Panasonic Aktie

I will present the consolidated financial results of Panasonic Holdings Corporation for fiscal 2026 ended March 31, 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.

First, the highlights. Sales and profit decreased year-on-year. Sales decreased overall despite higher sales of Connect, 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 CC and Industry due to lower profit resulting from onetime 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 nonrecurrence of monetization of IRA tax credit through transferable method in FY '25 and restructuring expenses. As for the FY '27 forecast, overall sales are expected to decrease due mainly to the impact of deconsolidation and the effect of exchange rates, while 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 effective restructuring. Overall AOP is expected to increase even after factoring in a negative impact of JPY 30 billion, reflecting risks from deteriorating situation in the Middle East and the further memory price hikes. Annual dividends for FY '26 were determined at JPY 40 per share and forecasted to be JPY 54 for FY '27, up JPY 14.

Now the details. Sales decreased year-on-year by 5% to JPY 8,048.7 billion, while sales excluding automotive were up increased or were up by 3%. AOP decreased to JPY 447.4 billion, while AOP excluding automotive, increased year-on-year. OP decreased to JPY 236.4 billion and net profit decreased to JPY 189.5 billion. This slide shows results by segment. Next few slides describe the analysis of year-on-year comparison for sales and AOP. First, sales analysis by segment. Overall sales decreased despite higher sales of Connect, Electric Works, Energy & Industry due to lower sales of HVAC and CC and Smart Life and the Automotive deconsolidation.

The major factors by segment are shown on this slide. This is AOP analysis by segment. AOP decreased overall despite increased profit in Connect, Electric Works, HVAC and CC & 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 onetime expenses related to past manufacturing process issues. This despite increased profit in industrial and 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 yield terms, positive JPY 65 billion; fixed cost, negative JPY 13 billion, but this includes positive JPY 45 billion from restructuring. Raw materials and logistics prices, negative JPY 9 billion, effect of price revisions and rationalization, positive JPY 45 billion; Blue Yonder, negative JPY 10.3 billion due to an increase in strategic investments. Exchange rates, negative JPY 2 billion, mainly seen in Energy & Industry.

The automotive deconsolidation, negative JPY 24.5 billion; U.S. tariffs negative JPY 31 billion and recording of onetime expenses related to past manufacturing process issues, negative JPY 40 billion. As a result, AOP was down JPY 19.8 billion. OP decreased by JPY 190.1 billion due mainly to restructuring and portfolio management-related expenses in other income and losses totaling JPY 170.3 billion.

An update on progress with the group management reform. The structural reform in FY '26 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 FY '26 amounted to JPY 174.5 billion, while the positive effect was JPY 45 billion. The group-wide effect of the restructuring for the 2 years covering FY '26 and '27 is expected to be JPY 145 billion.

Status of cash flows and cash positions. On the left, operating cash flow for FY '26 decreased to JPY 624.3 billion year-on-year due to the nonrecurrence of monetization of IRA tax credit through transferable method in FY '25 and restructuring expenses. On the right, net cash was outflow of JPY 756.7 billion.

Next, forecast for FY '27. This is the consolidated forecast for FY '27. Overall sales are expected to decrease to JPY 7.6 trillion and AOP is expected to increase to JPY 600 billion. OP is to increase to JPY 550 billion, and net profit is to increase to JPY 420 billion from an increase in AOP and the nonrecurrence of restructuring expenses recorded in FY '26. EPS, JPY 179.89, ROE 8% and EBITDA JPY 1 trillion.

This is the forecast by segment. A negative impact of JPY 30 billion 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 FY '27 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'll 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 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 FY '26, while demand from our customers is expected to exceed the FY '26 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 Gen AI is expected to expand, shows a year-on-year increase and decrease factors of 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 factory 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 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 absence of onetime expenses recorded in FY '26 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 the absence of onetime restructuring expenses. This shows the year-on-year increase, decrease factors of operating profit.

From the left, higher sales in real terms is expected to become a positive factor of JPY 120 billion. Fixed costs will be a positive factor of JPY 60 billion due to the effect of restructuring of JPY 100 billion despite the increase in strategic investment and the impact of the inflation. The net impact of raw materials, logistic prices, mainly from the price hikes in copper, resins, memory will be a negative factor of JPY 125 billion. The effect of the price revisions and rationalization will be a positive JPY 124.9 billion.

