Panasonic Holdings Corporation

Thank you very much. I'd like to first of all present the Q2 financial results for fiscal 2026. This is a summary of results. Sales and profit decreased year-on-year in Q2. Overall sales were down due to lower sales in lifestyle and deconsolidation of automotive, despite higher sales of connect, industry, and energy. Looking at each business, sales of generative AI-related businesses in industry and energy increased, in addition to higher sales of process automation in Connect. However, the sales of the in-vehicle in energy decreased. Overall, Ajacero P decreased due largely to the lower profit in energy, resulting from the significant deterioration in in-vehicle despite higher profit in lifestyle-connected industry. Net profit decreased due to lower AOP and the deterioration in other income and loss. Operating cash flows decreased year-on-year due to the absence of monetization of IRA tax credit through transferable method in fiscal 25. For the full year, the sales forecast is revised downward due to a major revision in vehicle. As I said, OP is expected to continue its year-on-year increase despite the downward revision of 30 billion yen, factoring in the impact of U.S. tariffs, which was not factored into the initial forecast of May 9. By segment, Connect and industry forecasts are revised upwards, while energy forecasts is revised downward. The forecast of the annual dividend is 40 yen per share and remains unchanged from August 29. Next, the details of the Q2 results. Consolidated financial results are shown here. Sales decreased year-on-year by 10% to ¥1,923.8 billion. However, the sales excluding automotive increased by 2% year-on-year. Adjusted OP decreased to 90.4 billion yen and operating profit decreased to 78.1 billion yen. Net profit decreased to 70.9 billion yen. This shows the results by segment. In the next slides, I will explain the analysis of year-on-year comparison for sales and adjusted OP. First, the sales analysis by segment. In lifestyle, sales decreased due mainly to lower sales of consumer electronics and HVAC, despite higher sales of electrical construction materials, mainly in Japan. In connect, the sales increased due to higher sales of process automation, capturing the demand for ICT, along with the higher sales of avionics, mobile solutions, and blue yonda. In industry, sales increased driven by continued demand growth, for information and communication applications such as generative AI servers. In energy, overall sales increased due to the following factors. For in-vehicle, sales decreased due mainly to the lower sales volume at Japan factory and price revisions reflecting lower material prices. Despite the higher sales volume in North American factories, for industrial and consumer sales increased due to continued favorable sales of the energy storage system for data centers, with expansion of the generative AI market. Within other elimination adjustment, entertainment communication sales decreased due to deterioration in the North American market conditions while sales in housing increased.

This slide shows our adjusted operating profit analysis by segment. While adjusted operating profit increased in lifestyle, connect, and industry, adjusted operating profit in energy decreased due mainly to decreased profit in in-vehicle with the impact of US tariffs, increased upfront costs for ramping up Kansas and Wakayama factories, and other factors. These factors resulted in overall decreased adjusted operating profit. This shows the results of lifestyle segment by divisional company. Adjusted operating profit increased in living appliances and solutions company with enhanced business structure and kitchen appliances. Also adjusted operating profit increase in electric works company with higher sales of electric construction materials in Japan. This shows our year-on-year operating profit analysis by factor. From the left, increased sales in real terms was an increase factor of $5 billion. Increase in fixed costs was a decrease factor of $12.6 billion. but here we also note the positive effect of restructuring of 3.1 billion yen. Net impact of raw materials and logistics prices was an increased factor of $6.8 billion. The net impact of price revisions, rationalizations, and others was a negative of $6.1 billion. Deconsolidation of automotive was a negative factor of $6.7 billion. Impact of US tariffs was a negative factor of $14.8 billion. As a result, adjusted operating profit decreased by $31.8 billion. Operating profit decreased by $54.1 billion due to deterioration in other income and loss. This slide shows the situation of cash flows and cash positions. On the left, operating cash flow for the first half decreased to 298.4 billion due to the absence of monetization of IRA tax credits through transferable method in fiscal 25. On the right, net cash was a negative of 829 billion yen. will explain the consolidated financial forecast for fiscal 26 from the next slide this slide shows the consolidated financial forecast for fiscal 26. the forecast of sales is revised downward by 100 billion due mainly to low sales in energy forecast of adjusted operating profit is revised down by factoring in the impact of u.s tariffs estimated at 30 billion yen which was not factored in at the beginning of the year or in May. The forecast for operating profit is revised down 50 billion due to mainly a deterioration in other income loss by 20 billion resulting from increased restructuring expenses. The forecast of profit before income tax is revised down by 65 billion due to deterioration in financial income. As a result, a forecast of net profits down 50 billion yen. This shows four-year forecast by segment. Connecting industry revised upward, energy revised downward.

