Panasonic Holdings Corporation

Let me start the presentation on the consolidated financial results for the first quarter of FY25, fiscal March 2025, ended June 30th, 2024. First, the summary overall sales increase on increased sales in connect and industry as well as currency translation, despite decreased sales in lifestyle, automotive, and energy. By business, industry and energy had positive factors with favorable sales of generative AI-related products. Lifestyle had negative factors with decreased sales of air-to-water heat pumps in Europe and consumer electronics in China. In-vehicle of energy also had negative factors with demand at the Japan factory continuing to decrease. Adjusted operating profit decreased overall due to decreased profit in lifestyle, connect, and energy despite increased profit in automotive and industry. Net profit decreased due mainly to recording of one-time gains in FY24 with the liquidation of Panasonic liquid crystal display. Operating cash flow slightly increased year-on-year, and we aim to generate further operating cash flows. Regarding the US IRA Inflation Reduction Act, we have decided to elect the transferable monetization method for most of the tax credit applicable to FY24. Consequently, the associated cost is recorded in this first quarter. The timing of monetization is scheduled for during or after Q2, which is approximately two years ahead of our initial assumption. This slide describes the impact of the IRRA tax credit on our financial results. For the first quarter, we assume to elect the refundable monetization method, which is the same accounting treatment and items as before. As mentioned earlier, we have decided to elect the transferable method for most of the tax credit applicable to FY24. The details of such impact to the first quarter financial results are shown in the middle of the slide. The impact amount to adjusted operating profit is 16.2 billion yen, which includes the associated cost of 5.5 billion yen. On consolidated basis, sales increased year-on-year by 5% to 2,121.7 billion yen. Sales on constant currency decreased by 2%. Adjusted operating profit decreased to 84.3 billion and operating profit decreased to 83.8 billion yen. Net profit decreased to 70.6 billion yen due mainly to the impact of recording in FY24 of one-time gains with liquidation of Panasonic liquid crystal display as explained earlier. This is the results by segment. In the following slides, you will see the year-on-year variance analysis of sales and operating profit. This is the sales analysis by segment in lifestyle sales decreased due to lower sales of air-to-water in Europe and consumer electronics in China, as well as lower sales for other segment products, despite higher sales of such products as electrical construction materials in India, showcases, and room air conditioners. In automotive, sales decreased due to discontinued production of certain models, sluggish sales in China, and the impact of reduced production by car manufacturers. In connect, sales increased in process automation, capturing the recovery trend of smartphone demand in China, as well as increased sales in Gamba solutions and avionics. In industry, sales increased with increased sales of products for generative AI servers and ICD terminals, despite decreased sales of industrial use relays in Europe and China. In energy, sales in in-vehicle decreased. This is due to the continuing decrease in demand at the Japan factory, as well as price revisions reflecting lower raw material prices in others. Production in North America decreased in the first quarter, adapting to temporary production adjustment, but recovery there is now seen with an increased number of models eligible for IRA tax credit, so favorable sales is expected for Q2 onward. Sales in industrial consumer increased with favorable sales of energy storage systems for data centers driven by degenerative AI market. Within other elimination and adjustments, sales decreased for both entertainment and communication and housing. This is the adjusted operating profit analysis by segment. In lifestyle, profit decreased due to decreased sales of air to water in Europe, consumer electronics in China, and negative impact of exchange rates, despite increased sales of electric construction materials in India, showcases, room air conditioners, and others. In automotive, profit increase due mainly to improved product mix and rationalization, despite increased fixed cost and decreased sales. In Connect, profit decrease due to decreased sales of media entertainment, upfront investments in avionics, and increased strategic investments in Blue Yonder, despite increased sales of process automation and Gemba solutions. In industry, profit increased due to increased sales of products for generative AI servers, fixed cost reduction, and effective yen depreciation. In energy, profit in in-vehicle decreased. This is due to the impact of decreased production in Japan, increased ramp-up costs for the Wakayama and Kansas factories, and recording of the cost of transfer monetization of IR tax credit. Despite improved profitability of the North America factory, due mainly to the rationalization of raw materials. Profit industrial consumer increase due to increased sales of energy storage system for data centers serving the generative AI market.

