Panasonic Holdings Corporation

the results for the third quarter of the fiscal year ending March 2025. First major change in our financial statements. We recently announced the completion of the share transfer of Panasonic Automotive Systems, PAS. As a result, in December 2024, PAS has become a company under the equity method and is excluded from the scope of consolidation. Accordingly, the figures of businesses that are not subject to the share transfer of PAS are recorded in other eliminations and adjustments, and figures for both FY25 and FY24 are reclassified. On this basis, I will give the summary of the Q3 results. Both sales and profit increased year-on-year, excluding automotive, despite decreased sales due to the deconsolidation of automotive. Looking at sales of each business, major positive factors included favorable sales of generative AI-related products in industry and energy, in lifestyle, air to water, after experiencing tough conditions turned to a year-on-year increase, and sales of electrical construction materials were favorable. Adjusted operating profit increased, with higher profit in lifestyle, connect, industry, and energy despite the impact of deconsolidation of automotive. Operating profit also increased. Net profit decreased due mainly to an increase in income taxes. For the full year forecast, even with the deconsolidation of automotive, the group-wide profit forecast remains unchanged. Only the sales forecast is revised downward. By segment, the forecast of industry and energy is revised upward. Generative AI-related businesses continue to be favorable in Q3, and their high growth is expected to continue for the full year. Now the details of the Q3 results. From this Q3, the consolidated results are shown on the basis of excluding the impact of the automotive deconsolidation. Sales decreased year-on-year by 1% to 2,152.6 billion yen, excluding automotive sales increased by 5%. AOP increased to 150.2 billion and OP increased to 132.3 billion. Net profit decreased to 99.5 billion yen. results by segment. In the next slides, I will explain the year-on-year variance analysis for sales and operating profit. First, sales variance analysis by segment. Lifestyle sales increased overall, driven by HVAC, electrical construction materials, and consumer electronics. Sales of air-to-water in Europe, after experiencing tough conditions, turned to a year-on-year increase, due mainly to improved distribution inventories. Sales of consumer electronics in China recovered to the same level year-on-year, including the effect of subsidies. The decreased sales of automotive is due to the impact of deconsolidation. Connect sales increased with increased sales of process automation, capturing demand for ICG industry in China, as well as increased sales of Blue Yonder, Gemba Solutions, and Avionics. Industry sales increased with increased sales of products for information and communication applications, such as generative AI servers, despite decreased sales of automotive industrial use relays due to market slowdown, mainly in Euro. In energy, sales of in-vehicle decreased due to price revisions reflecting lower raw material prices. Sales increased at the Nevada factory reaching 10 gigawatt hour with the added equipment starting operations and increased customer demand. Sales of industrial consumer increased mainly in energy storage systems for data centers with continued growth of generative AI market. Within other eliminations and adjustments, sales increased in both entertainment and communication and housing. Next, AOP variance analysis by segment. Lifestyle profit increase due mainly to increased sales of HVAC, electrical construction materials, and consumer electronics and through rationalization. The decreased profit of automotive is due to deconsolidation. Connect profit increase due to increased sales of Blue Yonder with contributions from favorable sales of Sauce and improved marginal profit ratio. Other factors include increased sales of process automation, GEMBA solutions, and avionics. Industry profit increased due to increased sales of products for information and communication applications such as generative AI servers, rationalization, and price revisions despite decreased sales of automotive industrial use relays due to market slowdown as well as price hikes in raw materials. In energy, profit of in-vehicle increased due mainly to increased sales volume at the Nevada factory with improved productivity and other factors, as well as the increased IRA tax credit, despite increased upfront costs for Kansas and Wakayama factories. Profit of industrial consumer increased due mainly to increased sales of energy storage systems for data centers, improvement in material market prices, and material rationalization. This slide shows the results of lifestyle by divisional company. Sales and profit increased in last HVAC and electric work company. In cold chain solutions company, both sales and profit decreased. This slide shows our year-on-year operating profit variance analysis. From the left, on the basis of excluding automotive, increased sales in real terms was positive $22 billion. The increase in fixed costs was negative $16.6 billion, due mainly in investments in energy for future growth and the impact of inflation. The net impact of raw materials and logistics prices was positive $14.4 billion. The price revisions and rationalization also had a positive impact of $6.5 billion. The breakdown of blue yonder is shown on the bottom right. On the constant currency basis, AOP on standalone basis increased by $6.1 billion. On a consolidated basis, AOP increased by $5.8 billion. Excluding the impact of strategic investment and synergy investment, AOP increased by 6.7 billion. Exchange rates had a positive impact of 2.8 billion, mainly seen in industry and energy. The year-on-year increase in AOP totaled 34.9 billion yen on the basis of excluding automotive. In addition, automotive was a decrease factor of 10.8 billion due to the impact of deconsolidation. Other income and loss had a negative impact of 19.3 billion due mainly to the expenses related to the share transfer. Operating profit as a result increased by 4.8 billion.

