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Hello, everyone. This is Yoshimatsu speaking as the Global CFO. Thank you very much indeed. On the occasion of the presentation of the financial results for the first quarter fiscal 2022 by Bridgestone Corporation. Let me start on the presentation on the first quarter results. Please be aware that these are the 2 points I am going to cover. Highlights of the business and financial performance for the first quarter of fiscal 2022.
First, I would like to explain on the trend of actual performance as well as the consolidated projections for fiscal 2022. And during that, what I am going to do first is to review the plan we presented back in February. The company earmarks fiscal '22 as the year to "accelerate the transformation towards a strong Bridgestone". So that unprecedented raw material costs and inflationary impact will be countered by strategic selling price management to accomplish year-on-year increase in revenue and adjusted operating profit.
Revenue plan is JPY 3.650 trillion, reflecting 12% or about JPY 400 billion increase year-on-year. This exceeds the level before the coronavirus pandemics in 2019, approaching the historical high back in 2015. Also, GP margin of 39.3% reflects our expectation and results to maintain on the high level. Adjusted operating profit of JPY 425 billion, year-on-year increase of 8% or about JPY 30 billion. Last year, through the code rebuilding earnings power and quality, we improved profitability substantially. And in this fiscal year, adjusted operating profit margin is 11.6%. Again, the projecting kind of to maintain the high-level profitability. Subsequent events, including the further sources of raw material and the cost, order [indiscernible] tension monthly income, [indiscernible] between Russia and Ukraine, resurging of the corona pandemics in China. On top of that, the cyber-attack in our U.S. subsidiary by the outside threats after, among other risk events. However, with the further stepping up of the selling price management on top of the actual measures to enhance further the profitability, the more favorable development and then the original plans for the FX means that there is no change in consolidated projections for fiscal 2022 from the disclosure of backend fiscal back in February this year. On to the consolidated results for the first quarter. For the continuing operations, on the year-on-year basis, revenue grew 23%. And a year-on-year increase of 19% in adjusted operating profit, substantial increase in both revenue and profit. Adjusted operating profit margin of 11.3% is more or less equivalent to the prior year level.
Of the profit attributable to owners of parent looking at profit attributed to parent from continuing operations. Adjustment items included the JPY 12.8 billion of impairment losses coming from the Russian tire operation among others. So the result shows a 3% increase year-on-year at JPY 65.4 billion. Also mindful of discontinued operations. Profit attributable to owners of parent for this quarter, declined 81% year-on-year at JPY 53.8 billion, reflecting one-off gains associated to the decision to sell U.S. construction materials business last year, which is more than JPY 220 billion. Next, let us take a look at the overview of the performance for this quarter. In this first quarter, amid various management risks emerging such as the conflict in Ukraine, the resurgence of COVID-19 in China, and the cyber-attack incident at the U.S. subsidiary, the company was able to expand global tire sales through flexible and agile risk management to promote global tire sales. In response to raw material and other cost inflations which exceeded our presumptions, we have further strengthened "selling price management" and "premium business strategy" in each region. And the negative impact of cost increases was largely absorbed by the positive impact of improved selling price and mix. Also, the replacement tire demand increased significantly from the previous year, mainly in development countries. Flexible supply management based on our global manufacturing footprint, which is one of the Bridgestone's strengths enabled us to respond to changes in demand, resulting in a significant increase in sales of replacement tires.
