4091.T FY2025 Q2 Earnings Call Transcript
Date: 2024-11-01
Source: Financial Modeling Prep

Unidentified Company Representative: Now we would like to commence the Nippon Sanso Holdings Corporation Earnings Call for FY2025 Second Quarter. Thank you very much indeed for taking time despite your busy schedules. My name is [Ishimoto] from IR team, thank you for joining this conference. Some housekeeping announcements. First, the conference materials are the financial results, pension and earning call reference we have just released. Please have these materials ready. Today's main speakers are Hamada, President, CEO; Draper, Senior Executive Officer, Group Finance and Accounting Officer and CFO; and Kajiyama, General Manager of IR. In addition, Kubo, Executive Officer, Group Corporate Planning Office; Mickey, Senior Executive Officer and CSO and the Group Sustainability Management Office; and Yoshida, General Manager of Accounting are also in attendance. Today's agenda begins with explanation from CEO Hamada; CFO, Draper; and IR, GM Kajiyama covering Q2 results based on the materials. We have time for Q&A in the end. Zoom simultaneous interpretation function is available for English and Japanese. Please select your preferred language in the Zoom control panel. If you prefer communicating in English during Q&A, please set the Zoom audio language to English. Now Hamada, over to you.
Toshihiko Hamada : Hello everyone. We are having this earnings call a bit earlier. Before, I thank you for joining. This is Hamada-san from Nippon Sanso Holdings. Thank you for taking the time to join our second quarter earnings call today. As usual, the global situation and economic environment, I would like to briefly touch upon these topics. There are geopolitical issues that remain unsolved, therefore there's still lots of tension in the world and amid such environment, the global economy, Europe and United States, inflation is settling down and the interest rates had remained high. Also, countries started to lower interest rates including United States. In the United States, there's the presidential election and in various countries, there are many elections and a ruling party, an opposition party being replaced. And the main force have been changed in various governments. There's a lot of change in the world and that has a substantial impact on the global economy. And we think such trends may continue. And our group, we want to have an accurate understanding of such global trends and we want to be able to continue business in a flexible and agile manner. Financial performance, we will refer to later on, but in this business environment we have approximately 20,000 employees and staff. And thanks to the sincere efforts of our employees and staff as well as the support of our customers and other stakeholders. We are making steady progress towards the goal of the final year of our medium-term management plan and aspiration 2026. First, I wish to express my gratitude in this regard. Concerning the business trend, gas volume is on a declining trend and there are ups and downs. But for example, in the United States, cylinder and the equipment business somewhat slowing down. Small users use a lot of these services and it's the fundamentals of the gas business. And at one time, semiconductor specialty gas was at its bottom. But mainly for memory-related semiconductors, we are seeing a recovery trend. But I think you hear and see in the media a lot about AI related news, logic. Semiconductor manufacturers seem to be struggling amidst the AI trend, and utilization rate in the factories seem to be lagging behind. And we want to make our most efforts to continue our business, continuous stable supply of gas. Based on that, we want to continue to grow, and we want to enhance our corporate value. These, I think are the important points for the NSHD group. NS Vision 2026, there are five focus fields like operational excellence and pricing. Each segment also has its own strategy. So bearing these in mind, we want to make our utmost effort. And four or five years have passed since we transformed into a holding company structure. We want to capitalize on our strengths to our maximum extent and we want to be clear on the rules of the holding company as well as operating companies. And details of financial performance will be explained later on by Mr. Draper and Mr. Kajiyama. To summarize what I just mentioned, customers and social trend, we have to be able to respond flexibly and in agile manner, operational excellence, productivity improvement, price management. We want to continue such efforts so that we can maximize our profit. And the business expansion opportunity, we want to be able to capture as much as possible. And mainly around sustainability, non-financial KPIs, we want to work on them as well so that we can respond to the fundamental needs of society. And through such efforts, we want to continue and commit to enhancing our corporate value. May 2025, we announced our medium-term management plan NS Vision 2026. And as written on the slide, we have five focused fields. And we have explained our initiatives for the four years through March 2026. Today, I would like to talk about last fiscal year's performance in terms of non-financial KPIs of our medium-term plan, introduce our sustainability initiatives, particularly in the environment field. And 4 o’clock Japan time, there was a business acquisition announcement in Europe. We would like to explain about this business In Europe, we would like to explain about