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.

Next, let me talk about the personnel optimization. In order to transform into an organization with higher productivity per employees, we review the operational efficiency thoroughly, mainly in the sales and indirect operations of the group companies. And we designed the necessary number of the organizations and headcount. And we would also proceed with the business terminations and site consolidation and closures of the unprofitable businesses that cannot expect to improve profitability. Through these measures, we will build a lean structure to meet the drastic changes in the business environment and to reduce the headcount by the size mentioned here. The timeline here says that through FY27, but mainly during FY26, we plan to implement the early retirement program for group companies in Japan. The responsibility of not achieving the medium-term business plan resides with me, the group CEO. But in order for us to continue to contribute to the customers and society in 10 years or 20 years, I believe this is my responsibility to try to complete the management reform toward fiscal 29, but the fact that we have no choice but to go through this personnel optimization is extremely regrettable personally, and I would like to take this seriously, and I intend to return about 40% of all my remuneration for fiscal 26. Now, in the redesigning of the organization and number of headcounts and efficiency measures, this will not be just the temporary measures, but we will continue to make efforts and also try to strictly manage the optimum number of the headcount as well as the fixed cost for each company of the group, depending on the changes in the environment. Let me explain the report timeline concerning group management reform. I will be explaining the progress of the management reform. We usually hold the strategic briefing on the individual business in June timeframe, but we would plan to do so in December this year. In January, we would launch the new structure virtually, including the smart life, HVAC, commercial refrigeration, food equipment, electric works, and we would start the official structure in April. Last time, we showed the businesses with the issues as well as businesses to be reconstructed and business conditions to be scrutinized. We would like to report to you the progress, but for the countermeasures that we plan to take for different businesses, when we finalize them, we will communicate them to you. And early fiscal 27, we would look back at this fiscal year and to announce the new mid-term strategy. Once again, in order to realize the sustainable growth for the fiscal 26, we will focus on the management reform and we would make sure that we complete this group management reform to rebuild our business foundation to accelerate the improvement of the corporate value.

Thank you very much for your kind attention. Sugiyama-san from Yomiuri Shimbun, please. Thank you, Sugiyama from Yomiuri Shimbun. I hope you can hear me. Yes, we can. I have a question for Kusumi-san. So once again, The company shifted to the operating company system in FY23 and has been implementing reforms. Why do you see the need for the structural reform at this point in time? And you are planning to reduce the headcount by over 10,000. Why would that be necessary? Thank you for your question. for FY 23 to 25 during this period in reflection, the targets were not achieved. And when we scrutinize, we find that compared to the competitors, that are ahead in implementing reforms. As I mentioned back in February, the SG&A expenses of Panasonic is about 5% higher than our competitors. Inclusive of that factor, we feel that we need to drastically change our fixed cost structure. in order to go back to the growth trajectory with improved profitability. And therefore, the cost reform is a must. Compared to the past, back in FY25, especially in terms of operating margin, it may appear to be doing okay, but compared to our competitors, we find a big gap. uh we are still suffering from low profitability and with this we cannot transition into high growth addressing the workforce uh yes i am really reluctant to do so over the past three years uh the things have worsened to the situation where that became necessary i feel sorry for that but at the same time The management foundation of this company has to be transformed today in order to sustain the growth in 10 years time, 20 years time. So after looking at all options, I have come to this conclusion. And including the management of all relevant companies, we had discussions on what is necessary. And we came to this conclusion. At each operating company, what will be the target profitability and how can we get that was thoroughly discussed. And we have identified that in this particular area, structural reform is needed, whereas for others, everyone is making efforts still compared to our competitors. The labor productivity is not necessarily comparable. So we have identified those factors, and when we put all of them together, we found this figure to be the necessary figure to be achieved. Thank you. Withdrawal from the loss-making companies and consolidation and closure of sites were mentioned as countermeasures. I think so far you have used the term businesses with issues. How are loss-making businesses different from that? And what do you mean specifically is my second question. Thank you for your question. Businesses with issues that we have called them so far was the lower than whack on a business basis. And loss making businesses mean it's worse than that. And therefore, reform is absolutely necessary. These are the businesses that need to be addressed immediately. Now, among them, on a business division basis, we find, one, areas to have opportunities for improvement, while others didn't. And some already have some solutions in sight. So for businesses where ROIC is below WAC, as mentioned earlier, we have set the deadline to come to a conclusion during FY26. For loss-making businesses, the performance is worse than that. And inclusive of the need to overcome the situation, we found that these businesses have less chance of success. So looking at particular product areas or business areas, we are to make decisions. As mentioned by Kusumi-san, the granularity differs from one business to others to terminate or withdraw within each business operating companies. They are businesses that have seen the countermeasures implemented as well. I see. Thank you.