This shows the cash flows and cash positions. On the left, cumulative operating cash flows up to Q3 amounted to 702.7 billion yen, with an increase year-on-year, including the monetization of the IRA tax credit through transferable methods in Q2. Consequently, in Q3, we achieved the current medium-term target for the cumulative operating cash flow, which is 2 trillion yen from fiscal 23. Going forward, we will continue to generate further operating cash flows. On the right, net cash was a negative of 462.4 billion yen. Next, I'd like to explain the consolidated financial forecast for fiscal 25. This shows the consolidated financial forecast. As shown in the middle, labelled revised amount, only the sales forecast is revised downward by ¥300 billion as a result of deconsolidation of automotive, the profit forecast remains unchanged. The full-year forecast by segment in terms of profit, while the deconsolidation of the automotive will have an impact, the group-wide forecast remains unchanged with the upward revision of industry and energy. This shows the factors for revised sales and AOP by segment. As for AOP, the forecasts for industry and energy are revised upward. In industry, higher product sales for information and communication applications. In energy, improved productivity in North America in vehicle and increased sales of energy storage systems for data centers and industrial and consumer. The impact of the deconsolidation of the automotive is shown on the bottom left of the table. This shows the 4-year forecast of lifestyle by divisional company, which is unchanged from the forecast of October 31st. This shows our analysis of the forecast for AOP by factor in comparison to the forecast as of May 2024. The upper graph shows the forecast as of May 9th. and the lower graph shows the forecast today. AOP forecast of 450 billion yen remains unchanged, as improvements in other factors are expected to offset the impact of deconsolidation of automotive. Please note that the figures for automotive in the upper graph are prior to the reclassification related to the deconsolidation. The changes before and after the reclassification are shown on page 42. Next, let me explain the status of our Gen AI-related businesses as we did in the previous meeting. Both in industry and energy continue to have favorable results in Q3, and we expect high growth to continue for the 4-year. For energy, the 4-year forecast is expected to exceed the upward revision of Q2. Finally, the shareholder returns. For the annual dividend, we forecast ¥40 per share, with a year-on-year increase of ¥5 as announced on August 30. The payout ratio relative to the 4-year net profit forecast is expected at 30%. We will distribute stable and continuous dividends. Also, we aim to achieve the enhanced corporate value through business growth and profit increase. That concludes my presentation. Thank you for your attention.

Thank you for your kind attention. The materials for group management reform have been uploaded on our websites. Please go to the IR page. Next, our CEO, Kusumi, will talk about the group management reform. Good evening. Thank you for taking time out of your busy schedule to join us today. CFO Umeda has gone over the results for Q3. And what I'd like to do is to look back on the developments in the current medium term, as well as to talk about the group management reform that we will now embark on. First, the summary. Other than cumulative operating cash flow, we are not likely to achieve the KGI's. This is because of the three factors, priority investment area, enhancement of competitiveness, and the fixed cost structure. And as a result, each company faces the problem in both competitive as profitability and indirect cost. The purpose of the new Management reform is to ensure that we will continue to contribute to society over the next 10 years, 20 years, helping people to live better lives. We felt the need to fundamentally change the management to embark on the fundamental management reform. We will have to address the issues that we have seen Under the new operating company structure, we need to rebuild the organizational structure and cost structure to remove the things that hamper the competitiveness enhancement. And for that, we will concentrate, we will optimize our resources in an optimally globe-wide way. First, I'd like to talk about the revision of our group-wide fixed cost structure. We will dramatically reduce the corporate and indirect costs led by the holdings as well as operational excellence company and at each divisional and operating companies. We will utilize generative AI and DX to improve the productivity. We will improve the efficiency and we will pursue creating the synergy on the group-wide basis. We will embark on the employment structure reform as well. We are going to change the overall structure of the fixed cost. Second is the enhancement of the competitiveness. We will be addressing the businesses with low ROIC as well as those that are not likely to recover the competitiveness. We will consider the possibilities of withdrawal or the best ownership to address those issues. The third area is the priority investment areas. We will revisit the areas that have been identified. in the current medium term plan as the investment areas. We will now concentrate on the solutions area. I will elaborate on this later. Through this, we are to reform the fixed cost structure as well as to improve the profitability. FY March 2026 should be the initial year of the next medium term, but we regard this fiscal year as the year to have the foundation.