear me? Yes, please. Okay, I have two questions. First, about the U.S. economy and outlook. This may be a follow-up question to the earlier question, but we have strong trend in mining and construction equipment in North America. But if you look at page 23, housing starts have already passed the peak, and the road construction has turned negative. So what is your view on rental and infrastructure business going forward? Could you talk about the trend by end customer, end user? Which ones are promising and which ones are deteriorating? This is Hishinuma speaking. For North America, we did have some concern about housing earlier this year, in the first half. However, for housing, housing did recover in Q2, despite our concern. On the other hand, rental business has been strong earlier this year, but demand started to subside due to the inventory situation being more stable. In terms of the overall situation for North America, we do not have so much concern, and we expect a fairly strong performance going forward. Thank you. Earlier, you mentioned the distributors' inventory requirement in North America will be fulfilled by the end of the current fiscal year. Given such a circumstance, why can you take such a bullish outlook for North America? This is Horikoshi. For instance, with regard to the Infrastructure Investment Act, enacted by the Biden administration in the early fall of 2021, the allocation of $200 billion of the budget to each state has finally been decided, and I suppose this amount is about half of the total budget. I believe that this will impact infrastructure business going forward. I mentioned that the rental business is doing very well this year, or rather, there was a shortage in the rental equipment, and this led to stronger sales of rental equipment to distributors, and such growth made last year and this year would be disappearing. Having said that, recent statistics show that the housing market has not worsened so much, and it is said that the U.S. economy is stronger than expected. Although I cannot say it is absolutely good, I'm not that pessimistic as far as the current circumstances are concerned. I see. I'm sorry for being persistent, but if there is another recovery or if it continues to be strong, will the driver be the housing market again, or will it be rentals, or will it be infrastructure such as road or construction, or will it be driven by industry, as I often hear about it recently, such as expansion of logistics, warehouses, and production bases? May I ask what you are expecting as the next driver? This is my last question. Let me talk about the demand structure in the U.S. today. 28% of the demand is rental. Energy-related sector accounts for 9%, housing is 16%, and non-residential is 20%. The rest is roads. As I said earlier, the housing demand is certainly affected by interest rates, but I think there will be no more significant impact, and housing demand will not decline further. I think that the other areas, such as mining, energy, non-residential, roads, and public works, will be affected by the Infrastructure Investment Act mentioned earlier. Thank you. It was very clear. My second question is about mining equipment. I had an impression that the business continues to perform very well when I visited the Ibaraki Plant the other day. I heard that the operation is expected to continue to be at a quite high level, with the order backlog of more than six months. With this context, I'd like to know quantitative information about the current order backlog for mining equipment, if possible, and how long do you expect the operations to remain at the high level to fulfill that backlog? I hear there are some negative factors for the construction equipment operations in other markets than the U.S., so I'd like to ask if there will be a situation that you will have to lower the operation rate? Thank you. This is Hishinuma. As for the order backlog for mining equipment, it remains at a fairly high level for dump trucks for North America, large hydraulic excavators for Germany, and dump trucks from Komatsu, et cetera, and we see no sign of a decline at this point. For the time being, the order backlog remains at a high level, and it will be reduced. For KMC, the order backlog is also at a fairly high level, and we expect it to remain at this level for some time. I will not say too much about specific figures, but for example, at the end of September, I think the order fulfillment ratio for the current fiscal year for mining equipment achieved approximately 90%. Compared to construction equipment, mining equipment requires a longer lead time from orders to sales, but so far, there has been no particular decline in the number of orders we receive. As Mr. Ogawa mentioned earlier, it is said the mining majors will increase their CapEx for the next fiscal year, so I don't think there are any signs of a decline at this point. As I said earlier about Indonesia, the situation is highly correlated with the price of coal, and we will continue to monitor this. But at the moment, there are no obvious signs of a decline in orders. By the way, what about that order backlog or production for construction equipment in this context? Are you talking about the status of orders for construction equipment? You said mining equipment has a substantially high order backlog and you need to continue high level of production. And how about the order backlog and the future operations for construction equipment? Maybe you have already done an adjustment, though. Regarding orders, we announced the sales forecast for the current fiscal year as we see the current status of orders to some extent, and we see orders are obviously declining in Europe. Therefore, we have lowered our sales forecast for this fiscal year for Europe, as we see the status of such orders and retail sales. In other regions, U.S. is not performing so bad, actually, and that is reflected in the current forecast. As for Asia, we clearly see the decline in retail sales and orders. It is very difficult to forecast the next fiscal year for construction equipment based on the current order situation in the first place, due to its short lead time. Anyway, we reflected the current order situation to the forecast for this fiscal year by downward revisions for Europe and Southeast Asia. Okay, that was very informative answer. Thank you very much. Thank you for your question. We are running out of time, and there are three persons raising their hands now, so I would like to take only one question for each. The next question is from Mr. Ouchi of SMBC Nikko Securities. Thank you. Can I ask your free cash flow projection for the current fiscal year? This is Horikoshi. In April, we provided a rather high number of about JPY 350 billion as our expectation for free cash flow. But now, we are assuming this would be about JPY 300 billion, about JPY 50 billion-JPY 60 billion less. The basis for this number is that operating cash flow, which comes from operating income, is expected to be about JPY 70 billion higher than the April forecast with profit growth. On the other hand, working capital, especially inventories reduction, will be smaller by about JPY 120 billion than our initial forecast. By offsetting these factors, we expect free cash