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Hello, everyone. Thank you very much for joining Nidec Conference Call. My name is Abe, General Manager, Institutional Sales Department of Mitsubishi UFJ Morgan Stanley Securities. As we start this conference, I'd like to ask you to make sure all of the materials are ready in front of you. If not, please download the file on Nidec's website right now. Please note, this call is being recorded. And the conference materials will be posted on Nidec's website for the coming weeks for those investors and analysts who are not able to join this call.
Now I would like to introduce today's attendees from Nidec Corporation. Mr. Akinobu Samura, Senior Vice President and Chief Financial Officer; and Mr. Masahiro Nagayasu, General Manager, Investor Relations. At first, Mr. Samura will make a presentation. After his presentation, he will move on to a Q&A session. And then Mr. Samura and then Mr. Nagayasu will answer your questions. Mr. Samura now presents, Nidec's fourth quarter fiscal 2022 results, future outlook and then management strategy. Mr. Samura, please go ahead.
Good day, everyone, and welcome to today's conference call. I am Akinobu Samura, Chief Financial Officer of Nidec. I will be your main speaker today and answer your questions with the help of Mr. [Indiscernible] as an interpreter. Please see slide 3 for the fiscal year '22 full year results. As shown on slide 4, net sales stood at a record high of 2 trillion, ¥242.8 billion, a 16.9% higher year-on-year.
Operating profit decreased 41.3% year-on-year to ¥100.1 billion due to structural reform expenses of ¥75.7 billion. profit before income taxes decreased at 29.1% year-on-year to ¥120.2 billion after foreign currency gain of ¥20 billion posted. Profit attributable to owners of current decreased 66.9% year-on-year to ¥45 billion after income tax expenses of ¥75 billion and losses from discontinued operations of ¥2 billion. We will continue WPR-X the drastic reform of profitability and aim to make a reshaped recovery in fiscal year '23.
On slide 5 and 6, you have step charts showing the net sales and operating profit year-on-year and quarter-on-quarter, respectively. As you see slide 5, the operating profit declined roughly corresponds to the structure reform expenses in the period. As you also see slide 6, the total quarter-on-quarter earnings sales declined roughly much exchange related decline. And Q4 operating profit was slightly down before the effect from exchange rate and structural reform expenses. See slide 8. For the fiscal year '23 forecast, we are aiming for the net sales of 2 trillion, ¥200 billion, operating profit of ¥220 billion and operating profit margin of 10%.
Please see slide 10. Out of the private elective Vice President, appointed by the Nomination Committee in March, a new president will be selected by the same nomination committee in April next year. The new president succeeds to the management question with four year term of office as President and another four years as Chairman, when the new president is selected in April next year. The current CEO, Mr. Nagamori, is going to become representative of Nidec Group and Board of Director. While the current COO, Mr. Kobe, will be promoted to CEO of the company.
Please see slide 11. We exceeded net sales of ¥10 billion in fiscal year 1985. And then 12 years later, we hit 10x higher net sales of ¥100 billion sales in fiscal year 1997, 17 years later in fiscal year 2014. We achieved another 10x higher net sales of ¥1 trillion. Last fiscal year, we exceeded ¥2 trillion net sales. And going forward, we are going to increase sales and profit through organic growth and M&A with a focus on expanding markets and aim for net sales of ¥4 trillion in fiscal year 2025. And in fiscal year 2030, that is 16 years after we hit net sales of ¥1 trillion in fiscal year 2014. We are aiming for another 10x higher net sales of ¥10 trillion.
Please see slide 12. Nidec's midterm strategy, Vision 2025 remains unchanged. That is organic sales target of ¥3 trillion, its operating profit margin of 15% and M&A sales target of ¥1 trillion. Please see slide 13. We are aiming to become #1 automotive system company by anticipating the strong demand boosted by case or connected autonomous sharing electric mobility trends. In the area of EV traction models, E-Axle business is expected to become profitable in fiscal year 23 through introduction of Gen 2. For the targeted replacement ratio is over 70% and the cost reduction of Gen 1. In addition to this, the market areas will be shifted from China centric to global and growing Europe and North America. And the growth of sales and profits will be promoted strongly through focus on traction motors only and other components in addition to E-Axel.
