Panasonic Holdings Corporation

Hello, this is Juanico. Thank you very much for joining us. I will now give the overview of the fiscal 2026 first quarter financial results. First, the summary. Sales increased in all segments, but overall sales decreased with the deconsolidation of automotive. By business, sales of generative AI-related businesses in industry and energy increased, in addition to increased sales of process automation and connect. Adjusted operating profit increased overall due to increased profit in all segments, offsetting the impact of U.S. tariffs and the automotive deconsolidation. Net profit increased due to an improvement in income taxes, despite a deterioration in non-operating income and loss. Operating cash flows decreased year-on-year due mainly to the automotive deconsolidation. fiscal year March 2026 full year forecast, the group-wide forecast remains unchanged. The impact of U.S. tariffs from FY March 26 Q2 onward has not been factored into the current forecast since the situation remains fluid and requires more time for careful assessment given the recent major developments. The forecasts by segment are revised for CONNECT and other elimination and adjustments. Now the details. For the consolidated financial results, sales decreased year-on-year by 11% to $1,896.7 billion, while sales excluding automotive increased by 2% year-on-year. Adjusted operating profit increased to $91.5 billion, operating profit increased to $86.9 billion, and net profit increased to $71.5 billion. These are results by segment. Next few slides provide the year-on-year variance analysis for sales in adjusted operating profit. First, the sales analysis. First, the sales analysis by segment. In lifestyle, sales increased on steady sales of consumer electronics, HVAC, and the electrical construction materials in Japan. In connect, sales increased on increased sales of process automation, capturing demand for ICT and EVs in China, along with increased sales of mobile solutions, Gemba Solutions, and Blue Yonder. In industry, increased sales were driven by increased demand for information and communication applications such as generative AI servers. In energy, sales of in-vehicle decreased due mainly to the price revisions reflecting lower raw material prices despite increased sales volume at North America factory. Sales of industrial consumer increased on continued favorable sales of energy storage systems for data centers with the expansion of the generative AI market. Within other elimination adjustments, sales of both entertainment, communication, and housing increased. Adjusted operating profit analysis by segment, adjusted LP increase, offsetting the deconsolidation of automotive. As shown in the graph above, adjusted LP increased at all segments, particularly lifestyle and energy. Major increase-decrease factors by segment are described on this slide. These are the results of the lifestyle segment by divisional company. Profit increased in living appliances and solution, heating and ventilation AC, and electric work companies. Cold chain solutions company posted lower sales and profit due mainly to the non-recurrence of special demand observed in the previous year. This is the year-on-year OP analysis by Factor. From the left, on the basis of excluding automotive, increased sales in real terms, positive $30 billion, increase in fixed costs, negative $12 billion, including the positive effect of restructuring of $2.1 billion. The net impact of raw materials and logistics prices, positive 14.7 billion. Price revisions and rationalization, positive 2.8 billion. Impact of U.S. tariffs, negative 5.8 billion, mainly affecting Energy and Connect. Blue yonder, negative 6.5 billion on constant currency due primarily to increase in strategic investments such as security enhancement. The effect of exchange rates, negative 6.4 billion, mainly affecting industry and energy. The deconsolidation impact of automotive, negative $9.6 billion. And other income and loss, negative $4.1 billion, including restructuring expenses of $2.2 billion, resulting in the operating profit increase of $3.1 billion.

