Panasonic Holdings Corporation

Thank you very much for taking time out of your busy schedule to join us in our online briefing. We will now begin the briefing at Panasonic Holdings Corporation on the financial results for FY25 as well as group management reform. The attendees are as follows. from Panasonic Holdings Corporation, Representative Director, President, Executive Officer, Group CEO, Yuki Kusumi. Executive Officer, Group CFO, Akira Waniko. Lastly, but not the least, Executive Officer, Group CSO, Kazuo Sumida. First, CFO Waniko will go over the financial results followed by presentation by CEO Kusumi on group management reform. After the two presentations, we will accept questions only in Japanese, first from journalists and then from the institutional investors and analysts. The slides. are uploaded on our company website as well. First, our CFO, Juanico. I will present the consolidated financial results of Panasonic Holdings Corporation for fiscal 2025 ended March 31st, 2025 and financial forecast for FY26 ending March 31st, 2026. First, a summary of the results. Both sales and profit exceeded the forecast as of February 4th. and increased year-on-year on the basis of excluding automotive, which was deconsolidated in FY March 25. Overall sales excluding automotive increased with increased sales of Lifestyle, Connect, and Industry. By business, sales of generative AI-related products in Industry and Energy increased in addition to sales of Process Automation, Avionics, and Gamma Solutions in Connect. Adjusted operating profit and operating profit increased at all segments except for automotive. Net profit decreased due mainly to the absence of one-time gains with the liquidation of Panasonic liquid crystal display recorded on FY24. For operating cash flow, the cumulative amount for three years since FY23 was $2.2 trillion, achieving the medium-term target of $2 trillion. Annual dividend is determined at 48 yen per share, with a year-on-year increase of 13 yen compared to the forecast as of August 30th, up 8 yen. The payout ratio is at 30.6%. For FY26 forecast, sales and profit are expected to increase, excluding automotive. However, the impact of U.S. tariffs has not been factored into the forecast. Overall sales are expected to increase, excluding automotive, due to increased sales in energy. Adjusted OP is expected to increase with increased profits in lifestyle, industry, and energy. OP and net profit are expected to decrease due to factoring in restructuring expenses of 130 billion yen. Now details of the results. Sales were $8,458.2 billion, broadly at the same level as the previous year. Excluding automotive, sales increased by 5%. Adjusted OP increased to $467.2 billion and OP increased to $426.5 billion. Net profit decreased to $366.2 billion. Results by segment. The next slide explains the analysis of year-on-year comparison. First, sales analysis by segment. Excluding automotive, overall sales increased due to increased sales of lifestyle, connect, and industry, despite decreased sales of in-vehicle, in-energy, mainly with price revisions reflecting lower raw material prices. The major increase-decrease factors by segment are shown on this slide. Adjusted operating profit analysis by segments increased at all segments except for automotive. As shown in the graph above, adjusted operating profit increased largely in connect industry and industrial consumer of energy. The major factors are as shown on the slide. The slide shows the results of lifestyle segment by divisional company. First, operating profit analysis by factor. From the left, on the basis of excluding automotive, increased sales in real terms was an increased factor of $65 billion. The increase in fixed cost was a decreased factor of $68 billion. This is due mainly to investments in energy for future growth and the impact of inflation. Raw materials and legislative prices had a net positive impact of $50 billion. The effect of price revisions and rationalization was an increased factor of $22.5 billion. The breakdown of blue yonder is shown in the bottom right. Excluding the effect of exchange rates, adjusted OP on a standalone basis increased by $5.8 billion. On a consolidated basis, adjusted OP increased by 3.7 billion, excluding such factors as the impact of strategic investment, adjusted operating profit in real terms increased by 11.3 billion. The effect of exchange rates was an increased factor of $18 billion, mainly in industry and energy. Automotive was a decreased factor of $14 billion due to the impact of deconsolidation. Other income and loss was a decreased factor of $11.7 billion due mainly to expenses related to the share transfer. Operating profit increased by $65.5 billion. Looking at cash flows and cash positions, operating cash flow for FY25 amounted to $796.1 billion and the cumulative amount for the three-year period was $2.2 trillion, achieving the medium-term target of $2 trillion. Net cash was negative $653.2 billion. Consolidated financial forecast. Overall sales is expected to decrease to $7,800 billion and adjusted OP to increase to $500 billion. On the basis of excluding automotive, both sales and adjusted OP are expected to increase year-on-year as a result of factoring in restructuring expenses Operating profit is expected to decrease to $370 billion. Net profit is expected to decrease to $310 billion. EPS expected at $132.790, ROE 6.5%, and EBITDA $800 billion.

