Panasonic Holdings Corporation

I will present the consolidated financial results of Panasonic Holdings Corporation for fiscal 2026 ended March 31st, 2026, and the forecast for the fiscal year ending March 2027. We are presenting our financial results and forecast based on the new reportable segments starting from this earnings briefing following the new group structure as of January 20th. First, the highlights. Sales and profit decreased year-on-year. Sales decreased overall, despite higher sales of Kinect, Electric Works, Energy, and Industry, due to lower sales of HVAC and CC, and Smart Life, as well as the deconsolidation of automotive. Adjusted operating profit decreased overall despite increased profit of Connect, Electric Works, HVAC and CCN Industry due to lower profit resulting from one-ton expenses related to past in-vehicle manufacturing process issues of energy and the automotive deconsolidation. Operating profit and net profit decreased due to recording of restructuring expenses for the group management reform. Operating cash flow decreased year-on-year due to the non-recurrence of monetization of IRA tax credit through transferable method in FY25 and restructuring expenses. As for the FY27 forecast, overall sales are expected to decrease due mainly to the impact of deconsolidation and the effect of exchange rates. All sales in real terms are to increase in all segments. AOP in all segments is to increase due mainly to higher sales of AI infrastructure-related businesses and the effect of restructuring. Overall, AOP is expected to increase even after factoring in a negative impact of $30 billion, reflecting risks from a deteriorating situation in the Middle East and the further memory price hikes. Annual dividends for FY26 are determined at 40 yen per share and forecasted to be 54 yen for FY27, up 14 yen. Now the details. Sales decreased year-on-year by 5% to $8,048.7 billion, while sales excluding automotive were up by 3%. AOP decreased to $447.4 billion, while AOP excluding automotive increased year-on-year. OP decreased to $236.4 billion, and net profit decreased to $189.5 billion. This slide shows results by segment. Next few slides describe the analysis of year-on-year comparison for sales in AOP. First, sales analysis by segment. Overall sales decreased despite higher sales of Connect Electric Works Energy and Industry due to lower sales of HVAC and CC and Smart Life and the automotive deconsolidation. The major factors by segment are shown on the slide. This is AOP analysis by segment. AOP decreased overall despite increased profit in Connect Electric Works, HVAC, and CC in industry due to lower profit in energy and smart life and the automotive deconsolidation. In energy, AOP decreased overall due mainly to significantly lower profit in in-vehicle, reflecting the impact of the U.S. tariffs and the recording of one-time expenses related to past manufacturing process issues. This, despite increased profit in industrial consumer, driven by higher sales of energy storage systems for data centers. In smart life, AOP decreased due largely to restructuring expenses related to strengthening of the TV business partnership. Next, OP analysis by sector. From the left, increased sales in real terms, positive $65 billion, fixed costs, negative $13 billion, but this includes positive $45 billion from restructuring. Raw materials and logistics prices, negative 9 billion. Effective price revisions and re-rationalization, positive 45 billion. Blue yonder, negative 10.3 billion due to an increase in strategic investments. Exchange rates, negative 2 billion, mainly seen in energy and industry. The automotive deconsolidation, negative $24.5 billion. U.S. tariffs, negative $31 billion. And recording the one-time expenses related to past manufacturing process issues, negative $40 billion. As a result, AOP was down $19.8 billion. OP decreased by $190.1 billion due mainly to restructuring and portfolio management-related expenses in other income and losses totaling $170.3 billion. An update on progress with the group management reform. The structural reform in FY26 was implemented as originally planned, and the scale of personnel optimization exceeded the original plan of 10,000 employees, ultimately reaching 12,000. Restructuring expenses in FY26 amounted to $174.5 billion, while the positive effect was $45 billion. The group-wide effect of the restructuring for the two years covering FY26 and FY27 is expected to be $145 billion. Status of cash flows and cash positions. On the left, operating cash flow for FY26 decreased to ¥624.3 billion year-on-year due to the non-recurrence of monetization of IRA tax credit through a transferable method in FY25 and restructuring expenses. On the right, net cash was outflow of ¥756.7 billion. Next, forecast for FY27. This is the consolidated forecast for FY27. Overall sales are expected to decrease to 7.6 trillion yen and AOP is expected to increase to 600 billion yen. OP is to increase to 550 billion and net profit is to increase to 420 billion from an increase in AOP and the non-recurrence of restructuring expenses recorded in FY26. EPS, 179.89 yen, ROE, 8%, and EBITDA, 1 trillion yen. This is the forecast by segment. A negative impact of 30 billion yen is factored in other elimination and adjustments reflecting risks from situation in the Middle East and the further price hikes of memories. Next few slides show major factors.