The Blue Yonder AOP is expected to grow by JPY 2.7 billion. The FX impact will be a negative 40 billion, mainly seen in Energy & Industry. The absence of onetime restructuring expenses recorded in '26 is expected to become the positive factor of JPY 40 billion. Furthermore, negative impact of JPY 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 JPY 152.6 billion. Operating profit is expected to increase by JPY 313.6 billion due to JPY 161 billion 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 East situation, we mainly assume the price hikes in raw materials such as resins as well as the decline in sales in Middle East. Furthermore, rising memory prices have been seen due to the supply shortages. Accordingly, we have factored in JPY 30 billion 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 JPY 600 billion AOP.

This shows the outlook of each individual business, starting with the in-vehicle of energy. On the left is the line graph 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 purchasers 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. In '27 outlook, we expect gradual market recovery compared with the '26 and the increase in demand for our battery production, driven by our strategic customers' market share gains in U.S. Therefore, we forecast full year battery sales volume of 46 gigawatt hour in FY '27. If 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 industrial and consumer and of energy. The graph on the left shows the sales outlook. We previously targeted the sale of JPY 800 billion in FY '29. In light of demand exceeding our early expectations, we will bring forward the JPY 800 billion sales target by 1 year to FY '28. We are also raising our target to JPY 950 billion in FY '29, approximately 3x the level of ' 26. 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 our production capacity going forward. For capacitor backup units, we -- which use our new modularized supercapacitors developed through the collaboration between the Panasonic Energy and Panasonic Industry, we plan to start mass production in FY '27. 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 outlook for Gen AI-related businesses in industry. We 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 disclosure 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 extend into applications such as ADAS and robotics.

As shown on the left, we will target the sales of JPY 430 billion in FY '29 under this new scope, roughly doubling the FY '26 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 overseas. For the AI-related business of Panasonic Energy and Industry, we 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 and 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 automotive motor and automotive cooling fan motor business of Industry. We will continue to steadily conduct the portfolio management going forward.

Finally, our shareholder return. We decided to pay JPY 40 per share dividend for FY '26, no change from August '29. As for FY '27, our forecast is JPY 54 per share, JPY 14 up, the payout ratio of 30% relative to the net profit. We 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, Waniko, 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 JPY 122 billion reduction in FY '27 compared to FY '25. Currently, we expect to exceed that target and achieve JPY 145 billion reduction. As part of the group structure, we dissolved the former Panasonic Corporation and we established 3 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 personnel optimization has resulted in a reduction of 12,000 people globally.

We have completed the direction setting for businesses with issues, namely this with no foreseeable growth and ROIC below the cost of capital as well as this requiring careful consideration of business sites. Regarding PIDC Industrial Devices and the electromechanical control businesses, we have completed the construction process through delivering the structural reform results and material 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 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 FY '27.

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 cost and becoming asset-light 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 share transfer to YKK at the end of March. Through a full lineup of building materials and synergies, we aim to achieve growth that was not possible so far. We will continue to implement measures to improve the group.

Having strengthened our earnings base 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 inehaustable 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 for both material and spiritual abundance prevails as a true mission for the next 250 years.

Let me describe how our group can contribute to prosperous society in 2032, the 100th anniversary of that Meichi 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 2 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 2 challenges. First, in Phase 1 for the 3 years leading up to FY '29, the business supporting AI infrastructure and 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 JPY 150 billion from FY '27 and will certainly achieve our target of exceeding JPY 750 billion. 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 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 road map 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 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 5-year visions of our customers, including hyperscalers and AI processor semiconductor manufacturers. Furthermore, by building production and supply system 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.

In Devices and Systems supporting AI infrastructure, we aim to achieve JPY 1.4 trillion in sales and JPY 290 billion AOP in FY '29 and try to grow further in FY '30 and onwards. Already, our customers have shown us the future demand forecast. So we are very much likely to win the orders, especially the power supply for DS at data centers, we are getting the strong demand from the customers. And our award win rate, that is the agreements to proceed with the development orders and secured have reached 80% of the sales. From FY '27 to '29, we plan to invest about JPY 500 billion in total for businesses supporting AI infrastructure in advancing devices and systems and expanding production.

Next is the businesses supporting social operations in Solutions area. First of all, the business model transformation in Solutions area. Phase 1 is during the 3 years up to fiscal '29, and we mentioned that we would transform our business models. And this means that we will shift from the hardware-centric to service-centric value proposition. In response to the challenges such as labor shortages, resulting rising labor costs, environmental issues and regulations and soaring energy costs, we will support the operations of various clients and the public institutions through the service and engineering so that we can realize always-on, energy- and labor-saving solutions.

Conventionally, we have had the good evaluation from many customers in wide-ranging industries, especially in the area of hardware. The machines in the field are the machines installed and in operation. We call this MIF. By expanding the size of the MIF, we have been accumulating the customer base of the maintenance. For Panasonic Group by providing -- by having the high MIF and also services and engineering, we have a high potential to widen the services that we provide to our customers, especially by using the AI and digital technology, we can broaden our service offering from consulting, maintenance, hardware and services.