In the organic auto area, Nidec will capture increasing demand for electrification and gain further market share for motors for electric power staring and electric brake despite slower growth in the global hot sales. Please see slide 14. The sales of EVs used in Nidec's E-Axle made a rapid growth of 90% in fiscal year '20, 140% in fiscal year '21 and 138% in fiscal year '22 year-on-year, respectively. The number of models have reached 15 with 1 new model added in the March quarter. Please see slide 15.
In China, the share of NEV or new energy vehicles, including both EVs and PHEVs is seeing a permanent increase until calendar year 2025. While in Europe, it will be after calendar year 2025 when a remarkable increase of NEV share is recognized. The global market is expected to see NEV share of 38% in calendar year 2030. Please see slide 16. Automotive index forecasted on E-Axle sales volume of 949,000 units this fiscal year. 71% or 800 to 12,000 units will be Gen 2. 26% will be value engineered Gen 1. We are targeting 10 million unit sales of E-Axles in fiscal year '30 by expanding into the European market, et cetera. I will focus on profitability in fiscal year '23 onwards.
Please see slide 17. We are targeting the EV traction motor business sales of ¥500 billion in fiscal year '25 by supplying instruction motors only and other components in addition to E-Axles. Please see slide 18. The operating profit and operating profit margin dropped significantly in the second half of fiscal year '22 due to a massive luxury from expenses. However, we are preparing for a big shape recovery in fiscal year '23 by building a lower cost structure.
Please see slide 19. With the organic sales target of ¥600 billion in 2025, a small precision motor division is transforming the portfolio by actively working on our first three small automotive motors for electric vehicles and small EV motors that are less than 30 kilowatts and the secondary summer solutions such as cooling ferns and our subsidiary, CCI products and data home appliance motors. In HDD, we continue to focus on data centers and servers to improve the product mix for higher profitability. Please see slide 20. Our small present motor division is prepared for midterm growth while implementing WPR-X for short-term recovery.
Please see slide 21. We are going to realize high growth by capturing main innovation demand created by replacement with high-efficiency motors. The midterm growth drivers in the home appliance area, we offer brushless DC motors for air conditioners, washing machines and dryers, dish washers and compressors for refrigerators to meet the increasing demand for replacement with high system models. In the commercial area, we continue to supply motors used for commercial air conditioners and reward modules used for e-commerce.
In the industrial area, we are focusing on battery energy storage solutions, essential systems and the renewable energy industry and joint venture business with semi-solid lithium ion battery manufacturer. Please see slide 22. We keep pursuing profitability improvement amid continued slowdown in the home appliance and commercial areas. Please see slide 23. We have created a new business unit called machinery and automation starting from fiscal year '23 with Nidec drive technology as a core company. This business need handles reduces press machines and the machine tools. And it's going to drive high growth of machinery business and aiming for net sales of ¥500 billion in fiscal year '25 and ¥1 trillion in fiscal year '30.
As midterm growth drivers, we are aiming to gain a bigger global market share of storing wave gears or collaborative loads. As for planetary gears, we set a new production base for Europe by utilizing unused facilities of needed motors actuators in Spain. In press machines, we are focusing on antiprustic demands and EV demand against the backdrop of a shift from plastic to can bottles and growing demand for EVs, and launching through product lineups from small and high speed to large machines and introducing related equipment. In machine tourists, we are going to expand the product lineups and the market areas with a focus on the Chinese market to seek high growths. A brief slide to call.
The operating profit ratio of other product groups remained stable at a high level of over 15% since fiscal year '21, with exception of the March quarter of fiscal year '22. Please see slide 25. Our subsidiary, Nidec Components, former Nidec copper electronics, completed the acquisition of older shares of middle precisions at the end of the last month. Making middle precisions or our owned subsidiary of Nidec components enables the 2 companies to develop products jointly based on each other technological strengths. And Nidec Group to enhance its product lineup of potential meters and in quarters.
In addition, via this stock acquisition, utilizing Nidec components global sales channels, the 2 companies will deliver products across the world to meet the global demand of sensors. Going forward, Nidec components will make gross investment in middle precisions in a timely and appropriate manner to make the position sensing business a major pillar of the Nidec components businesses. Lastly, on behalf of the entire management team, we would like to thank our customers, partners, suppliers for their support and commitment as well as our shareholders.
At this time, we would like to open up the call for questions.