This shows the FI27 outlook for changes in demand by segment. Please note that certain uncertainties, such as the Middle East situation, have not been fully reflected and we will continue to monitor the developments carefully. Positive changes in demand are written in blue and negative changes in red. The major changes we anticipate by segment are as follows. For Connect, we expect that demand growth for supply chain management software, avionics and factory automation At the same time, we are closely monitoring the potential impact of the memory shortages on the aircraft and PC supply chains. In vehicle of energy, EV demand in U.S. is expected to remain at broadly similar level to the FI26, while demand from our customers is expected to exceed the FI26 level. For industrial and consumer of energy, Demand for distributed power supply system is expected to continue to expand significantly. For industry demand for information communication, applications such as GenAI is expected to expand. Shows a year-on-year increase and decrease factors of a sales forecast. Sales are expected to increase in all segments. Major factors by segments are shown. In particular, significant sales increase is expected in energy driven by higher sales of in-vehicle at our North American factories supported by the recovery in customers' production volume as well as continued sales expansion of the energy storage system for data centers. This shows the year-on-year increase and decrease factor of forecast. AOP is expected to increase in all segments. In particular, energy and smart life will drive overall increase in profit. For energy, AOP in vehicle is expected to rise significantly due to the higher sales in North America and excess of one-time expenses recorded in FY26 related to the past manufacturing process issue. In addition, much higher profit in industrial consumer is expected with higher rate of energy storage systems for data centers. For smart life, AOP is expected to grow due to largely at the absence of one-time restructuring expenses. This shows the year-on-year increase-decrease factors of operating profit. From the left, higher sales in real terms expected to become a positive factor of 120 billion. Fixed costs will be a positive factor of 60 billion yen due to the effect of restructuring of 100 billion yen despite the increase in strategic investment and the impact of the inflation. The net impact of raw materials or logistic prices, mainly from the price hikes in copper abrasion memory, will be a negative factor of 125 billion yen. The effect of the price of regions and rationalization will be a positive 124.9 billion yen. The blue yonder AOP is expected to grow by 2.7 billion yen. The FX impact will be a negative of 40 billion yen, mainly seen in energy and industry. The absence of one-time restructuring expenses recorded in 26 is expected to become the positive factor of 40 billion yen, where the more negative impact of 30 billion is factored in, reflecting risks for deteriorating situation in Middle East and further memory price hikes. Taking all these factors into account, AOP is expected to increase by 152.6 billion yen, operating profit is expected to increase by 313.6 billion yen, due to a 161 billion yen improvement in other income and loss, mainly reflecting the absence of the restructuring expenses. Here is some supplementary explanation regarding the impact of the situation in the Middle East and further memory price hikes. As for the potential impact on us from the deteriorating Middle Eastern situation, we mainly assume the price hikes in raw materials such as resins as well as the decline in sales in Middle East. But the more rising memory prices have been seen due to the supply shortages accordingly that we have factored in 30 billion yen impact at the group level. While uncertainties will persist for the foreseeable future, we remain committed to closely monitor the situation to achieve the target of 600 billion yen AOP. This shows the outlook of each individual business, starting with the in-vehicle of energy. On the left is the line graph that shows the sales volume trend in in-vehicle batteries in gigawatt-hour at our factories in North America, and bar graph shows the EV sales trend in U.S., Following the termination of the IRA Section 30D tax credit for EV purchases at the end of September last year, the situation of the EV market in U.S. has deteriorated. However, North American operation in 26 achieved higher shipment volume year-on-year. We expect gradual market recovery compared with the 26th and the increase in demand for our battery production, driven by our strategy customers' market share gains in U.S. Therefore, we forecast four-year battery sales volume of 46 GWh in FY27. The uncertainty continues. We will continue to expand our business in line with the market trend and customer demand. Next is our outlook on energy storage system for data centers in industry and consumer end of energy. The graph on the left shows the sales outlook. We previously targeted the sale of 800 billion yen in FY29. In light of demand exceeding our earlier expectations, we will bring forward a data billion yen sales target by one year to FY28. We are also raising our target to 950 billion yen in FY29, approximately three times the