This shows the result of the lifestyle by divisional company. In living appliances and solutions company, both sales and profit decreased, largely affected by lower sales of consumer electronics in China due to market downturn. In heating and ventilation, AC company profit decreased, largely affected by lower sales of air to water in Europe. This shows our year-on-year operating profit analysis by sector. From the left, decreased profit on lower sales in real terms was a decrease factor of 7.5 billion yen. Higher fixed cost was a decrease factor of 16.9 billion yen. This is due mainly to the investments in energy for the business growth as well as the impact of inflation. Net impact of raw materials and logistic prices was an increased factor of 12.4 billion yen. Defect of the price revisions, rationalization, was also an increased factor of 6 billion yen. Other individual factors, impact of IRA, including the cost of transfer monetization, was negative factor of 6.5 billion yen. The breakdown of Blue Yonder is shown at the bottom right. Adjusted OP on the standalone basis decreased by 2.3 billion yen excluding Forex impact due to increased strategic and synergy investment. On the consolidated basis, Adjusted OP decreased by 2.8 billion yen excluding the impact of strategic and synergy investment increased by 0.6 billion yen. Forex impact was an increase factor of 6.8 billion yen mainly seen in industry and energy as a result adjusted op decreased by 8.5 billion yen operating profit decreased by 6.6 billion yen this shows the cash flows and cash positions on the left of the three areas the shown in blue are the changes the supply excuse me Excuse me. So looking at the cash flows and cash positions on the left, operating cash flows amounted to 228 billion yen, a slight increase year on year. Going forward, we will continue to generate further operating cash flows. On the right, net cash was negative of 451.6 billion yen. So this shows an update of the progress made in initiatives for our three investment areas. Changes from the previous announcement are shown in blue, underlined in blue. There have not been many changes in automotive battery and supply chain management software businesses. In air quality and air conditioning business, As I said earlier, our air-to-water business in Europe is facing persistent market slowdown. The graph at the bottom right shows the air-to-water sales trend since the Q1 of last year in terms of sales amount and the year-on-year change. As shown here, sales decreased significantly in Q3 last year. We have not been able to return to the recovery trend. However, in the long-term perspective, this market is expected to expand. Therefore, in preparation for future market recovery, we will continue our efforts to enhance our competitiveness through collaborations with such companies as Innova and Tado. Finally, I'd like to explain the strategic capital partnership and establishment of a new company regarding Panasonic Connect's projector business and related operations announced today. This transaction is to further grow the projector business The new company will be established based upon the media entertainment business division of Panasonic Connect, in which Oryx Corporation will hold 80% of your shares and Panasonic Connect 20%. Through this partnership, we aim for further growth by leveraging Panasonic Connect's technological expertise and customer base, as well as Oryx investment capability, along with the knowledge and experience cultivated through investments in numerous companies, including manufacturing and large corporations. In addition, this partnership enables continuous R&D investments in hardware technologies, as well as execution of inorganic growth strategies such as formulating global strategic alliances. The transfer price is 118.5 billion yen, which will be allocated to Panasonic Connect's investment area. Sales recorded in FY24 for the business subject to transaction was about 77 billion yen. That concludes my presentation. Thank you for your attention.