About the hardware plus service value proposition, I'd like to show you one example. In the area of the showcase and freezers, those are not provided only to the supermarkets, but together with the remote monitoring, control and analysis solution, we are providing the products and services so that customers' operations can keep running. For the in-flight entertainment for the aircraft, it's not just replaying the movie and the music, we can play the role to deepen the touch point between the airlines and passengers so that we can provide a personalized experience to improve the customer satisfaction.

In 50 locations globally, we have integrated maintenance services covering the third-party equipment so that the airlines can provide a comfortable air travel. In building management system, we have a wide-ranging services of the lighting, central monitoring, security, disaster management and maintenance services. In water treatment, water supply and drainage, we provide the facility management, upkeep maintenance after construction, not just the design and the construction.

We will accelerate the introduction of the connected equipment so that we can realize the always on energy saving, labor saving value proposition. In the area of the solution, what we can offer is to upgrade customers' operations. The energy costs are rising and the environmental regulation is becoming more stringent. In addition to the labor shortage on site, the customers are looking for the total value, not just the equipment value. We have to improve the efficiency of the operation and the labor saving and energy saving and environmental countermeasures. So we have to make sure that the interruption of the operation lead to the economic loss or loss of credibility and the tolerance for the downtime is becoming more smaller so that preventive maintenance becomes important.

So in the wide-ranging areas, we would like to utilize the high level of the MIF and provide the operational support and modification, system linkage and integration so that we can widen the area of contributions to the customers, especially since we have a high market share, we will have a very wide-ranging access to the customers' Gemba or frontline. We have accumulated very rich know-hows in the facilities operation. We would like to further deepen our understanding about the customers' operation and to broaden our services and to enhance services and engineering so that this will lead to the higher revenue growth.

So based on what I explained, I'd like to talk about the financial discipline for the 3 years up to fiscal '29. As for the growth investments and shareholder returns up to FY '29, those would come from the funds generated from our businesses. 3-year cumulative operating cash flow is expected to be JPY 2.2 trillion or more and JPY 500 billion strategic investment for the businesses supporting AI infrastructure and also growth investment for Solutions area. And the consolidated dividend payout ratio is around 30%.

The financial discipline is the net debt-to-EBITDA ratio of around 1x. That is a similar level of liabilities to the cash generation capability. Panasonic Group will continue to solve the issues of the society and to support the development of the industry as the social challenges changes in 2032, we would like to continue to support the AI infrastructure and social operations and accelerate our contribution.

From [ Kyoto Agency, Higashi-san ] please.

Higashi from Kyoto Agency. I only have one question. Investment in BBU of approximately JPY 500 billion, BBU. Does this include the start-up of new plants?

First of all, JPY 500 billion, the majority of this would be for battery investment. New factory construction is not part of the plan. Does that answer your question?

Yes.

We take the next question from Nikkei, Masami-san, please.

I am Masami from Nikkei, I have 2 questions. First, this time, the structural reform, the direction setting is now complete mostly. And our initial forecast is to transfer some of the businesses to other partners expected more projects like that. But now it seems that you have overcome some of the businesses with issues. So I think that the frontline people worked very hard. If that is the case, how do you continue to do so?

Masami, thank you -- your question, probably, I think that the sale of some of the businesses to other companies were expected on your part, especially consumer electronics, maybe you had expected that something like that. Now the consumer electronics is a driver for our brand. It's very important. And at the same time, since the past, this consumer electronics in China and Japan, we have had a separate operation and our capability to compete in China was something that we gained.

And in the new structure, we decided to fully leverage and utilize what we learned in China. So under the new leadership, we are accelerating that. So this is a little bit different from other companies. We would like to fully utilize resources in China and the capability that we gained in China. So once again, we want to do so. And by doing that, including the kitchen appliance, I think we have set a good direction. I hope that answers your question.

Yes. My second question. So this time, our growth strategy is announced. So this -- the medium term -- it's not the medium-term management plan, I understand. And this time, many people expected the medium-term management plan. But this is the growth strategy rather than the medium-term plan. So could you explain why that is the case?

In the past, every 3 years, I think we had the rolling plan. So after 3 years, I think that the situations in the society and technology changes so significantly. Therefore, internally, to have a rolling plan rather than having such a 3-year plan, we decided to change that to do so every year. So considering only the 3 years in the future, should we try to set up the strategies. But rather than that, that would be like a hockey-stick type. So after 3 years, we can achieve this much. So that would be how you can make a plan.