Thank you very much, Mr. Samura. Now we have come to the Q&A session. Mr. Samura and Mr. Nagayasu will be pleased to answer your questions. Today's Q&A session will be conducted electronically. [Operator Instructions] We will now pause for questions from participants.
So today's first question is from Mr. James Pulsford from Alma. James, please go ahead.
Okay. Thank you very much indeed. You plan I think, your third-generation product from June 24. I wonder, could you comment on what are its characteristics compared to the second generation one? And after the delays and problems you had with customer acceptance for Generation 2, how can you avoid this with Generation 3?
[Foreign Language]
When it comes to Gen 3, it's not that we're trying to avoid making any delays. When it comes to Gen 3, our initial one was to launch the product in fiscal year of 2025. However, considering the current situation in the market, we decided to advance our schedule by a year, and we decided to launch Gen 3 in June of fiscal 2024 instead.
[Foreign Language]
We are going to launch new technology for Gen 3 therefore, there is a possibility, I believe, for us to be subjected to some issues that we may have experienced with Gen 2. However, we will make shift lessons from Gen 2 as we try to advance our schedule by a year when it comes to Gen 3.
Can you make any comment on the characteristics of the third-generation product, for example, in terms of what sort of cost reduction relative to Gen 2 you target. And I think the problem with Generation 2 was that your clients weren't happy to -- weren't keen to make the shift. And I'm wondering how you can -- that was the specific problem. I was wondering how you -- if you could manage that better this time around.
[Foreign Language]
When it comes to cost, if the cost of Gen 1 is 100 , cost of Gen 2 was 65 to 70. And when it comes to Gen 3, the cost is down as much as 50% of Gen 1. Therefore, this is a significant reduction of cost from Gen 1 to Gen 3.
[Foreign Language]
When it comes to the shift from Gen 2 to Gen 3, we will make sure that the timing is right for us to them introduce Gen 3. And at the timing has to be based on our customer period of a switchover from existing model to a new model. So we will base our timing to introduce Gen 3 on our customers' timing to introduce new products.
Great. Thank you. And can I ask a follow-up separate question, which is I gather you plan to launch a fully comprehensive E-Axle package, including various other components like onboard chargers, which was written in your documents. And that's also June '24. And I wonder how much demand do you think there is likely to be for this product rather than just the axles, how positive do you think that's like to be? And can you comment also on the difference in price and potential margins that may be achievable on this greater level of sales?
[Foreign Language]
When it comes to Gen 3, as we try to move up our schedule by year, we will change the size of the software. The mainstream has been passed in 100 kilowatts to 150 kilowatts. But going forward, the mainstream will be 70 kilowatts, and that's the size of our product that we are going to launch. That's what we are going to do going forward.
Sorry, the 70 -- sorry, the 70-kilowatt is going to be your standard Gen 3 products. Is that right? Is that different to the comprehensive E-Axle package that you're going to launch? Is that correct? Or am I misunderstanding?
[Foreign Language]
When it comes to 7-kilowatt product, that will be a value added version of Gen 2 product. Therefore for our -- as part of our immediate actions, we are going to introduce Gen 1 a value added version of Gen 2 and plus we are going to move up our schedule to launch Gen 3 by a year.
Right. So but you didn't -- the answer didn't really cover this point about the likely demand for the more comprehensive E-Axle package which includes DC/DC converter on board charger power distribution unit. And I wonder, could you comment on that? And I'm slightly confused. Is that product that's going to be launched then is that the product that's 70 kilowatt or have we got modeled up?
[Foreign Language]
This is Nagayasu speaking, when it comes to comprehensive model, it's so-called [Indiscernible] model. And when it comes to the original E-Axle model, that's the three in one, which comprises the motor, inverter and the gear. And the three in one model will be comprised of these 3 aforementioned elements plus DC/DC converter onboardn a charger and power distribution unit or PDU. And this can be made into both 70 kilowatts and 100 kilowatts. Therefore, compared with the 3-in-1 model, price will be higher with for 16-1 model. But on a total basis, 16-1 model will be cheaper than it is -- it will be purchased to set in 3-in-1 model plus 3 additional units because the harness will be expensive, which harness will be a component to connect to different sets.