The first questioner is Nakano-san from Nihon Keisai Shinbun, Nikkei newspaper. Thank you. Naganawa from Nikkei. I hope you can hear me. Yes, we can. Thank you. My first question. This is related to the news release today or the news item today. The Bank of Japan decided to increase the interest rate, which would most probably impact your policies. regarding the assumed interest rates as well as the investment environment. So wonder if you can comment on any possible changes to your policies going forward, financing policy. My second question is in relation to the projector business. I understand the new company will be established, 80% owned by Oryx, 20% by Panasonic Connect. In the case of automotive transfer, the partnership form was with some of the shares being held by Panasonic. Are you going to continue with this approach going forward with possible transfer of business going forward? Thank you for your questions. First, the Bank of Japan today announced 0.25% rate increase. Regarding this, it's just a matter of timing. In any areas affected by interest rates, I think this is only natural. We are basically financing through yen, and so the yen of financial costs should go up, but in the meantime, Our profitability approach will be enhanced so that we can deal solidly with the interest rates context. As for the real-term interest, it's much lower than the visual rates, and so Interest rates difference between Japan and the U.S. will be carefully looked at. Japan and U.S. account for a large portion of our business, and therefore we'll be looking at the interest rate environment in the two countries for financing and capital allocation. That's the answer to your first question. The second question, the projector business, 20% will be owned by Panasonic. The intent is as I mentioned earlier in my presentation. Panasonic brand will continue to be used for some time. And to assure our customers, we want to be absolutely involved in the business. So there is a similar approach with automotive. We do have a very good relationship with our customer base as well as in terms of expertise. And in the meantime, Oryx has its own strength. So both of our strengths will be leveraged so that the projector business itself can grow going forward. So that is the intent of this arrangement. That is all. Thank you.

Thank you. We move on to the next question. From Bloomberg, we have Furukawa-san. Thank you. This is Furukawa of Bloomberg. Thank you very much. on page two, IRA tax credit and impact on your financial results. And you have chosen to have a transferable monetization. There is additional cost. Why did you use this method? I'd like to know the reason. It is two years earlier to get this capital. But for example, we are right in front of before the presidential election in the United States. So if the Trump becomes the president, there could be some concerns on IRA or you need some cash or capital urgently. So this 5.5 billion yen cost of transfer and monetization, is this for the FY24 tax credit? Is this the point of clarification on that? Thank you for your questions. Initially, or last year, We said that we would elect probably the refundable monetization. And we said that it would probably take a little more than two years. But at the same time, it just happens that we have to think about the counterparties and the economic rationale. I think we can find a good foundation or reason from the economic perspective so based on that we have chosen or elected to do the transferable monetization so as for the ra or our funding situation they are not related to this decision so i think it's reasonable economically to do this transferable monetization so 5.5 additional costs For FY24, we booked most of the tax credit, and it's for the most of the tax credit, roughly speaking. So in terms of yen, I think there are some differences, but about 200 billion yen level. And that would be the account for 5.5, so it's about 3% per year in terms of cost. And right now in the United States, well, it's based upon the U.S. dollars and the interest rate in the United States is like 5.5% in terms of FF interest rate. So when it comes into the company, it's 10% or higher if you manage it or invest it for two years. So it's economically reasonable. So that's why we elected the transferable monetization. Thank you. Thank you very much.