Overview from performance in by-product. OE demand on passenger core and light truck tires and trucking bus tires, slowed down significantly due to the impact of automobile production cutback as affected by the semiconductor shortages. In the U.S. and Europe, on the other hand, replacement market sales remained strong despite a series of price hikes since last year indeed. In Japan, sales increased substantially in a run-up to the price hike, which was executed for the first time in 2 years in April. Mining and construction tires, favorable operations continues. In particular, for the mining tires, under the tailwind of rising mineral prices, the company increased its market share by expanding the Dan-Totsu product for a good MasterCore resulting in a significant sales increase of more than 20% over the previous year. Next, let us confirm the business environment, which surrounded us back in the first quarter. Currency exchange was for U.S. dollar and Euro appreciated against Japanese Yen compared with the prior year. Raw material prices, natural rubber prices movements were relatively calm. On the other hand, crude oil prices surged against the backdrop of geopolitical risks. Tire demands in the OE segment, demand declined in all regions due to the shortage of semiconductors. For the replacement segment of tire business, strong demand continued in the U.S. and Europe. On the other -- in Japan, demand increased significantly year-on-year due to the impact of a prebuy before the price hike. For your information, we would anticipate a certain -- we actually declined to come about in the second quarter. Next, let's look at the tire sales growth for the first quarter. Passenger car, light truck tires, and the tow-truck and bus tires, both grew 7% each year-on-year to show a strong recovery. In particular, with the further [indiscernible] of the stepped-up continuation of premiums segment -- premium strategy. Passenger car and the tires, high-rim-diameter tires above 18 inches, sales thereof increased 25% year-on-year in comparison with 2019 before the COVID-19, 53% increase indeed. For mining and construction tires, ultra large size or tires grew more than 20% year-on-year, which was the effective rising mineral prices as well as strong sales trend from the -- for large was more than medium-sized tires backed by robust construction demand. As for the factors behind the year-on-year increase or decrease in adjusted operating income, the negative impact of higher raw material prices was largely absorbed by improved sales prices and mix and in addition to the increase in sales volume, there was also the positive effect of exchange rates due to the weaker yen with JPY 16.3 billion increase in profit year-on-year. Next, I will explain to you about our performance by segments. While Japan, Americas and Europe, Russia, Middle East, India and Africa recorded significant year-on-year increase in sales and profits. China, Asia and Oceania recorded a decrease in profit due to the impact of the resurgence of the COVID-19 in China. Among the segments with increased profits, Europe, Russia, Middle East, India and Africa, in particular, showed a very high rate of increase, driving the overall performance. In a market environment of tight supply and demand, the adjusted operation management operating margin for the first quarter was 9.6%, close to double digit, almost double the level of the first quarter of the previous year, thanks to flexible supply management that led to a significant increase in sales, market penetration of price increases and improved mix. I will now explain the tire business performance by products. Both passenger cars and light truck tires and truck and bus tires increased in both sales and profits compared to the same period last year, but the profit margin was 11.5% and 9.7%, respectively, slightly lower than the previous year due to soaring raw material prices and the impact of the time required to reflect index-linked prices in the sales of tires for cars. Profitability declined slightly from the previous year. On the other hand, the profitability of specialties, which includes tires for mining, aircraft, agricultural machinery and motorcycles, they recovered further to 20.6% from the previous year due to strong sales of highly profitable mining and construction tires. Next, I will explain the diversified products business. As a result of the business restructuring, all of our continuing operations remain profitable as they were in the previous year. The following is the balance sheet and cash flow. The total assets increased by JPY 115.6 billion from the end of the previous year to JPY 4.690.5 trillion, mainly due to a foreign exchange impact of approximately JPY 200 billion resulting from the depreciation of yen. The equity ratio increased 0.5 percent points from the end of the previous year to 58%, resulting in the improved financial soundness.
Free cash flow for the first quarter was negative, mainly due to JPY 81.9 billion increase in the working capital resulting from increased sales. On the other hand, Free cash flow for the full year is expected to be positive, mainly due to an increase in operating cash flow, resulting from an increase in operating income from the second quarter onwards while executing the strategic investment in line with the midterm business plan. In the first quarter of the current fiscal year, we recorded an impairment loss of JPY 12.8 billion under adjustment item in light of the current suspension of production in Russia and export of tires to Russia. In addition, the company recorded a loss of JPY 11.6 billion from the transfer of the anti-vibration rubber business. And the chemical product solution business announced last December, a loss from discontinued operations for the quarter, which is a total of the 2 businesses for the first quarter for the fiscal year. The transfer of the 2 businesses is scheduled to be completed in July and August this year, respectively, as previously planned. Finally, I would like to explain our outlook for the full year of 2022. As I explained earlier, there is no change in the forecast for 2022 from the one announced in February. However, we have revised there's some assumptions and concepts behind the forecast, which I will now explain. With the exchange rate assumptions for the second quarter and thereafter or JPY 120 to $1 and JPY 130 to EUR 1. As for raw material prices, we assume that both natural rubber and crude oil prices to remain in the high range experienced in the latter half of the first quarter. Regarding demand for tires, downswing in the volume for OE is expected from the favorably guidelined based on the outline for the continued impact of automobile production cutbacks. Demand for replacement tires model is expected to be about the same as favorably forecast with a strong demand in the United States and Europe, but slowing demand in emerging countries.
In this environment, the negative impact of raw material price hikes is expected to increase by approximately JPY 95 billion from the February forecast resulting in JPY 240 billion year-on-year decrease in profit, but we plan to [indiscernible] these impacts through sales prices. A favorable currency impact of JPY 33 billion in revenue compared to February guidance is expected due to impact of weaker yen. If there are any major changes to the earnings forecast based on the future business environment or our business performance, we will promptly disclose them at that time. Thank you very much for your attention. This is all from me.