This shows the FY26 outlook of the changes in demand by segment based on our assumptions before considering the impact of the U.S. tariffs. Positive changes in demand are written in blue and negative changes in demand are written in red. The major changes we anticipate by segment are as follows. For lifestyle, we expect an increase in demand at each business, mainly for overseas markets. For connect, we expect further growth in demand for supply chain management software. For industry, we expect continuing expansion of the demand for information and communication applications such as GEN AI servers. Or in vehicle energy, we expect shift to directification at certain level to continue. For industrial and consumer energy, we expect further expansion of the demand for data centers. Let me explain the impact of U.S. tariffs. As mentioned at the beginning, the impact of the U.S. tariffs has not been factored into the forecast for FY26. We need to assess the developments going forward. Our sales in the U.S. in FY25 was about ¥1,570 billion, and sales composition by segment is shown on the left. As we have a certain level of the local production capability in North America, we estimate that the overall impact to AOP will likely be less than 1% of the group consolidated cells. In calculating the impact amount, our estimate is based on the assumptions listed on the right. As a general principle, we will address the cost increases through price revisions. In addition, we will work on the optimization of the global supply chain through short to medium to long term measures aiming for minimizing the impact amount. This shows the details of the year-on-year increase and decrease factors of the operating profit forecast for FY26. From the left, higher sales in real terms are expected to become an increase factor of ¥90 billion. The higher fixed costs, it is expected to become a decrease factor of ¥20 billion, which includes ¥35 billion as a effect of restructuring. The net impact of the raw materials and logistic prices is expected to become a decrease factor of ¥10 billion. The effect of the price revision's rationalization is expected to become the increase factor of ¥45.1 billion. For blue yonder, AOP excluding the forex effect is expected to decrease by ¥13 billion. The FXA effect is expected to become the decrease factor of ¥30 billion, mainly seen in industry and energy. In addition, the impact of the deconsolidation is expected to become the decrease factor of ¥29.3 billion. Other income and loss is expected to become the decrease factor of ¥89.3 billion. As restructuring expenses of ¥130 billion are factored in, as a result, operating profit is expected to decrease by ¥56.5 billion. This shows the breakdown of the restructure expenses. Estimate the cost of the ¥130 billion for personnel optimization integration and closure of the sites along with other initiatives. The table below shows the breakdown of restructuring expenses by segment and the effect of the restructuring expected for 26. Group management reform will be commented by our Group CEO Kusumi later on. This shows the fiscal 26 forecast by segment. Major factors are explained on the next slide. This shows our analysis of the sales forecast by segment, excluding the 4S effect. In lifestyle, sales is expected to increase overall, due mainly to the higher sales of the consumer electronics in Asia, despite Japan and China expected to broadly stay at the same level year on year. Air-to-water in Europe and coal chain in North America are turning to an increase, as well as the higher sales of the electrical construction materials for overseas market. In connect, the sales is expected to decrease due to the factoring in the deconcentration impact of the projector business despite the higher sales of the process automation, with the stronger investment demand for AI servers and economic stimulus measures taken in China. In energy sales, it is expected to increase due mainly to higher sales of the products related to ICT terminals and infrastructure. In energy, in vehicle sales, it is likely to increase due to improved productivity at Nevada as well as the start of the operation at Kansas and Wakayama factories. Sales of the industrial consumer is expected to increase due mainly to the sales growth of energy storage systems for data centers. Within other elimination adjustment cells are expected to increase in both entertainment, communication and housing. This is analysis of our AOP by segment in lifestyle. AOP is expected