Next is Umegachi-san of Toyo Keizai. Thank you very much for this opportunity. First of all, about energy. Fiscal 26 adjusted OP up by 45.3 billion. IRA is about 16 billion or so. So that is the 29 billion increase in sales. And the Invico and the consumer electronics. What is the breakdown, especially about the in-vehicle, the strategic partner is not doing very well. And in Nevada, Kansas and Wakayama, have you reached an agreement to increase the production? And it's also related to the tariffs. So if you can comment on that. That's my first question. Well, about the impact of the tariffs, they are not factored in to the numbers that we announced today. So, as of now, the major customer's impact, the demand from this customer is not decreasing. So, this is not something that we can foresee. So, based on that, we made this forecast, and Waniko-san can give you some details. Yes. First of all, about the numbers, I think you asked the question, so breakdown. So 29 billion IRA and the industrial and the consumer electronics at the breakdown. In-vehicle is 16 billion and 13 billion for the others. And also you asked about the uncertainty and as Kusumi-san said, you're right that there are a lot of uncertainties. And we need to really discern this together with our customer. But as of now, if you look at our results, for example, for FY25, fourth quarter, the plant in Nevada, we are getting strong inquiry. And we disclosed some of the results. So 10 gigawatt hour, four quarters. So it's almost a full production or full operation. So about the future trend, of course, that's something that we need to finalize together with our customer. I see. So in relation to tariffs, one point of clarification, maybe qualitatively, the 1% you mentioned, so that's less than 78 billion and the rest is being assessed or considered. Yes, that's correct. Thank you. Next question. On page 15 and 16, other income, I think the total is $130 billion and the breakdown life cycle is minus 62 and the remaining is $50 billion. And the size of the negative number, this is similar to the amount of the personnel optimization. So in terms of the size, that would be the lifestyle, and then the holdings and operational excellence, and the industry. Is that the kind of order that you plan to conduct this personnel optimization? Maniko-san will answer to your question. Well, first of all, 130 billion, the breakdown, is it in proportion to the personnel optimization? Yes, of course. The major part is related or proportional. Out of the 130, are there other reforms that we plan to have other than the personnel optimization? but there are segments with higher personnel optimization or smaller. So the major ones, yes, it is related, but it's not exactly based on the ratio to determine the targets for each segment. I see. So for lifestyle, about divisional company and the weight, Is it difficult for you to give us any further comment? So as of now, we do not disclose that. Thank you very much.