Thank you. We'll move to the next question. From Toyo Keisai, Umegaki-san, please. Umegaki from Toyo Keisai. Thank you. I have two questions. First, on IRA, a follow-up question, if I may. In terms of cash, I understand that the timing of cash income is going to change. For Q2 onward, maybe no impact on the profit and loss, but on cash flow, what will be the impact? And I understand that this monetization transferable is only for the tax credit for FY24. Any changes for the ensuing years? And my second question is relative to the overall financial results. I understand that many of the segments were suffering. Back in May, you shared with us the assumptions, and I suppose that some of the results were worse than what you were assuming. So could you elaborate on that? As for the refundable tax credit, for the second quarter we are expecting the income although it's not certain so what the impact is going to be i'm sorry not the refundable but transferable that is now conventionally For accounting treatment, we have been accounting for that, but in the operating cash flow, it is not incorporated. Whereas this time with the monetization in the operating cash flow, we should see an increase. As for the use within our capital allocation policy, Of course, we can't make distinctions amongst all the cash flow, but since this is the tax credits originating from the U.S. and therefore the Kansas plans as well as the investment for more incentive, this would be the possible use. For FY25, the assumption of the guidance is the refundable tax credit as explained during my presentation as mentioned our capital allocation is not the reason for that there is a counterparty and basically we are assuming refundable tax credit method for FY25. So, we're not electing transferable for the FY25 portion. Now, the overall results, the difference from our assumption, well, by segment, there are ups and downs. Some weakness was observed in such areas as LAS, China appliances, appliances in China. The divisional company in China posted quite a bit of decline in profit impacted by the real estate market situation there. It is having an impact on the durable goods as well, more so than we had anticipated. That is one reason for the softening. As for air to water, on a year-on-year basis, you might be misled, but if you look at page 10 in the investment areas on the lower right-hand side, you can see the bar graphs and the dotted line graph starting from Q1 of last fiscal year. From the second quarter, it declined. And in the Q3 of FY24, and in the fourth quarter as well, we saw a flat or decline. And Q1 saw the biggest gap year on year. But as of now, this was within our assumptions. As for the second half of the fiscal year, we may have to revisit our projection. As for automotive, production in the number of automobiles produced has been announced by our customers, OEMs. Still, we were able to secure a profit, although sales suffered. So we are on par with our projection. As for Connect, for Blue Yonder, as I explained in my presentation, we are making investments, strategic investment for growth going forward. And in avionics, investment is in the area of aircraft, the in-flight connections. and we're making investments there. But overall, it is in line with our projection because we have been projecting investments to be made anyway. And as for industry, the factory automation and Genba AI or the generative AI, for generative AI, Stronger than we had anticipated is our observation for factory automation, FA. We had been expecting a difficult year, and that remains unchanged. So in that sense, for industry, a bit better than our projection. For energy, Number-wise, this week, we have to admit that $5.5 billion, the cost associated with the transfer, that needs to be taken into consideration. But even excluding that, Pena, the plant in North America, saw a decline, slight decline in production volume. As I explained, the customer, production line, is modifying the line. And on a temporary basis, we are adjusting our production volume to accommodate that change. But for Q2 onward, we are expecting to go back to the normal level. and the energy storage system for servers are also included in energy, and that's doing better than we had anticipated. The one-time cost for the associated with the monetization and transfer. That is reflected in the overall figure, but given that the actual performance is stronger, more or less on the net basis, it's neutral. That is all. Hope that was helpful. Yes, thank you.

Next, Sugiyama-san from Yomiuri Shimbun newspaper. Thank you, Sugiyama of Yomiuri Shimbun. Two questions, please. First of all, about the automotive batteries in Nevada plant. you mentioned that and so nevada and suminoe what are the current status and in the future the market trend of the automotive battery what is your view and how do you respond to the changes in the market the second question is about the ira the transfer the third party uh Maybe you can just mention the region or the sector or industry of the third party, please. Well, first of all, about the automotive battery plant, as for the plant in the United States, as I said, there have been some adjustment of the production. So in terms of gigawatt or kilowatt, it's slightly down. Compared with the last year, as for Suminoe model SX and the production situation of those models has been sluggish or plateau. It's trending at that level. So concerning that, the fixed cost reduction is something that we are trying to do and to find the new customer. is also something that we are trying to do so US and Japan both in both countries we will be trying to develop our businesses so as for the automotive battery trend the future trend and our view or globally as you know EV is growing but Compared with the past, the growth rate has slowed down. But you have to look at the different regions. So we are doing business basically in the United States, Pena Papa plant and Suminoe that is in Japan. So that's all. So mostly it is the plant in the United States. So looking at the U.S. market, the growth or growth rate has slowed down or is more moderate than before but steadily the customer the number is growing compared with the last year so our capacity is being increased uh little by little and the kansas startup for uh fi 27 or 28 with the current capacity that would not be sufficient. So we need to manufacture more. So that is our understanding. So in Q2 and onward, For our automotive battery business, it is mainly for U.S. market. So that's our view. As for the IRA-related tax credit transfer, of course, we have to consider the counterparty, but this is the tax credit in the United States. So naturally, the company is the American company. Thank you. Thank you very much.