this business acquisition in Europe. These are the topics I want to share with you today. With the fiscal year ending March, 2026, which is the final year of an exhibition at 2026, we set financial and non-financial KPIs. For non-financial KPIs, we set a target for each of the items of e-environment, [SSIT&G] governance and the numbers are as written on the slide. First quarter results, when we announced that we were not able to explain about non-financial KPIs, because a lot of the matters were not approved there. Today, we are ready to explain about this topic and we have non-financial KPI as one of the indicators that linked to executive compensation. We have non-financial indicator linked to executive compensation so that it will become an incentive for executives. We will continue to thoroughly implement environmental management, occupational health, promoting women's participation in the workforce and compliance education. For more information on our sustainability initiatives, please refer to our recently released integrated reports. There's a lot of detailed explanation there. Next, I would like to explain about our group's material balance and environmental contribution. The input column on the left is side of the slide. It shows the raw materials, energy and water resources required for our business activities, while the output column on the right, it shows the amount of greenhouse gases, water waste, et cetera, emitted as a result of business activities. The light green box shows the amount of greenhouse gas emissions reduced by our customers through the NSHD grid products and services, including gas. I may be repeating, but the characteristics of our group's business is the fact that our group's energy consumption is mainly electricity as a result. Scope 2 accounts for approximately 80% of greenhouse gas emission and the amount of water resource used and discharged is small compared to the scale of our business. As a major power consuming industry, NSHD aims to reduce GHG emissions by replacing air separation units with energy efficient models and promoting efficiency in gas and production by scaling to meet demand and optimizing the plant operation. We are also focusing on the future energy mix of power companies aiming to minimize Scope 2 emissions and pursuing business opportunities in carbon capture, so cold negative emissions. Next, regarding environmental topics, we are also committed into biodiversity conservation. In August, we supported the idea of TNFD, joined the TNFD forum and registered as a TNFD adapter. As a result, we will begin disclosing information based on TNFD recommendations from FYE March 2026. We also introduced further biodiversity initiatives. Recently from July, we joined the OIST coral project, supporting the project with thermal bottle sales.On sustainability topics, we will hold an online sustainability IR conference on December 6 at 03:00 PM by CSO, Mickey. We will present our sustainability strategies and initiatives under NS Vision 2026. So please join us. Further details will be emailed soon by the IR department to investors and shareholders. Next, as I briefly mentioned earlier, at around 04:00 PM Japan time today, we released an M&A announcement in Europe, which I will now introduce. This slide was not included in the deck uploaded to our website at 03:00 PM Japan time, due to European press release timing.Let me introduce about the details, and you may not be able to see it. But the deck will be updated in a day or two. Our European subsidiary, Nippon Gases Europe has signed a contract to acquire 51% of the Italian engineering firm, Polaris. Polaris designs and manufactures air separation units and purifiers, providing equipment and engineering services mainly in Europe. In industrial gases, they focus on small and medium size air separation and unit and nitrogen generator.This acquisition gives us a majority stake in Polaris and enhances NGE's engineering capabilities. It strengthened our proposals to clients and allows us to pursue carbon neutral business opportunities. We also aim to create synergies with our Japan based plant engineering center over TNSC, the group-wide synergy is going to be demonstrated. Polaris has footprint not just in Europe, but Korea and other Asian countries as well as US. Next, I will explain our upcoming CapEx plans and investment plans. Since the first quarter FYE March, 2022 earnings release. We have shown CapEx plans by industry to give a comprehensive review of customer sectors to achieve strong growth in the future. Continuous CapEx is essential. As of September 30, 2024, our backlog is around ¥160 billion, comparing to Q1, it has increased, excuse me, the decreased, this is due to the carbon neutrality related energy industry targeted the larger scale. The project needed to be canceled. This is one reason and comparing to Q1, there was a slight appreciation of the Japanese Yen. So there has been FX impact. So these are the key reasons. In terms of the number of a project completed and a newly acquired one was about the same. So the total number remains the same. Given the situation, approximately 45% of these projects are related to environmental and hydrogen society contributions. As noted on the slide at the bottom, this scope covers projects above ¥500 million with the smaller project excluded. Moving forward, we plan to present our growth potential by quarter disclosing CapEx status. Now, this is end of my part. I will hand over to CFO, Alan Draper to talk about the Q2 earnings overview.