Thank you. Next is Gen-san from Denka Shimbun. Gen from Denka Shimbun. I have two questions. First, for Kusumi-san, In February, on February 24th, you announced the management reform. Usually those announcements are made in May. This time it was back in February. You said that the purpose was to accelerate the reform efforts, to engage as many people as possible for the wholesale reform. Now it's been three months since. Reaction from outside and the mindset change and understanding within the company in terms of the effect of the earlier announcement. What do you see as the effect? Thank you for your question, Gensan. On February 4th, we made the announcement, especially the leadership felt the significance of what we're trying to do. And many of the members of the workforce felt that they'd been motivated to take up the challenge. At the same time, given the size of this management reform, many of the employees and their family members I'm sure felt anxious and so I am committed to making a very detailed, careful explanation so as to gain understanding of all the people. With the announcements back in February, I think that had the effects of having the people's understanding of the need for this reform, and they have better ideas as to what needs to be done. If we had waited until May to make this announcement, we would not have been able to see such progress. $130 billion would be the necessary cost. $150 billion is the expected effect. And most of the effects should be felt in the fourth quarter. And if we delay, the effect will be felt later. And therefore, this financial effect was in our mind when we made the announcement in February. I see. Thank you. Another question. At the time of February announcement, there were four businesses with issues, mechatronics and kitchen appliances and others. Maybe you can't give us the details, but can you at least show us the direction? Well, we do not disclose the number by business, but Waniko-san, what can we disclose? Okay, the trend, not the specific figures. For the industrial device, one of the four areas. In FY25 or in FY24, including the China business, we had a very difficult year. In FY25, we saw a year-on-year increase and improvement in mechatronics. In FY25, as was mentioned in my earlier presentation, especially the in-vehicle for Europe and U.S. uh we had a we saw a rather difficult year as for kitchen uh the trend was different between the first half and the second half in fy25 with the day china market suffering. We had a difficult period, but in the second half, we saw improvement. As for the TV business, in terms of the profitability in absolute terms, we saw difficulty, but from FY24 to 25, we saw significant improvement. Let me add some comments. The TV business, on a global scale, this is a rather difficult business structure-wise. Between FY23 to 25, we felt that new approaches are needed. We started the collaboration with partner companies to shift to a light asset structure. We have seen improvement, but we do see a need for further improvement We would like to further promote the win-win structure with our partners, the collaboration. And so we will continue to consider different options. As of today, nothing has been decided yet. One thing I would like you to keep in mind is that as we move into the smart life business in the consumer electronics, especially in Japan, Hong Kong, and Taiwan, TV are very important products. So by supplying very Panasonic-like products, we would prioritize those and yet, proceed with their reform efforts. I see. Thank you.

Next, Sato-san from Nikkei Asia. Thank you. This is Sato speaking of Nikkei Asia. A point that you have already mentioned about the structural reform in the presentation the site integration and closure, and loss-making products were mentioned. And consumer electronics, I think it was separated from that. So basically, you also talked about the best owner. So for those businesses which would be integrated or closed, only the loss-making businesses would go through that process. But other than that, there would be no major closure or restore. In the consumer electronics you mentioned, in the past, I think maybe referring to the first page, or smart life, this is mainly consumer electronics. And we will try to rebuild this business. So as for the direction, as we mentioned previously, This is the domain where we have to have a capability to win in China in order to have a global business. And even in Japanese market, the Japan brand under the Chinese companies are increasing their market share, becoming more capable. But since five years ago, we believe that the business in China needs to be decided in China. And we have been accumulating the capability to be able to compete in China and we want to apply that globally, including Japan. So the mass production, the development and doing that with the Chinese resource or shifting to China and also the personnel optimization is something that we need to do. And through those initiatives for the smart life, we would need to focus on AOP. But as for kitchen, we will also work on such reform, but also to end or to break away from the businesses with issues. So withdraw or the shrinking this domain is not something that we plan to do. Thank you very much. Another question is about batteries. Your strategic customer, the sales, is struggling or is declining. Since the past, Kusumi-san, you said that commitment from the customer is something that you make sure to obtain. But still, I think that the market trend is doing not very well. So as of now, to what extent in the future the sales of the battery can be forecasted? So for example, if it's one year, you have a commitment, so you can talk about this with confidence. But then further in the future, that would be the new contract? Or to what extent? Can you say that the probability of the forecast is good? Well, that's a very, very difficult question to answer, difficult for me to answer, because what we do for the in-vehicle batteries, Japan and United States, we manufacture in both. countries and we will start to supply to Japanese customers. But because of the tariffs, the export of EV from Japan, what would happen to them, we don't know yet. So it's difficult to answer. But as for the major customer, As Waniko-san said, in Q4, the demand did not decrease at all. So this is my personal speculation. But in the United States, the Chinese batteries, using Chinese batteries and manufacturing U.S. EVs, is probably becoming more and more difficult. So that means that our demand is not being pushed down or is not coming under pressure. So that's my speculation. So if that is correct, then in coming year, the demand from the major customer will not go down. That is what I expect. Okay, thank you. It is not reviewing the contract per se. No, as of now, we are not thinking about that or we are not expecting that. Of course, when the surrounding environment changes, what the customer might say, we will depend on that. So we cannot say. Thank you. Thank you, Mr. Sato.