This shows the forecast of the lifestyle segment by divisional company. AOP forecast in electric works company is revised upward by 4 billion yen. This is the forecast revision factors by segment. In lifestyle, adjusted OP is expected to remain unchanged, factoring in uncertainties in external environment despite upward revision for electrical construction materials with steady sales in Japan. In CONNECT, both sales and profit are revised upward due to the higher sales of avionics supported by stronger order as demand in aviation industry recovers. In industry, both sales and profit are revised upward due to the higher sales of products in electronic devices and electronic materials driven by continued growth in demand for Gen-AI servers. In energy, overall sales and profit are revised downward. This is due to the downward revision on for in-vehicle, which is affected by the EV market slowdown in the US, and also the US tariffs, despite upward revision of industrial consumer with higher sales of energy storage systems. This shows our analysis of the AOP, profit forecast by factor. The upper graph shows the initial forecast, and lower one is revised one. And as shown in the middle, the far right, operating profit is revised downward by 50 from by 50 billion yen from 370 to 320 billion yen. Downward revision consists of the adjusted OP by 30 billion yen and deterioration of other income and loss by 20 billion. Adjusted OP is revised downward due to the impact of US tariffs of 30 billion yen which is now factored in to this revised forecast. Although the effect of the 30 billion yen sales decline in invico is offset by other factors. Deterioration in other income and loss of 20 billion yen is due to the increase in ongoing restructuring expenses. Next, impact of US tariffs. At the beginning of fiscal 26, we estimated the potential impact to be less than 1% of the consolidated sales. However, we did not factor this into our forecast as further assessment was still underway. Since then, through the efforts in price path through and supply chain improvement, the estimated impact has been reduced to 30 billion yen, so this is now reflected to our revised forecast. As shown in the lower table, energy segments automotive battery business is primary area affected. For short-term perspective, we will continue working to mitigate the impact through the further price path through, and from the medium to long term, we aim to further reduce the US status impact by reviewing supply chain and other countermeasures. This is an update on the structural reform currently underway, including the restructuring expenses recorded. Restructuring expenses are now expected to reach a total of 150 billion yen, and ¥20 billion higher than our initial forecast due to the larger-than-expected sales of the personnel optimization in industry. Accordingly, expected effect in industry is revised upward by ¥2 billion and group-wide ¥37 billion. So this slide onwards, I will explain each individual business, starting with the in-vehicle, in-energy. The graph on the left shows the sales volume trend in North American battery factory. Due to the factors, including the rapid changes in U.S. tariff prices and termination of IRA30D, the short-term EV demand has slowed down. As a result, we revised our four-year forecast downward. In addition to this, we factored in the impact of ¥24 billion from U.S. tariffs. leading to 62 billion yen downward revision in Asia Zero P for fiscal 26. In response to the deteriorating EV market conditions, we are working to expand the new customer base in US and continue to enhance the product competitiveness for strategic customer. Meanwhile, we are examining the effective use of our automotive battery production capacity in Japan as well as production at Kansas factory to meet the rapidly growing demand for data centers. Next is an update on energy storage system for industrial consumer. The chart on the left shows the sales trajectory for our data center-related business. At the beginning of fiscal 26, we forecasted 1.5 times year-on-year growth. However, due to the exceptionally strong customer demand, we now expect the sales to increase by 1.7 times compared to fiscal 25. As a result, as shown here, we revised the four-year AOP upward by 9 billion yen from the initial forecast. Driven by aggressive investment in data centers by hyperscalers, we anticipate a rapid expansion in demand exceeding our initial assumptions. To respond swiftly to this expansion, we are accelerating the optimization of our production capacity for rechargeable battery operations overall, including automotive applications in a short time. In addition, we will enhance the development capabilities for next-generation solutions to address the challenges the customers are facing, such as the voltage fluctuations moving to maintain our leading market share to achieve sustainable business growth.