And if you think about the purchasing in 3-in1 model plus additional 3 components, 3 different additional components, it will be cheaper for you to purchase 16-1 model. And what we are trying to do is to hurry up and launch this 16-1model in a hurry, especially for our OEM customers. Currently, especially in China, price competition is growing more and more intensive. Therefore, cost reduction will be very key for us able to survive in the market. So we are trying to see from the perspective of our OEM customers and trying to appeal by saying that the 16-1 model will be a little bit cheaper than to produce 3-in-1 model plus additional 3 different functions components.
Thank you. One very last question, I promise follow-up, which is just the extra 3 components, the PDU onboard charger, DC/DC converter, will they be internally manufactured or procured from outside?
[Foreign Language]
And this is Nagayasu speaking, one again. And some of the components we will be able to produce in-house. But at this moment, it is uncertain as to whether we will be producing everything with some of them in-house or some of them will be outsourced or not, et cetera, when it comes to DC/DC converter and other components. But what we need to do is to develop substrate or control the development of the controllable substrate will be very important. And when it comes to motor generator and inverter and onboard charger, they need to be able to be controlled in one single control unit and a developing development of the semiconductors to handle all of these different companies will be truly critical for us.
Thank you very much.
Thank you. Next question is from Mr. Ito from the ARGA investment. please go ahead.
Okay. Can you hear me?
Yes, yes. Thank you.
Okay. I'll ask my questions in both Japanese and English.
So the first question is your margin for this year looks kind of conservative. Is that just being conservative or are there macro headwinds that make this a pretty appropriate target?
Interpreted So the second question is, we hear news that there's a lot of inventory in the Chinese car market. So I just wanted to understand the situation of customers, customers of your E-Axles and how that is being incorporated into your budget? Thank you.
[Foreign Language]
When it comes to this operating profit forecast, if you exclude restructuring costs, our E-Axle business will be turning into the profit from this fiscal year. And we are going to continue to launch a restructuring meta. Therefore, this current recently released operating profit figure is our forecast as of at this moment. And that's the -- that's my comment on operating profit percentage.
[Foreign Language]
When it comes to my response to your second question, it is true that there are some goods on inventory due to the customer situations. But we are going to make sure to take a very close communications with our customers to handle the current situation when it comes to inventory. That's our current plan.
Thank you. Can I just ask one more question? Your long-term operating profit margin target is 15%. Is that something that is already being achieved by your new Gen 3 product pricing or 15% margin requires the situation where your production volume is much higher and you are no longer spending a lot of money on CapEx -- so that's my -- sorry, my additional question.
[Foreign Language]
I believe you are talking about E-Axle traction motor business. When it comes to our traction motor business, as far as '23 fiscal year is concerned, we are trying to get into a positive territory profit-wise. And in 2024 fiscal year, we are going to try to improve our operational profit ratio to close to 10% or so, so that we can achieve our target operating profit ratio in fiscal 2025. And when it comes to moving up our schedule of launching Gen 3 by a year, we are trying to reduce costs very drastically. And depending on the competition, we need to check to see if there is any need of adjustments in selling prices. That's what we need to be closely monitored based in our market situation.
Thank you. Next question is Mr. Ramsai Neelam from the State Street. Neelam Ramsai, go ahead.
Yes. Can you hear me fine?
Yes. Thank you much.
Yes. So my question, just taking a step back and looking at our -- the volume guidance. So some time back, we have a volume guidance of $2.5 million. And currently, we are standing at 1.5 million units for 2025. So I understand we are focusing more on profitability over the volume growth. But I want to understand what are the other factors that are impacting the guidance, maybe competition and the overall EV market conditions that might have changed over the course of last two years. Can you give some color on that?
[Foreign Language]
First, this is Nagayasu speaking. First of all, I would like to mention that we are going to start generating profit in this fiscal year. And as we try to do so, we are going to suppress to minimize the shipment of Gen 1 model, which is not so profitable model. And as we do so, we are trying to increase our in-house production volume, and there will be harsher compression. That's what we are going to experience in this fiscal year.
[Foreign Language]
And secondly, as we try to start to generating this fiscal year, we are trying to suppress our R&D cost as much as possible. To do so, we need to, in principle, start developing unprofitable models, and that is affecting our 2025 figures.
[Foreign Language]
And thirdly, our customers' demands are shifting some especially shifting from E-Axle to the motors alone when it comes to especially our Chinese customers. And therefore, when it comes to 2025 and 2026 fiscal years, some customers will be wanting not our E-Axle but our motors alone and is affecting our figures for 2025 and '26 fiscal year.