Next, Seisan from Asahi Shimbun, please. Say from us. I hope you can hear me. Yes. Regarding the workforce reduction, I have a question. Sales, 5,000, 5,000, you said. But how many that is for in Japan and overseas? How about the early retirement program? I cannot disclose that because the profitability structure reform is needed. The profitability improvement is needed and we are backcasting from that. I see. The early retirement program accounts for a large proportion. Would that be a fair statement? You know, the general breakdown. Well, general breakdown is very hard to explain because by business operating company, the situation is different and therefore I cannot generalize. I see. Another question. This workforce reduction, this is not related to the U.S. tariff policy, correct? Currently, that impact is not taken into consideration in putting together this plan. I see. Another question, again, on personal reform. 10,000 people altogether. When this is realized, earlier you talked about the fixed cost. of Panasonic being much higher than your competitors. With the reduction of 10,000 headcount, do you think you will be on par with your competitors in terms of fixed cost? Or do you think there's still a gap that would remain? Well, we would like to eliminate this excess capacity Well, you used the term excess, but I would like to consider what the margin or the excess is. Let's say there is some excess incapacity compared to what is needed. When that remains, the productivity improvement will not be achieved. In terms of the workforce, the ideal situation is for the resource to be a bit short of what's necessary because that would translate into productivity improvement efforts. So I'm afraid the current situation is depriving us of the opportunities to make the best of the workforce, which is not good in terms of us being allowed by society to use the workforce. I see. My personal view is I think ideal would be to have a bit of excess because I think that would generate great ideas. What do you think? It depends on the type of work that we're talking about. I think I say, thank you. So, in Panasonic, you think that majority of the work involved is not of not that kind. Well, you're still. busy, but maybe we should quit this so that we'll have time to think of better opportunities. I think that type of mindset is going to be needed for the evolution of the organization. I see. Thank you.

Next, Kuwajima-san of Sankei Shimbun. Kuwajima speaking. So once again, I'd also like to ask about the personnel optimization. You mentioned that you calculated backwards from the improvement that you want to make in terms of profitability. So as a major purpose of this headcount reduction, So, for example, there is too many headcount or elimination necessary, but rather you have this ideal profitable organization, and in order to get there, you have to reduce this number of personnel. Is that what you are saying? As I mentioned, depending on the division and those are considered, or I should say that for each business unit, So smart life, for example, 10%, aiming for the 10%. So where can they find the room for the improvements? They go deeper in there and we try to come up with the cumulative number. So you mentioned 10%, that's just an example. So smart life on page one. AOP ratio of 10% or so and in FY29 we want to achieve that. So what needs to be done right now and where do we need to change? So that's being studied in smart life and this is just an example. Another question about the energy, if I may. Earlier you said that the tariff impact, positive, negative, were mentioned. And until now, you made big investments in North America and built the plants. And to your peers, competitors, this tariff matter, do you think that is working on the positive side? As of now, I really cannot say definitely at this moment because how the tariffs are applied ultimately that would change the situation. In North America, what are manufactured, the vehicles manufactured, and we supply batteries for them. And based on that, it's not disadvantageous, based on that. But the materials for batteries, We are dependent on imports. So to, for example, to move the supply chain to the United States, whether we can do that or not, some of the materials are not produced in the United States. So there could be some impact. But the fact that we are manufacturing in the United States is not disadvantageous. I see. Thank you very much. If I may add... In my presentation on page 13, so you asked a question on that. So as Kusumi-san said, there could be different directions and we cannot say this is advantageous or disadvantageous for us but as I mentioned on the left hand side this is the US sales by business and it's almost 1.6 trillion yen for FY25 so it's 1% of the consolidated sales so About 78 billion is the impact, as I mentioned. And if we do not have any manufacturing in the United States, if this 1.6 trillion is only dependent on the imports, then the size of the impact would be very different. I'm sure that you can easily calculate that. So in each business, some production is done in the United States. We have a local production, local consumption. And the fact that we have that has been helpful for this. So I just wanted to supplement that. Thank you.