Alan Draper : Thank you very much, Hamada-san. I also appreciate everyone joining our Q2 earnings call. For the quarter, July 1, 2024 through September 30, 2024 revenue increased 3.3%. Excluding the favorable impact of the weakened yen, revenue increased approximately 2%. Core operating income increased 10.4%, excluding currency impact COI was up 8.7%. The COI margin as a percent sales increased to 14.4%, up 90 basis points and EBITDA as a percent sales also improved to 23.3%, up 70 basis points. As in the previous quarterly report, year-over-year, growth and margin improvement were driven by price management, stabilizing costs, and sustains operational excellence with productivity and best practices continuing to be leveraged across various businesses and countries. These gains were partially offset by the impact of lower volumes and cost inflation. Please see the right hand side of the page. This includes our year-over-year revenue analysis for the consolidated group. With respect to the Q2 revenue variance analysis, NSHD experience a favorable impact of 1.2% from currency. Outside of currency prices positive 1.8%, volume negative 1%, pass through and surcharges were up 0.6% from increasing energy costs in the onsite business and other category which includes M&A, divestments, deconsolidation and equipment activity was favorable 0.8%. During Q2, NSHD recorded a non-recurring impairment charge of ¥10.7 billion related to the nonrecoverable portion of a hydrogen construction project that was canceled, because of a renewable diesel customer bankruptcy. We are disappointed with the situation and the global Hico team is actively working to utilize and or redeploy these assets. In addition, internally we'll continue to analyze customer financial risk, strategic outlook and do our best to minimize and avoid repeating this in the future. With respect to forecast, we have not modified our external sales and profit guidance because the changes that we see are mostly currency and are not overly material. Overall, if the macro conditions remain relatively consistent with the first half sales will be within 1% of the current forecast of ¥1.3 trillion and will have an upside of approximately plus 2% to plus 3% on top of the ¥177 billion, core OI income forecast.Our second half forecast assumed foreign currency rates of $145.31 to the yen and €157.72 to the Japanese yen. Therefore depending on the performance of the yen there must be some additional tails one due to the recent yen weakness. In addition to the ¥10.7 billion non-recurring charge previously mentioned, IFRS operating income is expected to decrease minus 3% to minus 4% range from the previous forecast and profit before tax and net income will also be down similarly as the IFRS OI reduction of mins 3% to minus 4%.Operating cash flows improved significantly in second quarter, resulting in first half operating cash flow improvement of 36% or approximately $31 billion versus prior year. This is a tremendous accomplishment and solid performance by the organization. Investing activities which are nearly all capital expenditures increased 57% from the previous year due to large capital projects. Therefore, from a free cash flow perspective we were essentially unchanged despite the ramped-up capital spend. As Hamada-san mentioned on September 25, 2024, NSHD released our integrated report for the fiscal year ending March 2024. I encourage everyone to review this report as it offers valuable insight from our business leaders and outlines our strategies, goals and the priorities we consider essential for our stakeholders.Additionally, as you meet individually with our IR team, CEO Hamada or myself, we welcome your constructive feedback both positive and negative on the report and any suggestions you may have for improvement.Thank you very much for your attention. Now I will turn the call over to Kajiyama San to provide some additional remarks. Thank you.