Now we would like to begin the questions-and-answer session. First to call, Mr. Sakamaki from Daiwa Securities.
Thank you, Sakamaki speaking. My question refers to the company's view and assessment of your own actual performance in the first quarter of fiscal 2022, in reference to company's internal plan, which you explained included in the background of view. And relating to that, Page 15, FY, fiscal year projections. Is there any upside and the downside. For instance, in the first quarter, I understand that the so-called run of the brand before the price hike, which probably would not have the full year impact. At the same time, the balance between raw material costs and selling price, the balance between the 2, by and large, should probably be the same throughout the year. So the FX benefits may be over shadowed by the possible decline in the OE business because the lower demand and so on. Replacement market operations as well. Gasoline price continuing to surge, selling price increasing time after time. Isn't there a risk for the lower demand? The prolonged period of lockdown in China, isn't this a concern for the available supply from China? Or in the case, it may not be so relevant. But the ocean freight, the freight charges. I'm sure that you have an annual contract by now, but is there any implied risk in contracts, so it's a conventional view so [indiscernible] upside versus downside.
Thank you for the question. So what you would like to know is the company's own view or the assessment of our first quarter performance vis-a-vis the plan, be it revenue or adjusted operating profit, the actuals exceeded our plan. FX impact, of course, was there, and I explained about that. Adjusting that out still revenue and adjusted operating profit both exceeded our original plan. Also, although I did not quote any precise figure in reference to the cyber-attack on our U.S. subsidiary, to the adjusted operating profit JPY 14 billion push down on the adjusted operating profit, which is absorbed by factors such as the FX. In any case, the actual exceeded plan with or without the adjustment for FX, 4-year projections.
For -- one thing, FX assumptions haven't changed, which results in JPY 33 billion additional benefits. By the way, the U.S. cyber-attack incident at the U.S. subsidiary. Most of the expenses were booked in the Q1 book settlement. But for the rest of the year, some additional charges may accrue in order so that we can enhance the security measures.
Russia stoppage of production, stoppage of exporting to Russia. For the first quarter, on the 2 weeks' worth of impact on a 4-year basis, however, some impact will occur in reference into the resurgence of COVID infections in China. So all in all, those will be countered by changes to the FX assumptions. At the same time, for the 4 year projections, I talked about raw material cost assumptions, how we reviewed that number whereas we quoted JPY 145 billion to be the raw material-related cost increase back in February. That number has been added further by JPY 95 billion, meaning that on the year-on-year basis, JPY 240 billion is the magnitude of the pressure down towards our own profits, and that will be countered by JPY 289 billion, which is selling price measurement of the good effect. By the way, as the JPY 40 billion contingency that we explained back in February, that contingency stays. So please be aware that when we say the full year projection, it has no change from February. That's part of that as well. So indeed, various incidents have occurred. But all in all, FX factor and the good benefits, we will be able to absorb those negatives. On the other hand, adjustment items, what I did explain has to do with the impairment. The impaired value accounting of JPY 12.8 billion referring to the Russian business operations, mainly PP&E assets. Ocean freight charges last time back in February, we quoted JPY 20 billion [indiscernible] costs that has been added further by a little less than JPY 10 billion. Again, those are other factors which have been reflected before our resulting the decision to confirm the plans.
Thank you very much. It sort of means that in the first quarter, what degree of overachievement that you have to the adjustment -- adjusted operating profit in the first quarter?
Well, sorry, but we refrain from disclosing any particular number, but may I say almost 20% overachievement.
Okay. Then let's move on to Mr. Kakiuchi from Morgan Stanley Securities.
Thank you, Kakiuchi speaking. My question number one. Looking at your first quarter actuals, from the EMEA region is once again approaching the 10% order, so is that the actual -- the true strength of the operations? Or were there any run-off factors at play or anything else that I should be aware of? And also speaking with European tire operations, some of the companies talk about confusion or the difficulty and sourcing of the carbon black and other materials necessary from Russia. What about your operations in Europe?
That's question number one. Question number 2 refers to U.S. You talked about the impact of the cyber-attack on your subsidiary to the tune of JPY 14 billion. Is it volume? Or is that cost? So would you discuss a little bit further. By and large, furthermore, in North American replacement market, the market total -- the sales growth as a percentage, typically tended to be larger than Europe operations growth. But in this quarter, your own sales growth seem to have exceeded the market average. So is that the benefit of the aggressive focus on your major brands? Are this offensives, the bearing fruits.
Thank you very much for those questions. Let me start with the European question. Back in the first quarter, the numbers truly show -- well, of course, those are the true and natural strength in the European operations. In reference to the production suspension in Russia, that was for the 2 weeks to the end of the first quarter, the resulting impact was rather modest. So afterwards selling price management fared well. Profitability improvement has been progressing.