Thank you. Next is Ono-san from Nikan Kogyo Shimbun, please. Hope you can hear me. Yes. My first question. As you implement structural reform, withdrawal from loss-making businesses as well as consolidation and closure of sites. As for businesses that you're considering, consolidation, closures, any specific things that are on the list? As I mentioned earlier, we will be making announcements as decisions are being made. I see. Thank you. Another question. The personnel optimization or the workforce reduction of 10,000 people global. Are there any age cohorts that you have in mind? Each operating company is working out the details, so I cannot give you a generalized answer. I see. My personal comment. Some of the students that are younger than me back in university have joined Panasonic and they do have concerns regarding their future. And especially those that have joined Panasonic rather recently Any particular considerations for this younger generation? Well, the younger workforce to be more anxious. I think they will be affected by the articles that you are going to be writing based on this briefing. that may trigger and accelerates and aggravates the anxiety. So I'm hoping that our communication would rather motivate the workforce.

We are running out of time. so we will take a question from one another journalist so it media monoist mishima-san go ahead mishima speaking i hope you can hear me yes I also have a question on the personnel optimization. So this time, 10,000 is the size of optimization. So I'd like to know, is it possible to have a bigger number? Is there a possibility? This time, you talked about the site integration closure, and you mentioned that you would tell us the specifics when you make a decision. If there are any other things which are not on the table, if there are, probably this 10,000 number could increase. So do you have a pretty good idea on those factors? Is it possible for this 10,000 to go up? The major increase is not expected. So as you said, the profitability improvement some of the businesses have difficulty to improve the profitability when you look at the businesses and different regions and we are of course we have conducted the internal discussion to come up with this number so it's not going to increase drastically so I hope you would understand that thank you so the remaining measures will be announced as soon as you make a decision okay thank you very much thank you very much that's all for the Q&A session for journalists thank you very much we'll now move to Q&A session for analysts and investors once again we only have

except questions from the Japanese channel. From Goldman Sachs, Harada-san, please. Thank you, Harada, from Goldman Sachs. Two questions. First, the structural reform, 150 billion yen target. My impression is the workforce reduction has been already decided, but when it comes to the portfolio management, maybe withdraw from some businesses or improve on some, that's still very fluid. That's my impression. 150 billion yen improvement. I think some will come from the execution of what has been decided already while others are still just being considered. So could you give us the breakdown of the two? Thank you for your question. This is the decisions to be made on the ongoing basis. The discussions are still ongoing in some cases, but the overall direction has already been decided on. When we made the announcement back in February, Again, we were afraid that, you know, when details had not yet been decided, and so when we just gave you the general idea, they were reported based on the speculation which caused a lot of anxiety and inconvenience on the part of many stakeholders. So we have to make sure that doesn't happen again. And therefore we will be making announcements only when decisions are made. So to answer your question, maybe 99% already have the direction being decided internally, but still there are discussions ongoing And therefore, we can't give you the details. Otherwise, the effect of the structural reform cannot be calculated unless we have those ideas internally. 150 billion is the figure that we are talking about. And we are considering in the order of around 100 million yen internally. I see. Thank you. My second question, regarding ROE, over 10% is your target, you say. And fixed cost and profitability improvements are two things that are being mentioned. On a balance sheet side, to bring about ROE of 10% or higher, are there any countermeasures that you are considering? I know that for now, Executing structural reform is the priority, but I'm afraid that would not be enough. And so, in terms of capital allocation, are there anything that you can share with at this point in time? The details can be explained by Juanico-san later, but for this fiscal year, the investments for Kansas Factory would have an impact so that the denominator may go up, but the numerator does have the area for improvement. In terms of the investment for FY26, Once the capital allocation sees more latitude, we will be making investments where necessary, and shareholder return measures would also be considered. As for ROE 10%, it's not necessarily a high target. So over 10%, to what extent can we achieve that is what we would like to work on as much as possible. I think you were more interested in the balance sheet. So when it comes to the denominator, anything that we are considering, I think, is where your interest is, including the shareholder return. At this point in time, nothing has been decided, nothing that we can share with you. But for FY26 and onward, to complement what Kusumisan said for FY26. There will be investment for battery production expansion. And in terms of the financial discipline, the cash, the tightness of the cash supply may continue for FY26, but for FY27 onward, of course, with the management before having been implemented, we will move into the phase of reaping the effect of such reforms. And I think that we will have resources for the capital allocation and we will be sharing the details with you once we make the decision. Thank you. Regarding cash for FY27, you said that there is a possibility. Anything that you need to purchase large acquisition, for example, anything that we should watch out for? Well, major, we're not thinking of a three-digit billion yen amount of investments right now. I see. Thank you.