Keita Kajiyama: First, Japan on Page 16. In the gas business, which accounts for approximately 60% of revenue shipment volume of asset operation gas, our core product declined and impacted by the deconsolidation of a residential LP gas subsidiary, revenue decreased. In electronic material, gas shipment volume was flat year-on-year. On the other hand, in equipment and installation, since many projects generate revenue in accordance with the progress of projects revenue increased year-on-year for both industrial gas and electronics. Effective price management and strong performance in equipment and installation contributed significantly to increase in segment income year-on-year. As a result, revenue was ¥ 93.9 billion a year-on-year decrease of ¥600 million or 0.6%. Segment income was ¥10.4 billion a year-on-year increase of ¥400 million or 3.4%. There was minimal foreign exchange rate impact on revenue. Next Q2 performance of the U.S. business on Page 17. In the U.S. business shipment volume of our core products air separation gas increased before other gases, including electronics gas, acetylene, packaged gas such as dry ice shipment was soft. In equipment and installation, sales of both industrial gas and electronics was soft. With regards to cost, we continued effective price management and productivity initiatives. As a result, revenue was ¥86.9 billion, decrease of ¥600 million or 0.6% year-on-year. Forex impact was positive ¥800 million and excluding this Forex impact revenue decreased by ¥1.3 billion or 1.4%. Segment income was ¥13.7 billion year-on-year increase of ¥1.5 billion or 12.4%. Forex impact on segment income was minimal, but excluding this impact segment income increased by 11.4%. Next performance of the European business on Page 18. In the European business, shipment volume of air separation gas declined slightly year-on-year and sales of equipment and installation, including medical device was strong. Regarding cost, continued efforts were made in price management and productivity improvement. As a result, revenue in Europe was ¥80.4 billion a year-on-year increase of ¥6.2 billion or 8.4%. Forex impact was positive ¥1.7 billion, and excluding this impact revenue increased by ¥4.6 billion or 5.9%. Segment income was ¥15.2 billion, year-on-year increase of ¥2 billion or 15.1%. Forex impact was positive ¥300 billion and excluding this impact segment income increased by ¥1.8 billion or 12.5%. Next, Asia and Oceania on Page 19. In Asia and Oceania, the core products like the air separation gases increased the shipment volume year-on-year. In LP gas, which is largely sold in Australia, both unit price and volume increased. Additionally, gas and equipment in electronics accounting for 40% of total sales increased as well. With weaker yen sales were €44.1 billion, up ¥4.5 billion or 11.3% year-on-year. Excluding FX impact at ¥1.3 billion, the revenue increase is now ¥3.2 billion or 7.7%. Next, segment income was ¥4.5 billion year-on-year positive ¥100 million or 1.6%. Excluding the ¥300 million our FX impact then the segment income remained flat year-on-year at 1.8%, down by 1.8%. Next, Thermos business on Page 20. In Japan, the sales, particularly portable marks were steady. Sales from production basis in Asia were solid, but sales by equity method affiliates in other overseas regions was soft. In terms of profit, we've introduced a new product with updated colors and functions aiming to minimize yen depreciation and rising costs. As a result, sales were ¥8.1 million an increase of ¥400 million or 5.6% year-on-year. Excluding FX impact, the increase is positive 5.2%. Segment income was ¥1.4 billion year-on-year basis, almost flat or 2.7% increase. However, segment income margin decreased by ¥100 million or 3.7% reduction due to the impact of yen depreciation. This concludes the segment explanations. Lastly, let me touch on the materials in the appendix. Page 32 onwards. Key financial indicators, essential cash flow and the calculations, and the reference for necessary financial indicators are listed on Page 36, key management indicators. Overseas revenue ratio at the end of Q2 was 68.2%, the 2.7% increase from previous year, reflecting global growth. Bet D/E ratio improved to 0.71% at the end of Q1 compared to 0.72% at the end of the previous year. Finally, regarding the materials on the European Engineering Company acquisition as explained by Mr. Hamada, we will update and upload them to our website with the additional details presented today. Thank you for your understanding. This concludes today's explanation of the Q2 FYE -- in the March FYE 2025. Thank you
Operator: Mr. Hamada, Mr. Draper, CFO, and Mr. Kajiyama of IR. Thank you for explanation. We will now start the Q&A session. [Operator Instructions] This concludes my explanation. We'll now respond to questions until the scheduled closing time. Mizuho Securities, Yamada. Please start your question. Thank you for explanation for Mr. Yamada from Mizuho Securities
Mikiya Yamada : I have about two questions. First, President Hamada, you talked about the backlog decline more than ¥10 billion, non-recurring losses that's incurred. I want to know about the background of this non-recurring loss. And I think you have recoverable portion remaining on your balance sheet. What is the gross amount, 10.5% discount rate. I think you're quite conservative, but the remaining portion, is there a risk of having the remaining portion posted as a loss as well, and in order to reduce the greenhouse gas emission on a cumulative basis, you're engaged in such projects and do we not have to be worried about similar risk in those greenhouse gas emission reduction projects?
