In 2023, we embarked on the initial phase of “SHIFT 2025 and Beyond,” shifting our focus from addressing the impacts of COVID-19 to the next phase of growth. As such, we actively pursued business transformation and made bold investments in growth areas, achieving strong results particularly in our Americas, EMEA, and Asia Pacific Businesses. However, we faced unforeseen challenges due to changing sentiments in the Chinese economy coupled with consumer backlash against Japanese products following the treated water release, which negatively affected our business results. These setbacks were not merely a temporary issue. They highlighted long-standing problems about our revenue structure and portfolio amidst the evolving business environments.

In the Board of Directors meetings, we exhaustively discussed about fundamental enhancements in brand equity and transformation of the business models for our Japan and China Businesses as well as short-term issues to be addressed in achieving earnings recovery. The discussions about the positioning of our China Business and overall growth strategy were particularly profound.

While we have addressed the immediate issues, on hindsight, we could have worked on the reforms with a sense of urgency earlier than 2023, particularly with respect to the delayed recovery of the Japanese market and the changes in the Chinese market. Business environments can change overnight, so a robust revenue structure and readiness for agile decision-making are essential to withstand whatever comes our way.

Shiseido has its vision for 2030 to become a “Personal Beauty Wellness Company.” To realize this vision, it’s imperative to reform our revenue structure, decisively select and concentrate on specific brands and products, and conduct reviews on our regional portfolios. This is a pivotal moment for Shiseido as we are working to transform our business model.

At its core lies the commitment to delivering value that meets consumer expectations, harnessing our strength in R&D to drive innovation. However, we must be cautious not to become overly fixated on technology or our own perspective. We must have a deep understanding of our consumers, extending beyond direct interactions through our products to broadening our scope to encompass their behaviors, values, and lives. It’s essential for us to evolve into a company capable of leading agile transformation.

In terms of corporate culture, we are passionate about challenging the status quo. CEO Uotani has made significant changes, and there has been substantial improvement compared to eight years ago, when I joined as an external director. However, when facing difficult situations, we sometimes see silos between departments and hesitation to voice frank opinions. While this is an issue that will take time to solve, it affects the speed and efficiency of change, and I’m committed to focusing on ways to improve.

During our discussion today, we’ve repeatedly emphasized the need to boost our sense of urgency. To do so, Shiseido has decided to make a transition into a company with three statutory committees. This change is designed to further clarify the roles of management oversight and execution, allowing the execution team to focus on strategic implementation and quick adaptation to changes. Meanwhile, the board identifies medium-to-long-term issues and formulates management strategies.

Succession is also a critical point in governance. The transition of our management structure runs parallel with transformation of our business model and corporate culture, and we’re discussing this in tandem with empowering our executives and increasing human capital.

As external directors, we are committed to prioritizing direct dialogue with shareholders and investors. It is particularly important for us to gain deep understanding of what the capital markets expectations are and feed it back into our management. We have been receiving updates on investor meetings from CEO Uotani, COO Fujiwara and the Investor Relations Department, but we hope to engage in direct exchanges of views with the capital markets through various formats and settings moving forward.

Exactly. As you have mentioned several times, I also want Shiseido to become a company that can bring transformation in a positive way. To that end, let’s build a corporate culture and organizational structure bound by trustful relationships between the board and execution. Thank you very much for this great opportunity to speak with you today.