Next, from Nikkan Kogyo Shinbun, Morishita-san. Morishita from Nikkan Kogyo. Hope you can hear me, yes. Two questions, both related to IRA tax credit. First, the transfer for monetization. Investment to Kansas is what you mentioned. Particularly, what will be the areas that you will be investing in? That's my first question. My second question, very detailed question, I'm afraid, with this transferable. This is for FY24. You said most of the tax credit for FY24 most meaning that some would remain in the form of refundable thank you as mentioned earlier uh first it will come into uh our uh will come in as a cash And since this is the US tax credit, it will be used for the in-vehicle battery business in the US. It's hard to say which particular areas, but the state of Kansas is providing us with various subsidies. but that's not enough to pay for everything needed for our factory. So in line with the intent of IRA, we would like to use in the areas that will contribute to the energy saving. And most of the amount tax credit from FY24, not all, but the most, the needs, demand and supply. Is there a reason for this? Now, there are three forms of tax credit. One is the refundable, which we elected for, which would be around two years before the actual payment is made after It's been filed, a tax filed. The second is the deductible. That is deductible from the income tax to be paid in the U.S. And the third is transferable for monetization. There are three methods. And although the amount is small for the remaining portion, it will

be used for deductible the taxes to be paid by our u.s entities that is all thank you we um out of time for the q a session so we would take just one more question from journalists so last question from journalists Matsumoto-san from Nikkei Tech site. Matsumoto speaking. Thank you very much. So about the future prospect, I have a question. So in the second half of this year, there will be a presidential election in the United States. So if there is a change of administration, how would that impact your business results in your view? Thank you. Well, U.S. election, we are not in a position to make any comments on that. What Trump is saying and what Democrats or the candidate Harris is saying, they are different from each other, and we understand. And this has already passed as a legislation, so the immediate impact would require the revision of the law and it would take time. And IRA is a wide ranging legislation. And if you analyze the state that would benefit, I think many of them are Republican states. So when the election is over, we would respond accordingly. So Kansas, IRA, we made a decision without considering IRA and Pena, Gigafactory is even older in terms of operation. So we are watching very closely, but we would like to take appropriate response or measure. So there will be no immediate impact, we do not think. So thank you. Thank you very much.

So that concludes the Q&A session for journalists. We'll now move to the Q&A session for institutional investors and analysts. Again, we'll only be accepting questions in the Japanese line. We are not accepting questions on the English line. First is Okazaki-san from Nomura Securities. Okazaki from Nomura. My first question is on air quality and air conditioning. While Europe was weak, looks like your revenue sales were increasing, and yet profit, at least the profit margin was going down. So could you elaborate on what happened in air conditioning and air quality in Q1? My second question is on Blue Yonder, 9% growth. You're on here on SAAS, S-A-A-S. The slide says that the demand from the customers is getting sluggish. Could you elaborate on that and what your expectations are for Q2 onward? For air-to-water, air-to-water and air-to-air also was mentioned in the Business Company Investor Day event. which is represented by room air conditioning. For the room air conditioners in China, a bit difficult situation, but in Asia and Japan, given very hot summer days, we are seeing the strong sales, which is pushing up our sales. For air-to-water profit margin, It is high, and the drop on a year-on-year basis, about 40% drop. So that is having a major impact on profit. Through increased sales in air-to-air, the decline and loss in air to water could not be compensated for fully, and that had a net result for Q1, that is. For Blue Yonder, SAS and ARR, for that business, if you can look at the appendix portion of our presentation deck, slide 25, 9% growth. Yes, here. Sauce ARR, annual recurring revenue becoming flatter, you said. As for the sales personnel, training and enhance competitiveness. We have had programs for that, especially starting around the second quarter, we should see the positive effect. The CEO, Duncan, is sharing that information with us, and Higuchi-san, the CEO of Connect, has confirmed that. If you can look at SAAS NRR, Net Revenue Retention, which is related to the investment made by the customers. Most of the contracts are three-year contracts. And so we are now seeing the updating or the replacement of the contracts that were signed before we acquired the company. And we are trying to increase the fraction of SaaS, in other words, a cloud-based, native cloud-based, more transfer. And therefore, the contracts with existing customers are being revisited. on-premise meaning the customers on-premise or customized products. We want to reduce those as much as possible and increase the sauce portion. And so if you can look at the upper right graph, you can see that's happening. And that is the reason why a SaaS ARR may appear to be weak, getting weak, but with the Salesforce enhancement and the product updates being conducted once every six months for sure, and improve the customer satisfaction. those programs will be implemented. I hope that answers your questions. Thank you.