Toshihiko Hamada : First about the global decline and the accounting treatment, they're not necessarily equal to each other, 100 point something. You have those numbers, but the customer company filed for chapter 11 and a lot is being still discussed. And what we can encourage as impairment up to Q2 is this amount ¥10 billion or so. And for a while, various negotiations will continue, which means there are still some uncertainties that remain. And the total investment amount in this project we have not announced. But against this total investment amount at this point in time, what we are able to estimate -- we have posted as impairment. Please understand the situation that way.And should you be worried about similar cases. Carbon neutrality related projects, specifically renewable energy or renewable diesel related projects. We do have multiple such projects, but this particular project was the largest. And we have to refrain from speaking detail about the counterpart, the customer but their product price was not as good as they expected.And ultimately, they were not able to succeed in their business, and this company had to file for Chapter 11, technology and our initiatives, NSHD initiatives. It doesn't mean that all of our efforts will immediately turn into risk. That is not how we evaluate the situation. But as I mentioned, we are engaged in various kinds of carbon neutrality projects ranging from large projects to small projects.Particularly in the United States, we have lots of large projects. Europe and Japan, we have many small projects. And the technical advantage is not yet fully established. Therefore, there might be some similar partnering companies, but we don't think there will be a significant financial impact on our company. As I always say, carbon neutrality related sustainability and related investment projects. Concerning these projects, what projects will grow, what the projects have growth potential, we have to closely monitor future growth potential as we continue such projects, we think. And we looked around broadly about our overall situation and we did not discover similar projects and we did not discover projects in immediate danger. If Mr. Draper has anything to add about the numbers -- any forced to casted numbers.
Alan Draper:
Q - Mikiya Yamada : Okay. Thanks very much for the elaboration. So, I think you're also involved in the direct capture as well, but I think the bullet body of the DAC is much bigger. So I think we do not need to pay big attention to that project as well. And may I understand that the -- so far the risk is under control.
Alan Draper: Yes. That's correct. We have parent guarantees and other aspects in place on that contract. Thank you.
Mikiya Yamada : Understood. Thanks very much for the elaborations. [Foreign Language] I have another question. I was trying to switch my channel and may I continue on? I have a second question. I was wondering if I can switch channels and can you hear me?
Toshihiko Hamada : Yes, we can hear you.
Mikiya Yamada : My second question. Electronics related, equipment installation, they seem to be strong, including backlog, next year and beyond. Do you expect the strong performance to continue and specialty gas shipment trend what was the trend like in Q2 and that with the second half of the fiscal year? What is your forecast?
Toshihiko Hamada : Thank you for the question. Large equipment in the installation, we have in Japan and Taiwan that impact our financial performance, but they are ongoing successfully in Japan. There's some timing difference, but the overall plan is ongoing steadily. We think therefore there will be no impact towards year end. And there's a larger construction project knowing in Taiwan as well. It was successfully completed, small and medium equipment installation projects. We have those projects as well, but the equipment installation projects that we are involved in that they are generally proceeding successfully. And I cannot mention the customer name, but there's a plan to construct a factory for a large customer, which is being delayed in Europe and China. And we have not formally received orders for these projects, which means that there is no direct impact on the NSHD's financial performance. What would be the mainstream for AI, which companies -- a company will end up using. What kind of technology? We do not have full understanding of these AI related trends. We have to closely monitor such AI trends and semiconductor material gas SSG, semiconductor specialty gas SSG is the business we call it. Roughly speaking in each region, we have started this business and Q1, we didn't see so much of this trend, but in Q2, clearly, we are seeing better numbers in particular Southeast Asia memory related company. They use a lot of gas and gas usage forg by these companies still growing. And when we prepared our guidance, we try to incorporate as much as possible and businesses proceeding quite successfully. Memory related business, memory related gas is growing and same performances Q2 or we may see for the growth compared with the Q2.