Thank you. That's helpful. Just to follow up on that. So I think we were initially planning for 6 million units of capacity for 2025 with around ¥500 billion cumulative CapEx over a few years. So with the change in the guidance now, there are any changes in planned capacity as well as the CapEx guidance?
[Foreign Language]
When it comes to capacity, our priority is to secure land and buildings in order to secure volumes and some adjustments mechanically will be done right before everything starts, therefore, that's going to remain unchanged for our priority remains to be to secure plants and land for our production.
Is there an official guidance you can give like in terms of capacity in terms of units or the CapEx amount you're planning to do over the last -- the next few years?
Repeat that.
Can you give any official numbers on like how much capacity you're going to expand over the next few years and also the CapEx?
[Foreign Language]
Are you referring it to traction-related CEOs?
Yes, tractions. E-Axle low traction related. Yes.
[Foreign Language]
When it comes to the investment, we have already started investing in advance in the scale of 5 billion or even $10 billion. Therefore, when it comes to 2023 fiscal year, we are trying to minimize making of any huge investment.
Okay. Okay, thank you. And last question probably from the slide #14 and 18. I see the E-Axle unit volume grew 70% roughly in Q4 year-on-year, but the revenue has declined 50% roughly. So is that -- there is some accounting gap between the volume shipped and the revenue booked? I think you can give us some color on that?
[Foreign Language]
When it comes to Slide 18, the biggest factor is the restructuring cost which is a huge amount.
I'm talking about...
[Foreign Language]
But if you exclude the restructuring cost, our profitability is actually improving.
I'm talking about the revenue part. So in Q4, I think the difference between the blue line and yellow line, which I think is the E-Axle revenue, so which has declined 50% from Q4 2021, whereas the volumes have increased. I'm asking whether there is any accounting gap between the shipments and the revenue booking.
[Foreign Language]
When it comes to January to March period, as stated a few minutes ago, we have stopped shipment of unprofitable models.
[Foreign Language]
Therefore, compared with the previous quarter or the quarter before the previous quarter or the same quarter from the prior fiscal year, the volume has declined.
[Foreign Language]
And the budget on the slide 14 is about the shipment volume of models that are containing the Nidec E-Axle models. But when it comes to our E-Axles, our share has declined by 50%.
[Foreign Language]
And specifically, taking when it comes to during this specific period, you can see the figure on the number of models over here. When it comes to the models figure, it's 118,000 units compared with that, our E-Axle figure is 57,000 units. So it's approximately 50% of the models figures.
Okay, thank you.
Ramsai thank you. Next question is from Mr. John Ho from Janchor Investment.
Good evening. Thank you for making time. Hallo, can you hear me?
Yes. Thank you.
Okay. Excellent. Hi, good evening. Thank you very much for spending time in the evening. I want to start my first question on looking back at the fourth quarter, which area is better and which areas is worse than our original budget if we exclude restructuring costs. Can you talk a bit about the macro environment impacting the various businesses? And give us some color on how those impact might be playing out this coming year? Thank you.
[Foreign Language]
When it comes to the guidance, I believe, our small precision motor business has been was -- performance was lower compared with the other businesses that we do. This is chiefly due to the decline in the sales of HDD motors and other products in this area.
[Foreign Language]
And another area that performed worse than expected was the area of machinery, and it is chiefly due to product mix. And the semiconductor testing equipment was replaced by pressing machines and the reducers and these were not as performing as they should have.
[Foreign Language]
And whereas the -- our appliance, commercial and industrial businesses did better than expected in our guidance. And this is mainly due to -- especially industrial business, where our volume was increased and the profitability also increased.
[Foreign Language]
And therefore, when it comes to volume, our SBM business is in a struggle pretty much. And in order to -- and our appliance, commercial and industrial businesses and especially our industrial product businesses is going to cover the loss made by the SBM business. I believe this trend is going to continue throughout this fiscal year.
Right. Thank you. Within ASM appliance, commercial and industrial, you mentioned industrial is doing really well. It's appliance and commercial similar to what we expect? Or are we seeing some headwinds on appliances, things like consumer appliances or other commercial applications?