But rather than that approach, we'd like to look at further in the future and think about what we want to change. We think that we need to change the way of thinking. And on top of that, of course, if the modification is necessary every year, we would do so. Toward the target after 1 year, for example, if something is not doing well, we will make the changes and adjustments. So 3 years in the future and 6 years in the future, that is not something that we are showing this time. But in the solution area, for example, there are various, not just KPIs, but the KPIs that we will be considering. So that type of planning or to make the strategies more sharpened, that is something that we need to focus upon. And based on that, rather than calling it the medium-term business plan, we decided to announce the group growth strategy.

Next from Toyo Keizai, [ Yamashita ], please.

This will be my very first time to ask your questions. My name is [ Yamashita ] from Toyo Keizai. I have 2 questions. First, on AI-related businesses, which are to be the pillar of growth going forward. Yes, there is a big expectation that demand will grow. But once the demand plateaus or flattens, what happens then? On Page 18, you're showing the cash allocation. So where would you be investing business-wise going forward? And including the AI-related business for overall portfolio balance, what is your thought?

Regarding our thinking on investments, I hope that Waniko-san can add more comments later. But first of all, for the next 3 years, no major investments was our original expectation. But we are now receiving inquiries for big demand in terms of production capacity, including the capacitors and batteries and panels. We need to make investments in all those areas. So we want to leverage this opportunity. And that is the reason why we have said JPY 500 billion new strategy investment.

For other types of growth strategies, we will be making investments within the framework for the other businesses, we will be making investments within the earnings made. But for the strategic investments for holdings, we are making this capital allocation as the holdings company for this JPY 500 billion. Anything to add?

Yes, JPY 500 billion, as Kusumi-san said, majority is related to battery, especially BBU-related expansion. Conventionally, in-vehicle batteries had been the main scope of investment for energy, but there is a major shift taking place on where the focus is. And we need to build the expansion capacity to support that rather than new plants, rather we are going to be making the best of the existing lines now that the demand is shifting. And you asked what happens if that part of the business slows down? Of course, we will be making investments, keeping a close eye on how the market and the business grows. Today, we are seeing rapid expansion increase in demand. So we are changing the targets upward every time we make announcements, but if we see a change in this trend, of course, we will be revisiting our allocation.

My next question is on Blue Yonder, which you covered in your presentation. Strategic investments are still proceeding. When would this phase change to the profit reaping stage? What is your current prospect or any update on this?

Thank you. For Blue Yonder, yes, we're talking about large investment. Sales profits -- when we can recover through sales and profit cannot be explained. We have always talked about the possibility of listing the share. But now we are seeing SaaS disruption as people call it. So payout period -- and the distribution, the cognitive connection is highly appreciated and that is growing. So we are looking at all these different factors to see what will be the best way to recover our investment. Anything to add, Waniko-san?

Thank you. Just a little bit of additional comments. Conventionally, regarding the strategic investment, including cognitive solutions, SaaS-based product transition has been the driver. FY '26 or FY '27 was the time frame that we had in mind for the strategic investment. Now we announced the full year forecast and you might feel that the strategic investment size has not been reduced much from the earlier prospects. And this is because various incentives and packages are being provided so as to accelerate the user corporation's adoption. We felt that for the deployment of cognitive solutions, we should be making more investments to facilitate that. And that is the reason why the strategic investment doesn't appear to be reduced much for this fiscal year compared to the previous year. Does that answer your question?

Yes. That is all the questions I had.

[Operator Instructions] Nikkan Kogyo Shimbun, [ Ono-san ] please.

[ Ono-san ] speaking from Nikkan Kogyo Shimbun. So today, you announced this group's growth strategy. In the solution area in coming 3 years, you're going to consolidate and you want to be profitable from fiscal '30. And as one of the indicators, you talked about MIF, MIF and you talked about your strategies. So about these machines in the field, I think in the comprehensive equipment, I think that the MIF-based management is talked about. And if you focus too much on that, it would lead to the price competition and profitability goes down. So how do you -- what do you think of that in the solution area? What kind of MIF do you have in your mind?

Well, this time, we mentioned MIF machine in the field. In the comprehensive copy machine, for each machine, there are consumables and there is maintenance services. So that's how the companies are managing the business. But in showcase and also the professional air conditioner, they need to work in the nonstop way. They shouldn't stop. And in addition, energy saving and various rationalization. For example, in the supermarket, they want to save labor and there is a very strong need for that. So it's not just consumables, but this -- when it is used for the professional services -- professional operations, the importance of services become more than the past.

So per equipment, how much profit can you raise?

