This is the management message that we want to communicate to you by announcing that we will acquire our own shares. That is all. Thank you.
Operator: Thank you very much, Mr. Nakamura. Next one, Yomiuri Newspaper, Mr. Nakamura, please.
Unidentified Analyst: Can you hear me?
Unidentified Company Representative: Yes.
Unidentified Analyst: Nakamura from Yomiuri Newspaper. I have two questions. One about semiconductor procurement status now. The production situation is very well good now. But do you think that semiconductor supply situations have been recovered fully before the COVID? And the second question was, you said about pre-tax profits. And you talked about the precious metal prices. And what is the current status of those prices, including forex situation, too? You mentioned the reduction of the precious metal prices.
Unidentified Company Representative: So, in terms of the semiconductor supply procurements this year or from the February, March periods, in 2023, the situation have been on the recovery, we’ve done a lot of measures and those actions are getting some fruitful results. And nowadays, it is not a concern at all. Once in a while, we might face some situation. However, recovered now. And now, we have a full-scale production in place after a long while until the second quarter or so. In the U.S. or the places like that, there were a shortage of the laborers at the supplier and equipment problem because the equipments were not running for quite a long time. And we had some situations like that. However, those issues have been resolved.
And in the North America, full-scale production continues after a long stretch of not having one, but we have a stable condition. And in terms of the precious metal conditions, actually those utilized mufflers or catalysts in the mufflers, that is to purify the air emissions. A few years ago, the precious metal prices were soaring really. But in the last several years, prices have fallen, because in China, they have progressed the electrification. That may be the main reason for the precious metal prices dropping down. And in addition to that, in the electrification efforts, not just automobiles, but when the economy is booming, precious metals, steel, copper, resin, those material prices are to fluctuate a bit. We have to, of course, look at forex currency rates as well.
We would like to keep watching out all those factors as we go. Thank you very much. Thank you, Mr. Nakamura.
Operator: Next question, please. Toyo Keizai magazine, Mr. Yokohama, please.
Unidentified Analyst: Can you hear me? This is Yokohama from Toyo Keizai. Thank you. I also have two questions. The first is about the full year forecast. Well, until the third quarter, I think that you are making good progress about the third quarter. I think the fourth quarter will be showing a slowdown in your operating profit increase. What’s the upside and downside? You know, automobile and motorcycle power products, I think the situation will be different, but can you share with us your perspective toward the full year forecast? Can I continue the second question about China? Well, currently I think the unit volume is increasing, as you said, but at the last presentation, I think that there is a severe competition. There’s a discount race in China. I understand that it’s a situation, but how do you see the Chinese market environment? I think Mr. Fujimura talked about the need to cut production capacity. So, what are your thoughts on China?
Eiji Fujimura: Mr. Yokoyama, thank you very much. In terms of the numbers, the first quarter outlook, rather than talking about that, I wasn’t asked to talk about this. I would like to give an overview of the financial results of this time. Well, this third quarter, the October-December, three-month actual, we had a JPY 380 billion operating profit. And the breakdown of the automobile and the motorcycle is JPY 160 billion each. So, it’s RS 20.1%. It’s the highest in terms of the quarterly result of motorcycle business. I think the situation is that — well, this is continuation of what I explained. And there’s a downturn in Vietnam and also there is a greater scrutiny in terms of the quality, but in Brazil and Turkey and Europe included, the unit volume is increasing or the profitability is increasing in Asia likewise, though there are areas where we see a decrease in unit volume.
I think that we have a proper pricing in place and other efforts, which is trying to show results. So, for automobile, last fiscal year, there was the semiconductor issue. And so, this was a major challenge. But in North America it’s a plus, 120,000 units. This is mostly hybrid. Second quarter, there was a logistics disruption, but this has been cleared already. And thanks to this, we have a dealer inventory of 30 days. So, this is the standard that we have in place. So, 330 days. So, we reached this standard now. And in Japan, it’s a plus 20,000. This is because of the semiconductor, the unit sales is in a positive range. Now China, it’s plus. And this leads me into the second question, but it is a positive. But the third quarter last year, the third quarter, the inland area, there was a lockdown, and there was impact of semiconductor supply.