JP Morgan Securities, Ayata-san, please. Thank you. Ayata speaking from JP Morgan. I also have two questions. First is about the structural reform and content. Thank you very much for giving us specifics. What I wanted to ask first is about the 130 billion the content of that. So this fiscal year, 35 billion, I think. So with this, sorry, 150 billion is the effect. The fixed cost reduction effect, can you give us the number? So with only the fixed cost reduction, how much can you achieve? Thank you for your question. Waniko speaking. I'd like to respond. So as for the breakdown under the fixed cost, we do not disclose that. But much of this, the breakdown of the structural reform is not disclosed. But as somebody else asked, the personnel matter is the major part. So top line and the marginal profit or rather than that, I think there will be more which would be impacting the fixed cost side. I see. Thank you. So what I wanted to ask is that on page 14 and 15 of your presentation material on the business results, on page 14, some of those factors for restructuring 35 billion on fixed cost. So that is almost the same as the number on page 15. So I think this is the amount of the fixed cost. What I want to ask is that concerning the fixed cost, there could be some strategic investments and inflation, so 55 billion for this fiscal year. So for next fiscal year, if that is about the same, so for two years, that would be 110 billion yen. So the effect of the structural reform, if it is mostly the fixed cost, if you net this with the 150 billion, there will be only 40 billion remaining. So as you explained, the next fiscal year, more than 600 billion yen. So higher fixed costs are factored in, and you still think that it's possible to reduce by more than $600 billion? If I may, for fiscal 26, the restructural reform, this is only for fiscal 26. And the personnel optimization, the headcount reduction is in other four quarters, and $35 billion is only for one quarter. Thank you. Let me answer. So when you net, does it disappear? No, of course we don't. That is not our intention. If it disappears, that would be contradictory. So we want to make sure that there is an effect of the reform. And aside from that, there will be an increase of the fixed costs as we increase the production. So there are other things and business top line and marginal profit and so forth. We have to, of course, cover them. And we want to make sure that we keep the net impact of the structural reform. If I may, I was also in charge of the business and the tradition of Matsushita is to look at the marginal profit ratio and try to reduce the amount of the fixed cost. And the strategic investment is aside from that. But I think that the amount of the fixed cost and how to control that is very important. We want to make sure we have that in the group. And one of the measures is to reduce the head talent cost or the personnel cost. So that's something that we'll be monitoring. So basically we need to reduce or control the amount of the fixed cost. And as we do so, we want to increase the top line. That would be the basics. So if that is the case, sorry to take a long time, so the effect is 150 billion, but the fixed cost increase, for example, about 60 billion or 70 billion in two years, and that part, through the operational improvements and other measures, you will be offsetting that. Maniko, I'd like to respond. Yes, in Kusumi-san's presentation on page 3, The effect of the structural reform is 122 billion, and this is the structural reform. So for others, as we mentioned, So if the fixed cost increases, we will try to offset that through the investment area as well as the improvement of the profitability. So as a bottom line, we want to, of course, make the positive improvements. I see. The second question, it's a simple question. So for this fiscal year, other income, it's negative 130 billion. So this is almost same as the structural reform cost. The gain on sale of the projector business, I think there was a big chunk of that. So aside from the restructuring cost, are there any positive or negatives to the major ones? Let me respond. Specifically, the major factors, yes, there are some. As you answered, the projector business and the sale of that business and others. But the different deals, they're not yet finalized. Aside from the projector business, there are others. So we need to offset that, positive and negative. And right now we have this total number. And as for the breakdown of the individual businesses, we cannot, we would like to refrain from disclosing the details as of today. Thank you very much.

Thank you. Next from Nomura Securities. Okazaki-san, please. Okazaki from Nomura.