For example, in the case of freezer and also HVAC, there could be some differences, of course. But conceptually, services and engineering and also in the case of copying machine after certain years, you would be replacing them. But in our business, we can expand the scope of businesses, starting with those machines in the field. So I think that the concept or basis is the MIF that we can use for this type of business.

I see. So you already have a MIF or high level of MIF and you want to add services on top of that?

Yes. When they become connected equipment, the range of the services and how the customers use them, we -- our understanding will improve. And through that, we would like to help customers in the wide-ranging ways.

I see. So for example, say that you understand the needs of the customers in the connected equipment, then when the competitor offers the cheaper hardware, your customer probably will continue to choose yours comprehensively together with the services. That's what you try to achieve?

Yes, if that's the case, we would be very happy.

Next, from NHK, [indiscernible], please.

[indiscernible] from NHK Osaka. For the growth strategy, you did talk about where you intend to make profit. But could you elaborate, especially regarding the Smart Life area, you did not talk much. You said that you are going to strengthen products and advertising. What do you mean by that?

The key to the growth is, as I said, AI infrastructure and for FY 2030 beyond, things that would support the social operation, meaning services and engineering. In February of last year, we talked about different areas, devices, solutions and Smart Life. And today, from the perspective of growth, I focused on devices and solutions, how to grow these 2 areas. There are many things, but mainly challenges to be solved would be efficient use of energy and alleviating the frontline labor shortage, both in devices and solutions areas.

In the meantime, in the Smart Life area, as I mentioned earlier, this is an area that is very difficult to differentiate ourselves or you might think that it is difficult, but there are products that can be easily differentiated while others are hard to be differentiated. When customers say this is good enough for those types of products, of course, cost competitiveness would be the key.

For those types of products, as we've been saying, we'll be pursuing the global cost, the global standard cost, leveraging the supply chain in China so as to be cost competitive. In addition, you might be one of the users, the Nanocare dryer, hair dryer, which uses the Nanocare technology to make your hair more beautiful with evidence. I think many people are already experiencing that difference by using our hair dryer or hair blower.

And I think -- and we do have the core technology for that. The same goes for the front-loaded type drum-type washing machines. Here again, we do have the core technology. With these technologies, we can have customers feel and experience for themselves the difference for Nanocare hair dryer, the Net Promoter Score is high. With advertisement, we want to communicate the benefits directly. And through SNS, that would expand more rapidly.

And NPS is elevated. And if we can have more Panasonic products with higher NPS, then that will enhance our brand capability and that will relate to the service quality as well. Through these efforts, we want people to really feel for themselves, the high quality and high reliability that Panasonic brand products can offer. So that is how we are positioning our consumer electronics products. So this is nothing new, and that is the reason why we didn't talk about that today. Does that answer your question?

Yes.

We have many hands raised, but we are getting close to the end time for the questions from media. So we will take just one more question from mass media. From Nikkei Business, we have Iwato-san.

Iwato of Nikkei Business. Yes. So this time, structural reform, you have exceeded expectations in terms of results. So is this irreversible? How should we interpret this? Because I think that the culture to continue making the improvements, do you think that you have already built such culture? Is there a kind of a system that you would not deteriorate from here? You can just continue to improve?

Yes. So personnel optimization, several times in the past for the individual business, I have experienced, and I wanted to do this never again. So this time, after operating companies trying to do many things and that led to the higher headcount, I think. So from now on, headcount control is something that we have to do. And then at the same time, of course, if we become too busy, we feel that we have to increase the headcount. So unlike the past, Panasonic Go, for example, the AI utilization is something that we can do on a daily basis so that we can improve the operational efficiency. So we'd like to accelerate that, so we would not go back to the past and operational efficiency can be improved.

So process itself at the headquarters and at PECs and operating companies, we will continue to work on them. And that's something that we will do at the group-wide level so that we will not go back to the past. And such culture, that kind of culture, that is to say that to make this easier for us to achieve and to be more creative and to improve the efficiency. That type of culture is something that we need to create at the same time.

Thank you. This concludes accepting questions from the journalists. We'll now take questions from investors and analysts again, only in Japanese only on the Japanese channel. From Goldman Sachs, Harada-san please.

We'll move to another questioner from BoA. Hirakawa-San.

Hirakawa from BoA. I have a question on sales plan raised from JPY 800 billion to JPY 950 billion for data centers. And I think this could be supported with the current expansion plan 3x. You said that you will be making investment decisions looking at the future as of today, you said looking 5 years ahead. You said 80% award received for FY '29. What about beyond that?

Thank you for your first question, Waniko would respond.