level of FY26. In response to the rapidly growing demand, we are quickly proceeding with the preparations to expand production capacity. For cell production, we have completed the conversion of the in-vehicle battery production lines in Japan and shipments for data center applications began in April 2026. We have also decided to allocate the in-vehicle production line for data center applications at the Kansas factory and to expand the production capacity going forward. For capacitor backup units, which use our new modularized supercapacitors developed through the collaboration between the Panasonic Energy and Panasonic Industry, we plan to start mass production in FY27. By simultaneously achieving the high level of both production capacity expansion and the development of new solutions, we will maintain our leading market position and drive further business growth. Next is our work for Gen-AI related businesses in industry. Previously, industry's AI-related business disclosures focused on the AI semiconductor-related areas such as GPUs and ASICs. However, as the business opportunities that leverage the expertise are rapidly expanding, we will broaden the scope of the disclosures. to include the infrastructure area supporting the evolution of AI such as servers, storage, as well as edge area where the advancement in AI technology extending to applications such as ADAS and robotics. As shown on the left, we target the sales of 430 billion yen in FY29. Under this new scope, roughly doubling the FY26 level, in terms of the production capacity expansion to support growth for electronic materials, we will construct a new facility in Ayutthaya plant in Thailand, while simultaneously expanding the production lines at Suzhou and Guangzhou plants in China. In addition, for conductive polymer capacitors, we will continue to expand the capacity at multiple sites in Japan and overseas. for the AI-related business of Panasonic Energy and Industry will provide a detailed strategic update at the Investor Day on June 8. Here is the summary of the progress made in our group portfolio management initiatives. Following the announcement of housing solutions in FICOSA, the transactions relating to those businesses have been completed. We have also announced the share transfer of the power tools business of Electric Works and the security system business of Connect since Q4. Today, we announced the share transfer of the trans-automotive motor and automotive cooling. Our motor business of industry will continue to steadily conduct the portfolio management going forward. Finally, our shareholder return. We decided to pay ¥40 per share dividend for FY26, no change from August 29. As for FY27, our forecast is ¥54 per share, ¥14 up. The payout ratio of 30% relative to the net profit will distribute a stable and continuous dividend. Also, we aim to achieve the enhanced corporate value through business growth and profit increase. Thank you for your attention.

Thank you for your attention. We now have our CEO, Kusumi, to explain the group growth strategy. Hello everyone, this is Kusumi speaking. Thank you for taking time out of your busy schedule to join us on this online briefing. CFO Oniko just reported on last fiscal year's results and the forecast for this fiscal year, especially with regards to the devices area. I will now give the details of the Panasonic Group's growth strategy. First, I'd like to go over the group management reforms implemented last fiscal year. First, the fixed cost structure reform last May. Recognizing the need to review the fixed cost structure for the entire group, we announced our goal to achieve a 122 billion yen reduction in FY27 compared to FY25. Currently, we expect to exceed that target and achieve a 145 billion yen reduction. As part of the group structure, we dissolved the former Panasonic Corporation and we established three new business companies, Panasonic Electric Works, Panasonic HVAC and CC, and the new Panasonic Corporation for Consumer Electronics. We consolidated and streamlined our headquarters, sales divisions, and indirect functions and consolidated our sites. The personal optimization has resulted in a reduction of 12,000 people globally. We have completed the direction setting for businesses with issues, namely those with no foreseeable growth and a ROIC below the cost of capital, as well as those requiring careful consideration of business sites. Regarding PIDC industrial devices and the electromechanical control businesses, we have completed the reconstruction process. process through delivering the structural reform results and the travel cost reduction. There's a plan to transfer our automotive motor and automotive cooling fan motor businesses as well. In the kitchen appliances businesses, we will thoroughly pursue global standard cost structure by shifting mass production development to China, optimizing development resources in Japan, reviewing standards and criteria that do not contribute to customer experience value, and actively utilizing CHAM Chinese components. In the TV business, we have established a prospect for risk reduction through collaborations with other companies overseas. Through these, we are to eliminate businesses with issues by the end of FY27. The HVAC business to be reconstructed