A question on the results. Adjusted operating profits for Q4. What's better than your expectation? Can you explain the reason why? Connect was good and industry energy weaker. So could you give us the breakdown? Juanico would like to take that question. You are correct in terms of the difference in presentation material. Slide four explains that. As you said, difference from previous forecasts, some had better results. So what are the upside? Connect related business was the upside. When we made the previous forecast, that was in the middle of the last fiscal year. And at that time in Connect, we had many concerns. Avionics, for example, At major customer, there was an impact of the strike and quality. And also there was the China market uncertainty in the market. So we anticipated these negatives when we put together the previous forecast. But those negatives did not materialize. and therefore we saw better results than the previous forecast. I see. Thank you. My next question is on Blue Yonder. For FY26, you expect decreased profit. Previously, You were talking about the strategic investment, and I understand there is additional investment need. The sales increase and profits, I'm under the impression that they are suffering. In addition, or aside from the structural reform, you are implementing various measures. Can you give us the update? Again, I'd like to ask Moniko-san to give you the details later, but regarding the SAS booking, doing well compared to the forecast, but the security-related issues that we faced last fiscal year necessitated additional investment for countermeasures. I don't have anything to add, really. What was just mentioned is the major factor. If you can look at slide 30, you can see the specifics. That should give you a better idea. Additional strategic investments, $6.6 billion compared to the last fiscal year is one factor. And as you can see there, strategic investment had been announced. And on a product basis, shifting to the soft space has been the strategy in addition There has been some investment needs that emerged, especially the public cloud transition necessitated additional investments. And that is the backdrop to the profits projected to decrease year on year. So if it's the countermeasures to what you encountered in the last fiscal year, that should be a one-time expenses. And therefore going forward, we should see improvement. Am I correct? Yes. And full utilization of AI, SaaS-based solutions, cloud-based solutions should materialize. The planning part of the supply chain management, the cognitive series would be completed by May. And this is the stronghold of Blue Yonder. So that's expected to translate into positives.

Next, Yasisa from UBS Securities. Yasui-san from UBS Securities. Go ahead. Thank you. This is Yasui. I have two questions. First, in the Kusumi-san's presentation on page 3, the reform and the impact from the reform. So 120 billion structural reform and the investments are about 150 billion. So the 150 billion, probably that's under the influence of the business environment. So you mentioned that you are determined to realize this, but there could be some variabilities. So going beyond 150 billion, if the environment changes, Are there any things that you would be in addition to the ones that are included, if you can talk about that? Well, we did our best to think about this and to come up with the structural reform of 122 billion. And if there is a major change in the environment, what do we need to do? Depending on the environmental change, we have to really respond. So in the area of the investments, for example, in vehicle batteries, and there were some questions that there could be some changes of the customer or a U.S. tariff, what do we do if the changes happen? And I think how to recover from them is something that we have to think about separately. That's all I can say. Okay, thank you very much. My second question, environmental changes and relation to the tariffs, you mentioned that it's very difficult to forecast. And in Waneko-san's presentation, a direct impact in your operation, I think was mentioned. in the calculation so through the discussion and also how the peers are doing indirect impact so to avoid the shrinking of the u.s market maybe that appears to go to asia so probably it's not very positive but uh Are there something that you have discussed as for the concerns or something that you need to prepare for in terms of the environmental changes that could happen? Maniko, responding to your question, yes, of course, they have not yet surfaced. And if you ask us whether we have any concerns, and on page 13, we are showing part of that. So North American business, the portion is largest in energy. As for the energy business, if I may review a little bit, the in-vehicle battery is the major part, and also the generative AI data center business in consumer electronics, we have a business, and that's the breakdown of the energy part. And in direct impact, the biggest concern is that the economy, economic sentiment coming down and the demand declining, and that would lead to the decline of our business. That's the kind of impact that we are concerned about, of course. But those have not yet surfaced, and they're uncertain. So in vehicle side and data center side, which is more concerning, maybe I would say in vehicle batteries. Now, this in-vehicle battery business, recently or until now, we have not seen any changes of the orders of the customer. We manufacture every month, so as we announced the Q4 results, we did not see any changes. Will there be any future changes? Of course, we cannot forecast everything. So this is really the location on the part of the customer. So we do not see that. Our strategy partner, for example, last year in North America, there were some difficulties or the struggle in terms of the vehicle, but our demand is not declining. So on the part of the customer. Aside from local production, they used the package from China to manufacture their vehicles. So they are not under IRA or they could be under the tariffs. So they will face some difficulty. So we comply with all the IRA and also we manufacture in the United States. So maybe we are replacing some of those battery packs and that could be something that is emerging, but we will try to have a close communication with our customer. A follow-up question. Thank you very much for your explanation. about the batteries, about the lifestyle and connect when avionics probably the easiest way to understand. So if you can talk about the higher US exposure. If I may continue. Lifestyle and connect among the lifestyle, the big exposure is the cold chain business centering in North America. So the business space, page 13, once again, this is the large portion. As for Connect, Avionics, yes, is one of the major business in North America and also the PC business is another one. So those are the major ones. So from now on, what do we do about the business flow and negotiation with the customers? They are still ongoing. But as I mentioned, it's largely based upon the local production and USCMA application within the North America. So in terms of the US tariff impact, I think that would be a manageable level based on our top line. Thank you.