For the North American operations, the impact on the cyberattack. Adjusted operating profit impact of JPY 14 billion. Total revenue about JPY 25 billion impact. Gross profit has been 40% of that would mean JPY 10 billion impact on gross profit. This really -- the windfall losses resulting from the stoppage of the production facilities as well as the various costs, which are good. Through until February -- until February had the local operations were quite favorable indeed. So we are looking to good recovery and robustness coming through again in April and beyond. I hope I answered adequately to your question.
Thank you very much. Mr. Yoshimatsu. In the North American tire market, the other tire manufacturers are always also having hike in prices as many as 3x in some cases. So we had some information about North America. But European tire sales, what about your own plan and experiences for the timing of the price hikes, what percentage?
I would like to refer to [ Mr. Saji ], who is the General Manager in charge of IR to share the information.
Thank you. Europe, first, price hikes. Basically, we're talking about the concentrated period of March, April and May, price hikes in Europe. In March for the PSR, summer season tires, 6% to 7% price hike. And in April for winter season tires, 10.5% increase and winter PSR tires.
On the TBR side, starting in April, Bridgestone and Firestone truck and bus tires, have been announced already, to be hiked by 7%. So remembering all of these points, I understand that you wanted to know about the strength of our operation in Europe. In the first quarter, what we have been continuously tackling to enhance our profitability since last year has persisted through different quarter this year. So that with the selling price and mix and those factors were able to duly counter and offset cost and inflationary effect.
And also one more point, regarding the volume, we did not pursue the volume very much last year. However, this year, even with volatile situation in Ukraine, we were able to manage supply, which is one of our strengths quite well through -- although there were considerable disruption in the supply chain. And as a result, the EMEA region was able to expand its sales volume significantly compared to the previous year, which was a difference from the last year with a resultant profit margin close to 10%. As for the impact on the production at our plants, of course, there were suspensions of production from Russia but we were able to generally cover and replace most of the materials, and there is no major impact on production. This is the response on Europe. As for the U.S. market, similarly, as our supply management by taking advantage of the [ global ] sourcing was quite successful in the first quarter. Market share increased considerably if you look at Q1 alone. And as was mentioned earlier by Mr. Yoshimatsu, there was the cyber-attack. And it does not look too great if you only look at the first quarter, but if it were not for that, the business itself remained very sound and strong leading to us to evaluate our sales of having been successful in the first quarter. In Europe, another point is that because we were to raise the prices significantly in April, there were some last-minute surge in demand however sales impact was not so great. We expect sales to remain steady from the February onwards. Does this answer your question? Thank you very much.
Now I would like to invite Mr. Sakaguchi of Mizuho Securities for your question.
I am Sakaguchi of Mizuho Securities. My first question is that you have explained and given us various backgrounds resulting in the Q1 upswing. If I may confirm, excluding the impact of foreign exchange and the impact of the cyber-attack, as you are saying, are you seeing that the result, and you were saying that results were up by about 20%. I think that means that it was considerably stronger than the plan at the beginning of the period. Where does this come from? Is it from the sales? Or was it the penetration of the sell price stronger than the expected. If it is the sales, I think Europe and U.S. were strong. And among them, for example, TB in the U.S. and the mining were stronger than expected. Would you give me a little more on the substance or the actual business which led to this upswing and that is the first point. The second question is similar to the first one, but I would like to ask about the sustainability of your business. And performance. I understand that the reason why you didn't revise full year forecast this time is mainly due to the external factors such as the exchange rate and materials. But if the positive factors working for Q1 continues into Q2 and beyond. Do you expect a continued strong performance? Or do you see some risks, especially in sales. It is similar to the above, but please tell me about the Q1 results and the full year plan in terms of the actual sales, et cetera, and how sustainable they are going to be in the future.
Yes. Thank you for your questions. Let me try to respond with 3 perspectives or points in respect to the first one which we just finished. First, as I explained earlier, we were able to meet demand through global sourcing despite the geopolitical risks that were evident mainly in Europe. Global sourcing is one of the core competence of our group. The second point is that our market share of the HRD tires are increasing further in Europe and the United States. The third point is what you mentioned in your question. The mining tires have been gaining momentum since the fourth quarter of last year. In Japan, too, we are regaining our market share since last year. And I believe the 3 points, price increase and fully capturing the last-minute demand before the price increase in Q1, the overall situation background leading to the figures that I have explained.