So, it’s a quite low number in China. Therefore, year-on-year, it is a positive because of this. So, there is this a shift towards that and also, the reduction in ICE market and I think that this situation continues to be tough for us. We have to use the incentives to compete against the others. This is a situation we have put in place. As for the automobile profit, despite these conditions, the JPY 160 billion, amongst this number, we have a realignment of a supplier, it’s related to Yachiyo. So, there was the impairment of the subsidiary, about JPY 50 billion or should I say JPY 45 billion, that is Yachiyo impairment, plus the warranty cost of JPY 50 billion. So, close to JPY 100 billion. Factors are included here, but we still have this JPY 160 billion.
And it’s ROS 4.6%, and [indiscernible] JPY 460 billion. So, it’s 4x the profit from compared to last year. And despite this tough condition and the volume increase in North America and the hybrid success and pricing, these factors are all combined together. And despite this one-time impairment and warranty cost issue, we have ROS 6% level. And so, I think that this is a situation that we currently have, JPY 600 billion. And in nine months, operating profit, JPY 1 trillion, free cash flow, JPY 930 billion. So, we are in a situation where we are having a record high. And in December, as an outlook have JPY 1,250 trillion, ROS 6.2%. Excluding the one-time events, if we have JPY 135 currency exchange, we think that we have average ROS level of 6.9% and by ’25, we are aiming toward 7% of the operating margin.
But in May, when we close our books or next fiscal year, when we announce our forecast for next fiscal year, I think we will be able to declare that have achieved our goal two years earlier. The fourth quarter, as for the decline, I’m just finally coming to your answer,. The fourth quarter compared to the past three quarters, you say that we will see a decline. Well, would you explain about the details here. Especially the suppliers, we have made cost adjustments plus in America, U.S. The wage increase, from January, we began this. And so, there’s that cost plus. It’s always the case, but we have a fluctuation of a quarterly numbers because of the costs and also R&D. These are going down in the fourth quarter. Please, Mr. Kawaguchi.
Masao Kawaguchi: Mr. Yokoyama, thank you for the question. The third quarter versus fourth quarter, the fluctuation in the profit, as Fujiwara has already explained. Yes, just as well to give you some numbers. As was said, the third quarter, just the three months, we have some JPY 380 billion operating profit. And the full year forecast if you deduct this, according to our current plan for the fourth quarter, we are expecting some JPY 170 billion. So, there is a drop of some JPY 200 billion. But the reason is because the assumption is that foreign exchange. So, this is different. In the fourth quarter, we are estimating JPY 140 against the dollar. The third quarter, the average was about JPY 146 against the dollar. And therefore because of this difference, according to our plan, the premises was JPY 140.
So there, is minus 80 billion or so. Meanwhile, the third quarter, as was said, the supplier, there was impairment of some JPY 50 billion. Therefore, this part will be knitted. And what we based is the fourth quarter, skewed a cost and also, R&D expense. Well, there will be the model development timing and the various activities that are underway which will influence this. But we think that the expenses are more skewed toward the fourth quarter. And this is about JPY 120 billion, compared three to four, it’s a negative in the fourth quarter. And as I explained, the cost part, again, in North America mainly, the wage increase and labor cost and inflation impact. Cost is on the rise. And these things also has aggravated the cost situation plus some seasonality with the suppliers.
And we have some adjustments to be made. And as these all combine to cost, it’s about an JPY 80 billion, third to fourth quarter, negative. So, about the upside and downside that you asked. Upside, it’s the foreign exchange. It’s JPY 147. Well, it’s difficult to predict the foreign exchange rate, but if it continues until March, then according to a capital plan, it will be on the upside. Meanwhile, the downside, North America economy and also the impact of the earthquake, these will be the downside factors. But through our sales activities, we want to minimize the downside as much as possible. That is all from me. Thank you.