This shows the cash flows and cash positions. On the left, operating cash flow for Q1 was 180.3 billion yen, with a year-on-year decrease due mainly to the deconsolidation of automotive. On the right, net cash was negative of 745.7 billion yen. Next, the consolidated financial forecast for fiscal 2026. It shows the consolidated financial forecast for fiscal 26. The group-wide forecast remains unchanged from May 9. Since an updated assessment of the evolving situation is still needed, the impact of the US tariffs from Q2 onward has not been factored into the full-year forecast. as was the case on May 9. Next slide, I will explain the outlook of the changes in business environment and the forecast by segment. This shows the fiscal 26 business environment by segment. Changes in the business environment from the previous outlook of May 9 are written in gray. I will explain two key points. First, regarding the impact of U.S. tariffs on our businesses, Connect and Energy are relatively more affected than others. In particular, the impact is expected for in-flight entertainment systems under Avionics in Connect, battery materials and cell under in-vehicle in Energy, and energy storage systems under industrial consumer in Energy. Second, regarding the business environment for energy for in-vehicle, our view remains unchanged about the electrification of vehicles at certain level over the long term. However, we expect a slowdown in the EV market for short term due mainly to the U.S. tariff policies and termination of IRA 30D tax credit. Contrary to this, for industrial consumer, the demand for energy storage system for data center is growing more than anticipated from the outlook of the May. With large-scale investment related to generative AI, I will explain the automotive battery business in North America on the next slide. This shows the trends in automotive battery sales at the factories in North America since Q4 of fiscal 23. Looking back at fiscal 25, our sales volume continued to grow each quarter, driven by our customers' appreciation for the advantages of our locally produced IRA-compliant battery sales. Following this trend, we forecasted annual sales volume of 46 GWh for fiscal 26 in the forecast of May, giving consideration to customers' demand. However, following the rapid changes in the US tariff policies, along with the announced termination of IRA 30D tax credit for EV purchases, among others, Some slowdown in demand seems unavoidable from a short-term perspective. Regarding the outlook of the sales volume, fiscal 26, we are now considering whether to revise our forecast due mainly to the policy changes. However, we expect the sales volume to surpass that of fiscal 25, despite slower growth. Now, despite the announced termination of the IRA30T tax credit for EV purchases, 45X tax credit for battery cells and module manufacturers will continue and our locally produced IRA compliant battery cells retain competitive edge. Also, we introduced the new cell technologies providing 5% higher capacity than the current cell at the new Kansas factory and these are leading to the strong demand from our customers. Going forward, we will continue to pursue a business policy that aligns our growth with market and customer trends. This shows the four-year forecast by segment. In CONNECT, we expected to finalize the strategic capital alliance agreement for the projector and related operation when we announced the fiscal 26 four-year forecast on May 9. However, the agreement was mutually terminated and the forecast of the CONNECT has been revised accordingly. For energy, as explained in the previous slide, we anticipate a slowdown in EV market in North America. On the other hand, the energy storage system for data centers, we are receiving much larger orders than expected. Recently, there have been significant developments in US tariff policy, so we need a certain amount of time to quantify and assess the impact. Therefore, we have not yet revised the forecast for energy at this stage. This shows the forecast of lifestyle segment by divisional company. The forecast remains unchanged from the May 9th forecast. That concludes my presentation. Thank you for your attention.

From Bloomberg, Furukawa-san, please. Thank you. This is Furukawa from Bloomberg. Am I on? Yes. Thank you. About the in-vehicle batteries. I'm looking at slide 22, and you're talking about the Kansas factory, 32 gigawatts. And this timing is in effect being postponed compared to the previous announcement. And I would like to know the reason why. And also, can you give us a timeline going forward? And also the Fakayama plants, the description exactly the same for 4680 from three months ago. Can you give us the updates on that? Thank you for your questions. First, regarding the EV battery, 30 gigawatts. Why is it postponed is your first question. I did explain that partially in my presentation, so I might be repeating myself, but due to various factors, the EV market, particularly in North America, is expected to slow down compared to our original forecast. We want to make sure we are in line with the demand as we ramp up our production facility so based on the very same policy that we've been adhering to this timing has been pushed back when would be. When will we achieve the full production is your second question. If I could repeat myself, we are currently vetting the demand. So we cannot say exactly when at this point in time, but it will be later than originally expected. Your second question regarding Wakayama factory, as for the ramp up of 4680 cell production, we are ready technically. But regarding the specification confirmation with their customers and quality confirmation, we are still in preparation. But we will be starting the shipment on schedule.