As for the full year, we have been addressing the risks that emerge in Q1, such as cyber-attacks we experienced in the United States. They were addressed and regardless of the impact of exchange rates, we will continue to improve our real strengths with productivity improvements, price management, and as I explained in the HRD tire market share in the first quarter, we will fight the inflation through product mix. Productivity improvement, sales price management, product mix is -- they will all work together to override the inflation. We believe there are increased possibility that we will continue to improve our true capability and profitability, and we can fill them ourselves now.
Basically, with the global sourcing for production and sales and increased share of HRD tires along with that and also the mining tire situation, are you saying that we can expect to see the same trend as we see now beyond Q2 compared to the original budget?
Yes. That is how we see it internally. And that is the way we see it as we believe that we will be able to realize this as one of the core competencies that we have. Thank you very much.
Next, I would like to invite Mr. Maki from the SMBC Nikko Securities.
Thank you, Maki of Nikko, SMBC Nikko Securities. I would like to also ask 2 questions. The first one is that there are some overlaps. But as for the demand for HRD, it was quite strong at positive 20% for replacements. I think the plan was around 116 to 120% of growth. In other words, it was over those figures. And I wonder if this is a temporary increase? Or is it an increase in market share due to the increase in structural shift from OE to replacement, which you have been observing for some time now. As a result, as for sustainability, which direction do you expect it to move? And would you expect this demand to continue for the full year? That's my first question.
And for the second part, on the price increase on the last page of the material, there is a spread between selling price and raw materials of about JPY 50 billion plus since we saw the same kind of number of JPY 50 billion or so at the last presentation, I assume that this buffer will be maintained while raising prices and managing sales. Do you think that the current price increases will be sufficient to retain this gap? Or do you think it is necessary to further raise prices in the future? Continental and Michelin has raised their prices for the third time. And I believe you have also raised prices for TB, et cetera. I wonder where the price limit for this increase lies that will not affect the demand in the future. Are you still in the range where you can raise prices in a healthy way? Or are you close to the breaking point? Please let me know if you are discussing this at this point.
Thank you very much, yes, for the first question. You asked about the HRD tire growth. The second question is the price increase and a few more details. [ Mr. Saji ] will answer your question.
Thank you very much for your question. As for the first question of HRD growth and whether such a growth is sustainable is or not. I have already explained in the past that our ratio of HRD in OE market is quite high and that the demand for HRD will be increasingly shifted structurally to the replacement sector. And in fact, this trend has already been quite steadily seen, and we saw 125% figure for replacement this year, and you had evaluated that as quite strong.
But this figure is not limited only to this Q1. During all quarters last year, it was steadily growing at 120%. Even in this volatile market and with recent significant changes in the balance between replacement and OE and despite these recent changes in demand, we continue to keep 120% and over of growth. We will, of course, continue to make efforts structurally, but we are increasingly confident that we will be able to achieve high level of growth for replacement from the demand structure in the future. Therefore, we believe that sales will continue to grow on these spaces. So that will be the response for the first question. Regarding the second point, the relationship between the annual sales price. And the most recent price increase regarding the spread. Well, as you mentioned, yes, we did carry out significant price increase. In case of our company, price increases were concentrated in March, April and May, and it has already been implemented in North America, Europe and also in Japan as well which took place in April. Since this part of the sales has not contributed much to the first quarter, the final page number of JPY 289 billion figure were derived based on the expectation that these effects will be significant from the second quarter onwards. We will continue to raise prices in Europe and U.S. in response to the market conditions. However, we cannot say at this point that this is the case right now. but we are assuming this to be the case. As for Japan, we did raise the price in April. But for Japan, we will have to cautiously follow to see if the price increases have actually penetrated the market or not. Since the market environment here is quite different. And based on that, we'll have to consider how to respond to the situation. In that sense, as for your question, whether the price is at its limit or not. As I explained earlier, we were able to win the sales in Americas and Europe through Q1 sales and supply and demand. But some markets is still in such a supply and demand situation. You asked if the price increases were at its limit now. Our response is, we do not see it that way. As for the demand for the first quarter, our forecast was that the demand in Americas and Europe would remain almost unchanged from 2021 to 2022.
However, our current situation or feeling is stronger than we had expected. Therefore, we are still considering the situation to be healthy. Now would that answer your question?
Yes. Thank you. Well then, can I understand that you do not necessarily have concern now that the present environment, with further inflation, especially in the United States may shift demand from the higher end tires to more inexpensive tires or the result in the changes in the driving business?
Yes, I think that is the current situation as we see it.
Thank you very much.
Thank you. with this, we would like to now conclude the performance presentation of the first quarter of 2022. Thank you very much for your participation today.