First, 3x cell supply capacity in Japan. Maybe that would be good enough not to require Kansas plant expansion. I think that's what you indicated. Line transition could be done more speedily and therefore, we have a better agility to shift the lines here in Japan than at Kansas. But plants in Japan, as we have been explaining, although the business is slowing down in vehicle batteries, 4 other car OEMs are in mind. So we can continue to use the current capacity as is in Japan.

So for the time being it will be used. But in the latter half, we'll be using the capacity in Kansas as well. In other words, we are going to have to change the focus, the shift in Japan and elsewhere. As for future prospects, there is upside taking place, and we would be responding to this upside in Kansas, and therefore, we will continue with the current plan.

A follow-up question. Kansas capacity expansion, how far into the future do you have in mind?

Do you mean about the capacity?

Capacity-wise, Yes.

We're still considering that. So how what is the fraction of Kansas capacity to be transitioned cannot be responded, but a certain percentage of the capacity at Kansas will have to be transitioned for data center applications. And we are still considering what's the right fraction of that.

My second question is on restructuring reform overall. When you embarked on this last year, Kusumi-san said Panasonic could not grow for the last 30 years, and you wanted to change that during your generation. And you said JPY 145 billion fixed cost reduction, which you have achieved. In the solutions area, there are still things that you need to work on. And whether you can achieve the AOP of JPY 75 billion for this fiscal year is still a challenge. So what you were envisioning a year ago, how much of that has been achieved, do you think, Kusumi-san? And to what extent do you plan to enhance the growth through the current reform in solutions during your leadership?

Thank you for your question. First, my thoughts and my aspiration, I can't be the one to decide whether I can fulfill that or I can accomplish that during my tenure, but JPY 750 billion with Solutions, Devices and Smart Life, we want to achieve that through these areas. For Smart Life, true competition is getting more fierce and competitors are going through many changes. For Panasonic Group, how are we to achieve these targets in this environment? One example would be refrigerators within the kitchen appliance business, which continue to be tough until recently.

But products for Japanese market can now be deployed starting FY '27 on the global cost basis this fiscal year. And should this achieve -- be achieved, then we know what the results would be. And we want to increase the market share with that. But by accumulating these different instances, we can achieve our target. To be more competitive in the market, what we did proved to be very effective and the capability of our Chinese employees are getting better as well.

And under the new leadership team under Toyoshima-san, I think they are really going to fulfill this mission. I'm rather confident of that. And in other businesses, in terms of structure within the holdings company, the operational company, business company CEOs are coming together for better communication, for better communication amongst different businesses. And it is based on that, that we have come we have come up with this solutions strategy. So the leaders of the 3 business companies said that, yes, this is the right way forward. So I think we are moving in the right direction. Does that answer your question?

JPY 750 billion to be fulfilled? Yes, I take it that yes, that's your commitment.

Let's move on to the next question. UBS Securities, Yasui-san.

First question is about the BBU. I have a question. Two questions actually about the fourth quarter, Q-on-Q, sales is flat. The profit is slightly down, I think. So why is the -- did the sales not grow so much and the profit declined? Could you explain the reasons? Also, Kusumi-san, on Page 11, you mentioned that the award rate or win rate is 80%. Could you explain the meaning of that? Because 80% market share, I think, is what you used to say. So based on that, the market share, award -- you already won the award. So how do you forecast your business results based on that?

So second question is the Middle East risk and also you included that to some extent. So housing-related I think there has been many news talking about some delays. You have many products for the residential area. So due to the shortage of the naphtha, if there is a delay, would there be an impact on your business? Or do you think that you can manage? So if you can talk about that.

About the BBU, Waniko-san can respond.

Yes. About the BBU, I'd like to make some comments. As for Q4, sales profit are mostly flat, I think. So I think you're correct in understanding about the BBU. But if you look at each quarter, there are differences of the situation of the customers and also the development cost on our part. So each quarter, there could be some fluctuations. And in the medium to long term, we expect the growth and doesn't mean that there is a negative impact. So within a certain range, we would grow, but Q4 happens to be flat.

Second question about the win rate or award win rate. It's not talking about the share -- market share. But out of the sales, how much of the orders have been secured or firm from the customers. So 80% of the total sales have been already secured. That's what it means by the win rate, award win rate.

But what about the risks?

Middle Eastern risk, I'd like to make a comment, yes. So Middle Eastern risk in the presentation, we mentioned on one of the pages. And right now, there are a lot of uncertainties. And what kind of impacts do we expect? We are currently discussing potential risks. There are 3 things that we can mention. The unit price of the raw materials increasing the Middle East business slowing down somewhat. I think that would happen for sure. In the worst cases, the production could be impacted. But that is something that until we have not yet reached, for example, suspension of the production. So how to deal with the first one, then second one. The first one, I think that the rationalization on our part. And of course, there is a limitation to that. And so we would like to offset that with pricing.