will... Strengthen the cost base for air conditioners and compressors in Asia through structural reforms and site optimization. In particular, we will improve profitability in the commercial air conditioning by reducing development costs through partnerships and focusing on specific areas. The consumer electronics business will strengthen the competitiveness by pursuing global standard costs and becoming asset-like through collaborations, while enhancing the brand and sales channels based on our core technologies that allow many customers to perceive the difference, creating a cycle in differentiated areas where we will strengthen products and advertising for higher profitability. Panasonic Housing Solutions completed the shared transfer to YKK at the end of March. Through a full lineup of building materials and synergies, we aimed to achieve growth that was not possible so far. We will continue to implement measures to improve the group. Having strengthened our erring space through last year's group management reforms, we now enter a growth phase. In 1932, our founder Konosuke Matsushita stated, Only when spiritual stability and an inexhaustible supply of material goods are combined can happiness in life be stable. This is what I have come to understand as the true mission of Matsushita. and declared the realization of an ideal society where both material and spiritual abundance prevails as her true mission for the next two hundred fifty years Let me describe how a group can contribute to prosperous society in 2032, the 100th anniversary of that Meiji revolution. The Panasonic group continues to evolve, supporting the development of society and industry by solving social challenges that change with times. In particular, towards 2032... We aim to solve two challenges, efficient use of energy and alleviating the frontline labor shortage by supporting AI infrastructure and social operations. This slide shows the steps of revenue growth or profit growth until 2030 through our efforts to address these two challenges. First, in Phase 1, for the three years leading up to FY29, the business supporting infrastructure in the devices area will expand significantly in both sales and profits, driving the group's growth. In addition to growth of other businesses, as shown last year, we will increase AOP by more than 150 billion yen from FY27 and will certainly achieve our target of exceeding 750 billion yen. During this period, the solutions area will transform its business model to further contribute to the evolution of our customers' operations, and this area will be the core of revenue growth in Phase 2 from FY 2030 onwards. The devices area and the smart life area centered on the consumer electronics business will continue to grow sustainably through technological innovation and strengthen competitiveness in Phase 2 and beyond. At the briefing in February 2025, we explained power supplies for data centers as part of our solutions area. Given the continuous technological advancements in devices, in line with the evolution of AI server technology, are the key. We have repositioned them within the devices area now. Now let me explain the overview and initiatives of our business supporting AI infrastructure in the devices area. Our business is supporting AI infrastructure, and the devices area is focused on the rapidly growing AI data center market. Our group contributes by addressing the need for high-speed GPU ASIC peripheral circuits and boards, which constitute the brain of AI processing. and by providing backup on peak power reduction around the power supply, which constitutes the heart of the system. In the future, we will expand our contributions to edge computing areas such as AI-driven autonomous driving and robotics. Here you can see the growth roadmap for the devices area. Key industry players such as hyperscalers and AI semiconductor manufacturers are rapidly increasing the capabilities of data centers and the GPUs and ASICs that support them to meet the rapidly growing demand for generative AI. In response to this evolution, the area surrounding the GPU ASIC, the brain of the server, requires further speed and stable operation, along with reduced power loss and absorption of power load fluctuations. Our group is paving the way to meet these demands through advancements in substrate materials and capacitors. In the power supply area, which can be considered the heart of the server, there is a need to achieve both higher levels of power efficiency and stable operation in response to the increasing power load and fluctuations per server rack. Through advancements in battery cells as well as advancements in devices unique to our group that fuse battery and capacitor technologies, we will continue to support the power supply systems of ever-evolving AI servers. Our group has the development capabilities to propose and realize products that don't yet exist in the market by advancing materials and process technologies in line with the five-year visions of our customers, including hyperscalers and AI processors, semiconductor manufacturers. Furthermore, by building production and supply systems that can flexibly respond to customer requests, we will ensure a stable supply and continue to support the evolution of AI servers and data centers.