Next, BO Bay Securities, Hirakawa-san, please. Thank you, Hirakawa from BO Bay. Two questions, please. One point of clarification. in-vehicle or automotive batteries at the plant in the United States or in Nevada. So operating utilization rate is down from the beginning of the fiscal year. This was within your expectation, is that right? That was my point of clarification. And it will not happen in the future? Any changes, any changes that you can share with us? The second question is about connect. In Q1, Q1 numbers appear to be a little weak and this year's plan, it's going to be a higher profit, significantly higher. So, I am unable to understand that, for example, in Q2 and onwards, avionics investment fund being reduced or process automation improving, pushing up your profit. So in order to connect to achieve the target, what kind of factors should we consider or background? Thank you for your questions about energy first. Yes, it is within the expectations at the beginning of the fiscal year. Originally, this is something that we deal with and Q1 is weak. So that was already discounted for. So for the full year, IRA, of course, that we show the number. And toward that, we will be progressing. So, as well, the lower production, we responded to that. That's why I said that earlier. So that's about energy. As for Connect, so the upfront investments, in the first half is higher so because of that and also in avionics it's the in-flight communication we have we are making some investments and also some concerning factor which is expected at or the the airplane manufacturers the policy about the production, the US authority is looking into the quality issue. So there are some uncertainties in relation to that. So as Panasonic Connect, as of now, the impact or process automation, we have ended at a deficit. So I think throughout the year, for the whole year, we want to make a good progress. So thank you. I hope that answers your question. Thank you very much.

Next, from SMBC Nikko Securities, Katsura-san, please. Thank you. Katsura from SMBC Nikko. I have two questions. First, I might have missed it because I was not connected for the first part of your presentation, but you did talk about the actual results compared to your projections by segment. Can you tell us the overall picture and your full year guidance remains unchanged. So can you explain the reason why you kept it unchanged? That's my first question. Secondly, related to IRA tax credit cash in, you said about 200 billion yen and the projector business transfer cash in. In light of those two, free cash flow you were assuming negative, it could possibly turn into positive cash flow. So can you comment on that? For the projector business, EV-based, 120 something was mentioned, but what about the amount of cash in to expect? I segment. I did. give you the picture on overall basis, consolidated basis. IRA transfer costs was not incorporated in our guidance. During Q1, actually during the month of July, we agreed with our counterparty that we can talk about that. Impact to PL was not assumed initially. So overall, compared to expected total profit, maybe around 10 billion yen, including that 5.5 billion short, maybe. But through communication with business companies, of course, some are stronger than others. And at current point in time, we don't have anything that is certain. The business companies say that they are doable and we don't doubt what they, we don't have reasons to doubt their projections and therefore the full year guidance remain unchanged. When we announce the second quarter results with a better visibility, we should be able to give you an update for the consolidated basis as well as by segment. That's our expectation. Your second question regarding IRA tax credit, the amount, cash in amount, well 100 billion yen a little short of 100 billion yen which would be a plus to operating cash flow to be recorded during fy25 which is not included in the initial guidance the cash flow for q1 uh 800 billion yen plus operating cash flow recorded last year and a slight increase over that, and that does not include this new element. As for project to business, as is mentioned in our press release, as of April 1st, 2024, That is the case. And therefore, in terms of the cash impact, it will be for FY26, the calendar year ending March 26, not for FY25, the fiscal year ending March 25. In terms of cash. That will be after April 1st. 80 billion yen plus is being assumed for profit. Although you did not ask about that, but I'm sure you're wondering about it. So the profits impact around 100 billion yen profit on sale of business to be recorded in the first quarter of FY26. Probably that is our current projection. That is all. Thank you.