And also the exposure of the Middle East is not so big as a group. About JPY 100 billion, so that could slow down. And because of the environment, that is inevitable. So we try to offset that with other regions. So -- those are the direct impact. But ultimately, the impact will be on the customers and also on the market as a whole. These are the secondary impacts that we cannot really foresee at this moment. So we'd like to watch the situation and try to respond. And about JPY 30 billion that is included, this is a very rough number. So the first half impact probably is around that level at the maximum. So we want to minimize that in the group management.

If I may add a little bit. I think you mentioned naphtha in your question. Naphtha, when there is a disruption of the naphtha supply, our consumer products are made of plastics. So electronics devices, we use a lot of solvents. So right now, in the case of solvents, alternative solvents or alternative materials is something that we are pursuing and trying to procure. And also the resin using the -- based upon the naphtha, we try not to depend on the Middle East and the alternative source is something that we are proactively trying to find. So if it is disrupted completely, it's going to be bigger than JPY 30 billion level.

If I may ask a follow-up question. Earlier, you talked about the BBU business and the OP. Q3 and Q4 profit level margin has come down. So when you consider the future profit margin, is it close to the Q3 level or Q4 level? Another thing is about the market share. Conventionally, BBU market share, I think you said 80%. So this time, there is a demand that is brought forward. So what about the market share this year, next year, what kind of level the market share do you expect?

Well, about the BBU, Q3, Q4, yes, I'd like to respond. Q3, I think we were at the higher part, higher level of the range. So if you ask us the question, Q4 was a little bit low. So I think the future level will be closer to Q4 in fiscal '27.

About the market share, the hyperscalers, each one, how much market share for manufacturers share. 70% to 80% is the number that we mentioned. This is about the distributed BBU. It's not the centralized BBU. And this is for the distributed BBU, I won't mention the names, but the hyperscalers, a certain hyperscaler, what will be the market share? The first vendor is 70%. The second is 20% and the remaining 10%. That's how they procure. So first vendor position, how do you try to continue to be a first vendor. And in that sense, we are getting the inquiries from them. That's the current situation.

Next, from Citigroup, Global Markets Japan, Fujiwara-san, please. [Operator Instructions]

Fujiwara from Citigroup Global Markets Japan. Yes.

One question I understand. The growth strategy. AI infrastructure, JPY 130 billion between FY '27 and '29 AOP and adjusted operating profit, JPY 150 billion or higher. Amongst this JPY 150 billion, it appears that non-AI infrastructure related would amount to only about JPY 20 billion, about 5% growth in 2 years. So what is the growth rate for those areas? And last year, 1 year ago, you said the operating margin of 10% or higher, ROI of 10% or higher. Are you still retaining these targets?

Thank you. First, the overall picture. JPY 150 billion profit increase, BBU or generative AI, JPY 130 billion. So the rest may appear not to be growing at all. That was what you indicated in the first part of your question. We do expect others to grow as well. The way they grow in Solutions area, there are 3 business areas. So they are all to improve the profitability. BBU, not as much as BBU or devices area, but they are to grow. And Smart Life, again, not as high as Solutions area, but steady improvement. So maybe the total sum may not add up. Yes, you are right.

For each segment, what they are reporting are added, it will be over JPY 750 billion. But I did refer to the situations in the Middle East and other uncertainties. And so this will be the minimum requirement that we want to achieve. And towards the second half of your question about AOP 10%, ROE 10%. Yes, we remain unchanged that we will continue to pursue those. But now we're talking about JPY 500 billion investment. So ROE 10%, yes, we want to stably realize that, but there are many uncertainties and there will be various investments made over the 3-year period. So ROE level itself, whether to target that would benefit us in terms of management has been revisited. So we decided to focus rather on JPY 750 billion, but we will continue to target that. That remains unchanged.

Let's move on to the next question, Nomura Securities, Okazaki-san.

Okazaki of Nomura Securities. So JPY 500 billion investment you mentioned, originally for the data center, you would utilize the existing plant. So in comparison to the in-vehicle batteries, I think that the smaller investment would be sufficient. So what kind of investment opportunities arose to come up with this JPY 500 billion strategic investment increasing -- rather than increasing the sales, I think it's something else. Is this related to the potential M&As?

We are not considering the M&A. And the part of the investments non-cell or modules and BBU assembly is also part of the investments, but the majority is for cells. So modification of the facilities and equipments and also the capacitors and the substrates materials are included in that number. So no plans for the M&As.

Next from Mizuho, Nakane-san, please.

