Panasonic Holdings Corporation

Thank you for gathering today. Before presenting our financial results, I'd like to offer our sincerest apologies. As we announced on the 15th of this month, we deeply regret the concern and inconvenience caused to our customers, distributors, and all our parties involved by the recall of our drum type washer dryers. We will continue to prioritize the safety of our customers and take thorough measures to prevent recurrence. Now, I would like to share my thoughts on the second quarter's results and outlook for the future. Details will be provided later by our group CFO, Waniko. In the second quarter, profits increased in all segments to a new record high profit continuing on from the first quarter. In particular, in the AI infrastructure related businesses, we increased our supply capacity through agile investments in response to stronger than expected demand, leading to improved results. We expect this demand to continue and we will make sure to seize these growth opportunities. Thank you very much. Tatsuo Ogawa, Sumitaka Yoshitomi Thank you for watching. My view is that the accumulation of these efforts had led to increased profits across all segments and to record high profits. In light of this momentum and the progress in each business area, we are revising our annual forecast upwards again following the announcement at the first quarter briefing. Details will be provided by CFO Waniko that this upward revision means we expect to achieve our AOP for fiscal 29, two years ahead of schedule. This upward provision is a mere interim milestone. We will not be complacent, and the entire group will aspire for higher goals and accelerate efforts toward growth. Regarding the solutions area, which drive further growth, we will present a specific growth strategy at the Investor Day event in December, so please stay tuned. This concludes my initial comments. Let me start my presentation on the consolidated financial results for the second quarter of fiscal 2027, ended September 30th. First, the summary. As mentioned in the first quarter briefing, growth accelerated in AI infrastructure-related and adjacent businesses on stronger demand from data centers. In addition, restructuring effects from initiatives in FY26, sales growth, rationalization, and pricing initiatives contributed to improvements across all segments. Profit increased in all segments in Q2 to pose the highest second quarter profit following the trend of Q1. Overall sales increased on higher sales of Connect, Electric Works, HVAC and CC, Energy, and Industry. By business, as in Q1, strong growth was achieved not only in AI infrastructure related, but also across a broad range of adjacent areas, including FY solutions and process automation. Adjusted operating profit increased in all segments, particularly for energy and industry. Operating profit and net profit increased due to an increase in AOP. Thank you for joining us today. Now some details of the Q2 results. For the consolidated financial results, sales increased year-on-year by 8% to 2,073.6 billion yen. AOP increased by 122.8 billion at 13.2 billion yen. Operating profit, profit before taxes, and net profit all increased, marking the highest second quarter profits. These are results by segment. In the following slides, I will go over the year-on-year variance analysis for sales and AOP. First, sales by segment. In Connect, sales increased mainly on higher sales of process automation that captured demand for ICT, including AI servers, avionics, and Blue Yonder. In Electric Works, sales increased on steady sales both in Japan and overseas. In HVAC and CC, sales increased overall due to higher sales of room air conditioners, air-to-water in Europe, and cold chain. In energy, sales for in-vehicle increased due mainly to higher sales at North American factories on improved utilization at Kansas. Industrial and consumer saw increased sales on strong demand for energy storage system for data centers. Industry posted increased sales on AI infrastructure products, including capacitors and multi-layer circuit board materials, and products for adjacent areas with growth in FA equipment for semiconductor manufacturing, such as server motors and sensors. Smart Life posted lower sales overall, despite higher sales in Japan, mainly of small appliances, due to lower overseas sales, including large appliances in China and ABC products in Europe. AOP Analysis by Segment AOP increased in all segments. In particular, energy and industry drove the group's profit growth. Energy's AOP increased overall due to a large increase in in-vehicle on higher sales at North American factories and U.S. tariff refunds, as well as increase in industrial and consumer. In industry, AOP continued to increase significantly due to the combination of leaner business structure from structural reforms and higher sales, capturing strong demand for AI infrastructure and adjacent areas. Operating profit variance analysis by factor is shown here. From the left, increased sales in real terms, positive $60 billion. Fixed costs, positive $21 billion on a $33 billion effect of restructuring in FY26, despite strategic investments and inflation. Net impact of raw materials and logistics prices, negative $64 billion, due mainly to price hikes in copper, resin, and memory. Effective price revisions and initiatives, including rationalization, positive $74 billion. with a positive exchange rate effect of 11 billion and positive U.S. tariff impact of 21.6 billion, AOP increased by 122.8 billion. Other income and loss, negative 20.2 billion, due mainly to recall-related expenses for drum-type washers and dryers. All in all, Q2 operating profit was up 102.6 billion at 180.7 billion yen. Next, cash flows and cash positions. On the left, operating cash flow for the first half was 323.1 billion up year-on-year. Free cash flow after investing cash flow was positive 83.4 billion. On the right, net cash was a negative 743.4 billion yen.