Thank you very much. Next, from Citigroup Securities, we have Mr. Ezawa. Thank you, Ezawa speaking from Citigroup Global Markets. I have two questions. First is about batteries. Earlier, you said that because of the customer, the production has been reduced, but it will recover. But in Q2, if there is a recovery as of July, you have confirmed the recovering trend? Or is that something that you can say also about the batteries, the price revision? 13.5 billion yen lower profit. I think there was an analysis. And what is the impact of the foreign exchange rate? I think that the price impact here, it shows in yen. So 13.5 billion, what is the impact of the foreign exchange? So that's my first question on battery. Well, first of all, from Q2, the recovery, it's not from the beginning of the Q2, but as of now, maybe from August, we will start to see some recovery. So the orders are being accumulated. So from our side, the production We want to make sure that we have a good preparation and the customer, when the batteries are available, they can sell them. That is the situation in the United States. So in Q2, we think that we can confirm the recovery and in Q3 and onwards, I think that we can just offset the adjustment. And 13.5 billion yen, which number is that in Q1 results? Yes. So in Q1, the results, I see the price revision, 13.5. So this price revision, this is negative. Well, this is excluding the Forex impact. So Forex impact is shown on the right-hand side or second from the right. We consolidate that impact. So on the left-hand side, those factors, this is the output of Apple. So on the constant currency basis, we are showing. So the price revision, the Forex impact is not included. Thank you. So 13.5 billion out of that energy here it says negative. How much is that? Well, energy, the price revision and the raw material are included and so through the price revision, it's more than 20 billion negative. Originally, Direct raw material cost increase or reduction has stabilized. And we are seeing that. So lower sales is something that we see, but the raw material price low coming down is also included. So I think that it's comparable. sorry to be uh taking too much long but the project business even announced at the sale of this so as a group the selection and prioritizing so project a business excluding that from the consolidated basis based upon the background other businesses probably it seems that there are many other businesses which also need to be deconsolidated. So are there any outlook for other businesses also being deconsolidated? Well, concerning that question, it has to do with the portfolio management. There are three factors or way of thinking and We have talked about that and whether it's consistent with what we are trying to do and whether we are competitive and whether we are best owner or not. So concerning those three, this projector business, media entertainment, as we said in the press release, with the help of the Oryx or this industry, how to do the entertainment in the virtual world and the software and also the equipment requires a lot of investments. So because of those, from the perspective of being a best owner, we made this decision. So as we mentioned in the past, it just happens that this partnership about this partnership that we announced. As for the portfolio management right now, we are proceeding with the various discussion. And as soon as we are ready to make the announcement, of course, we have to consider the counterparties. So sometimes we are unable to make the announcement right away. So we would like to make steady progress in that direction. Thank you.

Thank you. We are getting close to the end time. Maybe one last question. From Mizuho Securities, Nakane-san. Thank you. This is Nakane. Can you hear me? We're hearing noise. But can you hear me? Yes. Thank you. Two questions. First, FA solution and office automation. Why on why increase sales and profit achieved earlier than expected by looking at the demand situation? Should we expect ups and downs going forward or Can we expect sales to profit to continue to increase, albeit limited? That's my first question. My second question. My first question is for your business and market overall. The second question. The holdings. How do you expect to make sure that what is borne by different business companies could be kept low? It was hardly audible. As for FY solution, industry segment and process automation is connect segment. The situation is slightly different. We need to ask for a solution, especially serve a motor. In China. It's returning. We saw a recovery in Q1. Can we expect this to continue? Can we say that it has bottomed out? No, that is not our observation. the labor saving investments in China, we expect will continue to be rather sluggish. So if a solution in industry, Q1 was strong, was good, but we don't expect it to go down, but we don't expect it to recover, grow strongly either. Regarding process automation, The backlog, order backlog has been declining on a continuous basis, although we're not showing that in any of our slides. At the end of last fiscal year, January, February, March, since around that time, we are seeing demand or orders increasing for what applications? Smartphones mainly. recovery taking place in process automation that is making a contribution. And process automation had a very difficult year last year, but looks like it has hit the bottom or we are seeing signs of hitting the bottom. So that's the difference between the two businesses. And your second question for automotive. true. That's a pretty big business. So as you correctly described, it will be a common issue for the group overall. And we will be implementing the programs we are studying the best way forward. We do consider this to be an issue. And so we will make sure we implement the best methods possible during FY25. That's our current position. I hope that was helpful. Yes, thank you.

Thank you very much. With that, I would like to end the Q1 financial results earnings call for fiscal 25. Thank you very much for your participation.