Q - Mikiya Yamada : Understood, as well. Thank you very much. I want to confirm one point about the equipment installation. In Japan, the ruling party lost in the general election. And is that going to impact your equipment installation business?
Toshihiko Hamada : Unlike U.S. Presidential election, I don't think there will be major changes as a result of the general election in Japan. I don't think Japan is in a situation where they can make abrupt changes. I think that this strong condition, therefore, will continue. And Japan as a country wants to grow electronics and semiconductor business, utilizing state of the art technology. And I think all people concerned have a consensus in this regard. Therefore, we are not worried. This concludes my response.
Operator: Thank you for the question. Next, BofA Securities, Enomoto San, over to you.
Takashi Enomoto: I've got two questions. One, those new revision of the guidance, meanwhile, core OI, there may be the potential upside within the range of 1%. Taking into consideration of that from first half to the second half core OI. I think is going to be the decrease in the profit and that should be the guidance. And from your perspective, what are the risks in the second half? It seems like the situation will be deteriorated. So any the risk factors, for example the deceleration of the downturn of the economy or slowing down or the reduction of the gas sales. How we should assess and view the second half?
Toshihiko Hamada :
Q - Takashi Enomoto: Then in what condition the destination situation will be further deteriorated?
Toshihiko Hamada : One thing I can think of is the crude oil or regional conflict will be expanded or export import, impacting shipping route disturbance. If those event occur, there will be the certain level of impact on our business. But at this point in time, it's not foreseeable and we don't project that.It's difficult to say our situation is steady when we look at the economic environment. But at this point in time, we don't at least recognize that there is a major risk in the second half. And as for the full year guidance Alan Draper will supplement.
Alan Draper : Thank you, Hamada. Thank you Enomoto-san for the question. So overall, as I mentioned in my prepared remarks, if you look at our full year, our guidance right now that we have from our budget was ¥177 billion of core OI. If things remain relatively flat and consistent and and stable as we've seen and we don't expect any major change, we could be 2% to 3% higher than this on a full year basis. So 2% to 3% on ¥177 billion would put us in the ¥181 billion to ¥182 billion range. So we do expect a little bit of upside of things remain stable. One other comment I'll make regarding the outlook. We always look and meet with all the finance team and global leaders and we ask them how each segment is going to perform from a market perspective. And right now what we're seeing today is chemicals we think is going to be slightly negative. Energy slightly negative. Other manufacturing neutral, health remains positive or healthcare, food and beverage slightly positive, memory and electronics positive. And then steel and auto essentially neutral. So if you kind of balance those out, we kind of are seeing more of the same. So first half, we expect to see similar results in the second half but certainly we'd like to see some improvement in the economic environment that we're dealing in so we can start seeing some volume improvement.
Takashi Enomoto: Second question about CapEx. Initially ¥166 billion or ¥170 billion was a level, but in the first half it was a good level of progress it seems like. So is my understanding correct? And full year CapEx, is there any possibility of having an upside from the current guidance level? Thank you.
Toshihiko Hamada : The full year figure, I don't clearly remember, so I will not pass that to Alan Draper to respond but roughly speaking as was explained in terms of the numbers, the completed and newly acquired ones are the same. So the total number remains the same. And there are the large size, the project being completed or the canceled and the project has then the significant size. So in the second half there are a number of projects there being completed. We've got the certain level -- certain number of the projects expected to be completed. So slightly above the budget, maybe the level a ¥164 billion, ¥166 billion. So there may be an potential to have an upside from the given level, but then I will ask an Alan Draper to explain the details.
Alan Draper:
. :
Operator: Next CLSA Securities. [Jo San], please.
Unidentified Analyst: Hello, This is Jo from CLSA Securities. Can you hear me?
A - Toshihiko Hamada : Yes, we can hear you.