flow to be lower by about JPY 50 billion-JPY 60 billion. In that sense, can I assume that cash flow is likely to improve as inventories will be reduced mainly for mining equipment? Regarding free cash flow, Komatsu does not generate free cash flow when sales are growing. This is because working capital increased significantly. However, when the sales become flat or decline, working capital has positive impact, and free cash flow will be generated. Thank you. That's all. Thank you very much. We will take the next question. Mr. McDonald from Citigroup, please. Hello, can you hear me? Yes, I can. I have just one question. For the situation in Europe, you mentioned earlier that the distributors' inventories are quite high and production reductions are suggested. Can you give us a hint as to how much production reductions would be implemented, and how much time will be required for them? This is Hishinuma. Is your question about Europe? Yes, it is about Europe. Okay, I see. Last year in Europe, we had accumulated a large order backlog, as the production could not keep up with it. Afterwards, issues in the supply chain were resolved, and we increased our production. Then, in the current fiscal year, the retail orders for distributors stopped, and the distributors' inventories began to accumulate. We were watching how things were going, but the situation has become even more serious recently, as the inventory level at distributors remains high. So we started to reduce the production. We are making adjustments now to lower the inventories to some extent by the end of this fiscal year. What about the location of production reductions? Will it be in the U.K. or in Germany? As I think there is a possibility of cross-sourcing, I'd like to know where are you going to reduce the production. This is Horikoshi. First, about inventories. We have already been reducing inventories in Europe, and we already see that the situation is getting worse this year. So toward the end of this year, we will lower inventory from the level of the beginning of this year. So far, sales and orders have been very weak in the U.K. Also, orders for wheel loaders we manufacture in Hanover have been very weak. On the other hand, the fulfillment rate of orders for small utilities equipment manufactured in Italy had been very good, but recently, orders for the equipment have suddenly stopped. So now we have a large order backlog and no more orders from distributors. So now in Italy, we are now reducing substantially accumulated order backlogs. We will not implement significant production reduction immediately, as we have this order backlog, but when the backlog runs out, I think that is when we will have to reduce the production. So are you expecting to complete the production reduction by March? To be honest, I can't say for sure that all those issues in Europe will be completely resolved by the end of this fiscal year. In the case of the U.S., the situation is clear, but in the case of Europe, it will depend on how much retail sales are going to decline. Okay, I understand. Thank you very much. That's all. Thank you very much. Next will be the last question. Mr. Tai from Daiwa Securities, please. Thank you. I am Tai. I'm referring to page 36 of the handout, and this slide clearly shows that your company's sales have been repeating a cycle of up for two years and down for two years. This year, sales have unusually increased for the third consecutive year, but I wonder what they would be without the effect of the exchange rates. Anyway, I expect sales for the next fiscal year, FY 2024, will decrease according to this graph. I know it is not so easy to say like this, but if that happens, what items can contribute to maintain even only profits? I think you have already started such discussions internally for the next fiscal year, but for this fiscal year, prices rose, the product mix was good in parts and mining equipment, and the exchange rates were also favorable. But even under such circumstances, it seems only 15% growth is a little too small. Then, if these positive factors are getting weaker, do you think you can cope with the situation, or at least you can maintain a flat growth? It may be a little early to ask this, but I appreciate if you can tell us some hints. This is Horikoshi. As you mentioned, construction equipment has been in a two-year cycle for about two times so far.... It is clearly a two-year cycle, even with the pandemic. In the past two cycles, the turnaround between the ups and downs was like mining equipment declined or went up about 3 months-6 months after construction equipment fell or went up. Such a cycle has been repeated so far, but this time, while construction equipment is falling, mining equipment is not declining. So this is a clear difference. You have said that we might have discussed this point, but to be honest, we have not formed a clear idea about it yet. But looking at the current situation, I don't see any factors to indicate that the mining equipment sales will decline, and I think that can be considered as a contributor to maintain profits you suggested. Regarding KMC, KMC had a huge drop in North American coal-related business due to ESG in 2020, 2021, or maybe even 2022, but it is making a full recovery. Regarding coal mining, India is even going to increase its coal production compared to this year. Because of these factors, KMC's operating profit margin has been substantially increasing. Also, operating profit margin for underground mining equipment business has also increased considerably, partly due to structural reforms. Compared to a few years ago, mining equipment has obviously improved its profitability. As for construction equipment, its demand is currently in a downward trend, so I think we need to see how much this will affect the next fiscal year. Mr. Horikoshi, it is often said that the population of mining equipment is about 45,000 or 50,000, and they are replaced with new equipment after 10 years. Demand for this fiscal year is about 6,000 units, as shown on page 27, and I know this is because of the replacement for the equipment sold in 2012. But based on the population, I think the situation will change in 2024 and 2025. Do you think there will be a slight difference in the market? As you know, in 2011 and 2012, there was over-mining and resource majors invested too much CapEx, and the market dropped drastically around 2013. But the mining industry will not do such things anymore. In addition, there is a clear basic trend that the production of copper and nickel will gradually increase. Compared to 10 years ago, the trend is clearly different. This is based on the attitude of mining companies toward investment and a steady growth in demand for copper and nickel for EVs and CSG. In that sense, I have an impression that fluctuations will be smaller than in the past. As for mining equipment distributors, there are 17 companies now. This number had decreased year on year until 2022, but it is turning to increase in 2023, and I think this trend will continue. Okay, thank you very much. Thank you for your question. This is the end of the question-and-answer session. This concludes the business results briefing for three and six months, ended September 30th, 2023. Thank you.