[Foreign Language]
When it comes to home appliances in fiscal 2021, it was performing very good. But after that, there was some struggle in the housing businesses, for example. And we are not really sure if well, when we will be able to get rid of go past this current struggle with home appliance business at this moment. But our current projection is that this will continue to the second half of this fiscal year. But I believe once again, this industrial business, especially in the area of infrastructure, for example, are performing very good. Therefore, they will be able to recover the loss--that they will be able to cover the loss that is currently being incurred by our home appliance area.
I see. Thank you. I also wanted to ask some follow-up questions on E-Axle. On age 16 of our presentation, we give the market a forecast of our increase in the E-Axle volume. In particular, I think we are seeing that it will grow from 339,000 units to 949,000 units. It sounds like most of it is going to be in this AMEC division. And I assume most of that is out of China. Can you tell us if that's true, can you tell us who are the new OEMs and maybe the new models that we have won the contracts that will make up that increase of about nearly $500,000 in the AMEC or China division. Thank you.
[Foreign Language]
And this is something that I've stated before. But when it comes to China, our existing customers have been GAC and Geely. But in addition to these 2 major customers, now we have Shanghai, [Indiscernible] And so it doesn't have to be necessarily E-Axles that they are wanting from us. But when it comes to volume from these customers are increasing.
[Foreign Language]
And secondly, when it comes to these 2 existing major customers of ours, which are GAC and Geely, they are launching new models. And when it comes to GAC, they are launching new models from fiscal 2023. And when it comes to the Geely, they are trying to launch a so-called smart EVs, not just for -- not for the Chinese market but for European markets. And it is due to these new models that these customers' volumes are increasing.
[Foreign Language]
Now when it comes to GAC and Geely, they are -- their primary focus is on the mid-market. And from the fiscal 2021 and 2022, volume has increased by 180% or 2.8x of what it used to be.
[Foreign Language]
And when it comes to the Chinese market, especially Tesla and not as are in the price war. And this price war is very especially intensive in the high-end market of $40,000 or more. But therefore, when it comes to meet to market, which is not really part of this price war, I believe mid market has still has some potential for further growth in the future. But when it comes to one of our major customers, Geely, they are planning to introduce models in the calendar year 2023, and that's how aggressive they are when it comes to planning new models.
So they are going to double the total output from CY 2022 to '23 -- so the point is the mid-market is still growing, and the premium market is not growing, but the both market is in China, so that's going to be the acting. But the case is that if you're looking at these GAC and Geely, they are still bullish and they are planning a very high growth of the volume in calendar '23 and '24.
I see. This is very... Yes, this is very, very good. Thank you Nagayasu. So the increase of about 500,000 is mostly new models of Geely, it sounds like. Is that correct?
Yes. The most Geely and GAC, okay, Geely is doubling and GAC has not yet, but so they might be looking at 180%, but the GAC is planning a numeral which is going to require our Gen 2.
I see. I see. I see. Yes. Yes. This is very clear. Can I also ask, have we seen our local competitors in China, reducing the market share or maybe exiting the industry? Are we seeing that yet? Or they are still in the market competing?
[Foreign Language]
Our forecast prediction is that before the component of manufacturers which are offering the market, I believe OEM manufacturers are more likely to withdraw from the market.
I see. What about the outsourcing or in-sourcing trend? I know some even Geely have been both in-sourcing and outsourcing. Are they keeping that strategy at the moment? Or are they outsourcing more back to us? Do you have a read on this insourcing and outsourcing trend?
Okay. So the time is already running out. So I'm just going to be answering 2 things. Okay. Number one, the volume is increasing, as you saw on the bar chart. So there, that means that the multi-sourcing from single sourcing to dual sourcing or triple sourcing, that's very natural in any type of the market in the manufacturing market. Second, if they are really going to win this pricing war, they need the low-cost component, low-cost E-Axle. So the question is whether they can make their own E-Axle, which is lower cost than us, that we do believe that they cannot. Is that fine?
Thank you. Thank you Nagayasu.
Yeah, John Ho, thank you very much. Yes, unfortunately time is running out. So we would like to conclude this conference call. I would like to appreciate your participation today. And should you have any questions, please do not hesitate to contact either corporation or your sales representatives at Mitsubishi UFJ Morgan Stanley Securities. Thank you very much, and have a good day. You may now disconnect this line. Thank you.