to increase to mainly to the higher profit of electrical construction materials for overseas and showcases in North America. Air-to-water in Europe turning to an increase improved profitability of some products such as room air conditioners as well as the profit of the consumer electronics. In Connect, AOP profit is expected to decrease due to the deconsolidation of the projector business and additional strategic investment for Blue Yonder despite higher sales of process automation. In industry, AOP is expected to increase due mainly to the higher sales of the products related to ICD terminals and infrastructure. In energy, AOP in vehicle is expected to increase due to higher sales and higher IRA tax credit despite higher fixed costs related to the start of operations in Kansas and Wakayama. AOP of industrial consumer is expected to increase due to the higher sales of the energy storage system for data centers despite higher fixed costs for new model development and production expansion. This slide shows the forecast of the lifestyle segment by a divisional company. Next is the shareholder return. The BOD resolved today that the 48 yen dividend will be paid per year up 13 yen year-on-year. The annual dividend increased by 8 yen from the forecast announced on August 30th. The payout ratio relative to net profit is 30.6%. We distribute a stable and continuous dividend. Also, we aim to achieve the enhanced corporate value through the business growth and profit increase.

This is Kusumi speaking. Thank you very much for taking time out of your busy schedule to join us today. I will explain the progress of the group management reform efforts announced on February 4th. In February, we announced that the Panasonic Group would focus on the solutions area with energy and SEM solutions as growth engines while making devices and smart life areas highly profitable as revenue basis. In the solutions area, we will continue to invest for growth and turn them into entities that can consistently achieve double-digit adjusted operating profit margins. In order to realize the group's vision, each business will thoroughly hone the respective competitiveness, increase profitability, and be able to reinvest in growth at a faster pace than their competitors. To that end, we will advance fixed cost restructuring reform and profit improvement as part of the group management reform. We will accelerate business portfolio management to improve profits by 150 billion yen in FY27 compared to FY25, to bring about cumulative profit improvement of 300 billion yen by FY29, and we are resolved to definitely achieve ROE of 10% and adjusted OP margin of 10%. I will now explain the details of the 150 billion yen improvement in FY27. First, as explained by CFO Waniko earlier, the adjusted OP for FY25 was 467.2 billion yen. When the management reform was announced in February, the figure was 450 billion yen. And since then, the effect of improved profits by 17.2 billion yen has been achieved due to increased sales profits from Connect and other factors. Based on this result, although there has been a negative impact from the deconsolidation of automotive and others, we expect the structural reforms being implemented as part of this group management reform to have a positive effect of 122 billion yen. The breakdown is reforms of the headquarters, that is the Holdings Company, PEX, and the Panasonic Corporation's directly controlled divisions, 47 billion yen through consolidation and streamlining of indirect functions and operations and selection and concentration of technology projects. Reforms of the consumer electronics business, 33 billion yen for consolidation and streamlining of sales in direct divisions and expanding global standards. of costs structure that is the china structure reforms of other business divisions 42 billion yen from withdrawal and termination of loss making businesses sites consolidation enclosures efficiency improvement in i.t group wide and consolidation of indirect functions further profit improvement is expected through profit improvement in previous investment areas such as automotive batteries sales growth streamlining and price revisions In deducting the negative impact of investments in focus areas and exchange rates, we expect improved profitability of more than ¥150 billion in FY27 over FY25, aiming for an adjusted OP of more than ¥600 billion. Through this management reform, we will improve profitability and build a structure that is resilient to changes in the environment.