Unidentified Analyst:
A - Toshihiko Hamada : Thank you for the question. Individual user environment, customer environment, individual industry environment, I don't have that data with me. But roughly speaking, there was no particular factor that impacted overall demand.European economy, particularly Germany, though, they seem to be facing a tough situation. As a result, gas supply volume as well as gas production volume may not have reached expectation. And this trend, will it recover in Europe, I am not sure whether we can see a recovery in Europe. But in other areas, for example, heavy industry, piping, they may not grow, but we are getting resilient market, health care, food, CO2 industries. We are strong with these industries and we do think that there will be growth in these latter type of resilient industries, which will offset the possible growth in some other industries.U.S., I'm not sure of details. But on-site supply and so forth, I think they are doing quite well. But cylinder gas business is pushing down overall performance as well as equipment like valves and welding equipment. These businesses are not growing. And what does this mean? We are not sure what this trend means. But generally, this is my personal opinion, but there is U.S. Presidential election. And maybe this seems to be the trend immediately before U.S. Presidential election and once the outcome of the U.S. Presidential election becomes clear, U.S. might start to grow again. So I'm not worried about the U.S. so much either. Japan we do not expect a significant growth from a structural perspective, but electronics related gas we think there is a growth potential. Large factories they're starting operation and when various factories start operation they will use various gases. Europe, U.S., Japan we cannot expect significant growth but the declining industries might be covered by other growing industries. Pricing activity, we are engaged in proactive pricing activity in all industries. Therefore, when it comes to bottom line profit we it should be able to generate sufficient bottom line and decline in volume is impacting revenue. But in terms of profitability, we think we have been able to meet our forecast. So please understand this trend this way and this concludes my response.
Unidentified Analyst: Second question about the M&A, the acquisition in Europe acquisition of a European equipment manufacturer. What is the background behind acquiring this company now? I think it's because you don't have -- well, I think you have NSHD has your own equipment and why are you adding this business under such circumstances? Hydrogen related equipment you may not have focused on so much before or for example the acquisition amount or valuation of the company. If you could please comment on at what price we bought the company and valuation to the extent possible?
Toshihiko Hamada : And our European company had the long standing business with this company that we recently acquired. So we knew this company well from before and this company's main business is the aspiration unit and the nitrogen generator PSA equipment and this is not directly related to gas industry but chemicals various chemical related equipment that's handled by this company as well. So this company is engaged in a wide range of engineering, particularly ASU esprit separation unit. As you mentioned in Japan TNSC manufactures medium to large sized equipment separators, mainly speaking but the newly acquired company has a small to medium sized plants mainly speaking. Why did we acquire this company that manufactures separators? When there's load focusing in a particular area, we will not be able to shorten delivery time just in Japan. And this is not an issue that arose recently. From the past, when there's a peak we had to delay delivery time and we were causing inconvenience to the customers. And we had been thinking about how to resolve this issue and we don't have so much large land and facilities to set up another place to manufacture ASUs and economically it's not reasonable either. And this company decided to accept a capital injection from our company. So we want to utilize this company's engineering capability to maximum extent and in that sense I think it was beneficial to acquire this company. Gas generation equipment and ASU business, we think we can have a clear division of labor between NSHD and the new acquired company. And the carbon neutrality related technical capabilities with engineering that is also available in this company that we acquired.
Unidentified Analyst: Gas equipment and ASU compared with these kinds of capabilities that exist in TNSC is setting aside the size of equipment and plants manufactured. This is a company that has a broad range of capabilities. If possible, what was the acquisition price or valuation if possible. If you can comment on these, it would be very helpful.
Toshihiko Hamada : I'm sorry, we cannot disclose that information. Thank you.
Operator: Thank you for the question. In the interest of time, there are questions that we couldn't take and we would like to respond in an individual interview. So next I would like to introduce the IR event. As President briefly mentioned in the presentation, the Sustainability IR Conference will be held on 6th December continued from last year. It is going to be the 3rd Sustainability Conference. We hope you will be able to join us. With this FY 2025 the second quarter telephone conference now to be concluded. So the substance of the meeting will be uploaded on our website tonight. Thank you very much indeed for your kind participation and questions.