Next, consolidated financial forecast for fiscal 27. Sales forecast is revised upward by 600 billion yen and AOP is revised upward by 130 billion yen. These are due mainly to such factors as growing AI-related demand, exceeding expectations, revision of FX assumptions, and U.S. tariff refunds. Operating profit is revised upward by 120 billion yen and net profit up by 90 billion yen. ROE is expected to increase by 2.2% to 10%. The full-year forecast by segment. Full-year forecasts are revised upward for energy, electric works, connect, and in particular, industry. Next, I will explain the assumptions for revised forecasts as well as the key factors behind the increase and decrease. and Yuki Kusumi. Thank you very much. Thank you very much. In revised forecasts, those risks have been fully released, resulting in a positive impact of 20 billion yen, with 130 billion yen higher AOP from these factors, together with the impact of other income and loss. Operating profit forecast is revised upward by 120 billion yen. Now the outlook for each business. Starting with AI-related business of industry, this lower left shows the results and sales forecast for AI-related business. Q2 sales reached 88.6 billion yen 1.6 times year-on-year, driven by the strong customer demand and exceeding our expectations. 4-year forecast revised upward by 50 billion yen to 360 billion yen from the previous forecast of 310 billion yen. In response to the strong demand, we are rapidly expanding our supply capacity. For multi-layer circuit board materials, we decided to construct new facilities for Phase 2 at Suzhou plant in China and Ayutthaya plant in Thailand. For conductive polymer capacitors, we are making progress in our plans to expand capacity at Uji plant in Japan, Batam plant in Indonesia by adding new production lines and constructing new facilities. At Yokkaichi Plant in Japan, we are planning to establish a new development hub for next-generation semiconductor materials. Through these initiatives, we will more quickly strengthen both our technology and manufacturing capabilities, ensuring we are well positioned to meet the rapidly growing demand. Next is outlook for energy storage system for data centers in energy. The graph on the left shows the results and the sales forecast for energy storage systems for data centers. Strong growth continues in line with the initial expectations. For cell production, we are progressively converting our production lines in Japan from automotive applications. Thank you very much. In collaboration with Panasonic Industries, with mass production scheduled to start in fiscal 27, by fully leveraging our unique strengths, having core technologies for both battery and capacitors, we aim to further strengthen and solidify our market position. As mentioned, growth in our AI infrastructure-related business continues to exceed assumption. Particularly in industry, we are seeing the extended reference adoption in GPU-related applications, strong demand growth from Chinese customers, and growing demand for edge areas, including ADAS and robotics. These diverse business foundations of operation scanning. Thank you very much. Outline in the group growth strategy of May. By fully leveraging the strength of energy and industry while also creating synergies between them, we will continue to drive even stronger growth. Next is our outlook in in-vehicle of energy. Thank you very much. As a result, our Q2 shipment reached 11.4 GWh, up 16% year-on-year. Given the continued strong demand for our strategic customer, we plan to supply 46 GWh for 4 years, in line with our initial forecast by maximizing production volume for both Kansas and Nevada factories. Sumitaka Yoshitomi Sumitaka Yoshitomi Regarding the transfer of the power tools business of Bioelectric Works, after reaching agreement at the end of fiscal 26, we completed the transaction on September 1. In fiscal 27, we have already announced the transfer of automotive motor and automotive cooling fan motor business of industry. In addition, in Q2, we announced the transfer of automotive battery disconnect unit business and industrial power devices for industry. Household appliances businesses will continue to steadily conduct portfolio management across the group. Finally, our shareholder return. The interim dividend for fiscal 27 is determined at 27 yen per share, up 7 yen year on year. For annual dividend, following the upward revision of net income, we forecast 70 yen per share, up 30 yen year on year. Payout ratio is expected at 30.3%. We will distribute stable and continuous dividends. Also, we aim to achieve the enhanced corporate value through business growth and profit increase. I thank you for your attention.

From Nikkei, Mitsumi-san, please. Thank you. From Nihon Keizai Shimbun, Nikkei, my name is Mitsumi. I hope you can hear me. Yes, we can. My first question. The results were expected to be good, but I was surprised to see such good results. So regarding this Q2 results and forecast for the full year for Kusumi-san, was this what you anticipated or were you surprised as well? And for FY29, AOP is $750 billion. It's likely that it will be achieved this fiscal year, this target that was set only in May. Are you going to be setting a new target? Thank you for your question. Tatsuo Ogawa, Sumitaka Yoshitomi Last year, structural reform efforts were made. 12,000 people made a very difficult decision to leave the company. And we felt that we need to do a good job to make those people who left us feel that we are doing what we can. and in addition in the AI related area we are seeing the demand growing at a faster rate than we had anticipated so the thorough efforts made by our workforce as well as for the support given by all the relevant parties we feel Thank you very much. Thank you very much. I think we're only at the 20-30% level. So what happens if we get to 50% or 40% level? Once we get that, then we will be considering the next target. I see. Thank you. My second question. Panasonic Industry announced the investments worth 92 billion yen. 150 billion yen investment that you were talking about, or 500 billion yen in combination with energy. Is that part of that plan, is my first question. and also I think in AI-related areas, you are seeing profits growing at faster than expected rate. So what are you going to do? In addition to dividend, are you going to be making further investment? So are you going to be making further investment in AI infrastructure-related or solutions? Thank you. We made a press release today worth 92 billion yen. It is part of 150 billion yen plan that we have been talking about. Demand is growing at a faster rate than we had anticipated. So to what extent we are going to make an additional investment over 100 billion is what we are currently considering. As for the allocation of the upside, of course, cash flow upside is expected. So one is the AI-related demand. We Thank you very much. And for this fiscal year, we are expecting a dividend increase, and over a medium to long term, we might consider the same.