Next, from Mizuho Securities, Nakane-san. Nakane-san from Mizuho, please. We cannot hear your voice, so we'll first go to a different questioner. From Citi Group, Global Markets Japan, Ezawa-san. Thank you. From Citi Group, Ezawa is my name. I have two questions. Contingency, economic downturn or a tariff impact I have a related question to that. The structural reform restructuring efforts that you'll be implementing over the next two years, should things don't go as expected, what will be the priority areas for the management? Are we 10% to be achieved no matter what? Would that be the priority? or when economic downturn takes place or tariff having major impact. I think that would be common to all of your competitors, the industry, and therefore you don't have to make specific actions Rather, just execute what's been decided. Perhaps some of your financial performance may not be achieved, but still you are achieving certain results, which would be the case. Thank you for your question. Priorities. To rebuild the management foundation is the purpose. So we are going to execute that no matter what. Still, there could be some unexpected things that could happen. And of course, we would be implementing measures to overcome them. And 150 billion yen profit improvement would like to achieve that no matter what. I see. 150 billion yen realization is most important. I see. My second question, relative to the balance sheets, net debts. I think you have turned into net debt. DE ratio 0.3, I think, has been achieved. But your attention report says that The share buyback will be implemented in a flexible manner, no plans, no specific plans. Now, what are the balance or the structural balance sheets that you want to maintain is the question. any new discipline or standards that you plan to apply? WindingCo will take that question. Net debts, cash position is your speculation. If you look at slide nine, you can see our cash position. As of the end of FY25, net debts Yes, 653.2 billion. But that was the same for the previous year as well, net debt position. So what are the criteria? As we have been saying, net debt EBITDA one time is what we pay attention to. I see. Thank you.

Thank you. Time is almost up, but one person, one question from SMBC Securities, Katsura-san. Thank you, Katsura speaking. One question about energy. On slide 23, 24, and 26, in vehicle, these pages. In Q4, 10 gigawatt, 25, 45 gigawatt hour. So I think it's stronger than what we expected in Kansas on page 24, I think. as of the fiscal 27, full production will start. So it seems that it's stronger than what we heard in the past. It's up to phase one. I think there was an assumption for that. So customer and maybe there were some changes in environment. Because it's a bit different from the general trend of the society or industry. So investment is likely to continue and capex here is about 100 billion and it's not decreasing so much. So when you consider or is that including the phase two and three? And for the industrial, page 26, in a good sense, it's also, it's stronger. So 1.5 times. So I think that it was about 150 billion, 230 billion. So if you can talk about that. One call will respond. Well, first of all, industry and in-vehicle and consumer electronics about the in-vehicle. How can I say this? Earlier, I talked about the recent trend and almost a full operation. That is the level of the demand in Nevada. About Kansas, right now it is still starting up, but as of now, from the customer, there has been no request for delay or postponement. So, I would like to make sure that we respond to the request of the customers and quickly start up and that continues to be the case. So, fiscal 26 as a capex for the startup, there will be some and 26 and onwards, I talked about that, but in fiscal 27 and onwards, cash side will peak out. As for the industry and consumer electronics on page 26, concerning this, the amount is not written, but as you mentioned, those are the sizes, top line that we expect. So very strong demand is what we are seeing. In vehicle and the industry and consumer electronics, I compare those. And there was a question about where do we have a concern. And industry CE, I think that industry and consumer electronics, we are getting the strong demand. Thank you. Thank you very much.

Thank you.

With this, we conclude. the earnings briefing for FY25 and group management reform briefing. Thank you very much for your participation.