Nakane from Mizuho. One question. In-vehicle batteries, on a gigawatt basis, I think the results were better than expected. Sales were not bad either. Still AOP level seems to be not very exciting. So to the extent possible, can you explain factors behind the changes in AOP. The expanded sales benefit and JPY 20 billion and more fixed cost in Kansas, but at Suminoe and other factories, including other workforce, I think there will be more shift to the industrial use as well. So can you give us those details?

In addition, when can you expect to turn profitable, excluding the IRA tax credit effect? Initially, you were talking about this fiscal year, and now you're talking about next fiscal year. What is your current view? And what will be needed to become profitable?

Thank you for your questions. FY '27 is what you mean by this fiscal year, right? 46 gigawatt, yes, that was considered to be rather high. As for the profit, as was shown in the waterfall chart, JPY 52.9 billion for in-vehicle, that's the profit increasing factor. There was onetime expenses of JPY 40 billion in the previous fiscal year. So there is a reversal of that. And then there is the IRA tax credit increase with the production change. But as you said, for next fiscal year, Kansas plant, which started to ramp up in FY '26, we are going to see more impact in terms of the fixed cost as well as you have correctly indicated. And so this is the final picture that we have currently.

Can we turn profits excluding the IRA tax benefit? For FY '26, the results were not very exciting because of the onetime expenses of JPY 40 billion being recorded. But for FY '27 and beyond that will be a nonrecurrent portion. And so we are hoping that we can achieve what we are envisioning.

Sorry, we are getting close to the ending time. We will take just one more question. From SMBC Securities, Katsura-san.

Katsura speaking. One question. So in vehicle automotive batteries, I would like to clarify one point. BBU expectation is rising. So about in vehicle, the JPY 40 billion onetime number, I think it was a kind of a surprise. In the past, there were some missing targets. So I would like to once again ask you to explain that, why? And this guidance comparison to 3 months ago, maybe it's the same, but the gigawatt hour is a bit at a higher level. As for sales, the raw material cost is increasing. And together with that, the selling prices and also the FX, there are some upside from that. But at the same time, as for the profit improvement looks small. So in vehicle batteries, how you approach and also to apply it for the industry, what would be the time frame, if you can talk about that.

Thank you for your question. I myself, yes, JPY 40 billion, when I saw that, I was surprised. -- what has been happening is that it is not something that is burning or combustion or anything like that. But we have made this provision so that we can prepare for that. So this is just one time. It would not happen.

So as for the forecast, those are not different from 3 months ago about the sales and so forth. The forecast, you mean the fiscal '27 North American business?

Yes.

The sales -- well, concerning that, the trend is unchanged. 46 gigawatt hour is what we mentioned and the market is improving. So year-on-year, it probably appears to be stronger, but this is due to the recovery of the market as a whole and also the customers, strategic partner, their request has been coming in. And based on that, we make our plan. So once again, we would like to explain that. So also the share increase of -- on the part of the customers. And also the adjustment of PSI and including that, we came up with this number of the 46 gigawatt hour.

Thank you. We have come to an end of the scheduled time. So with this, we conclude our online briefing on the financial results for the fiscal year ending March '25 or '26 rather, and the group growth strategy.

I'll present the consolidated financial results for the third quarter of fiscal 2026 ended December 31, 2025. The summary. Sales and operating profit decreased year-on-year. Sales decreased overall due to lower sales in Lifestyle and the deconsolidation of automotive despite higher sales in Connect, Industry and Energy. By business, sales of generative AI-related businesses in Industry Energy increased in addition to higher sales of process automation and Connect. Sales decreased in in-vehicle in Energy, consumer electronics and air conditioners and Lifestyle and various other businesses.

Adjusted operating profit increased overall due to increased profit in Lifestyle, Connect and Industry despite deconsolidation of Automotive. Operating profit and net profit decreased due to recording of restructuring expenses for ongoing group management reform. Operating cash flows for the 9 months decreased year-on-year due to the absence of monetization of IRA tax credit through transferable method in FY March '25 and restructuring expenses. As for the full year forecast, overall sales and adjusted OP remain unchanged, but by segment, adjusted OP is revised downward in Lifestyle and upward in Connect & Industry. Overall, adjusted OP forecast for Energy remains unchanged, while adjusted OP for in-vehicle is revised downward and that for Industrial Consumer is revised upward. The downward revision of the forecast for OP is due to increased restructuring expenses.

Sales decreased year-on-year by 4% to JPY 2,063.3 billion. However, sales, excluding automotive increased by 5% year-on-year. Adjusted OP increased to JPY 159.1 billion. Due to the recording of restructuring expenses, operating profit decreased to a loss of JPY 7.2 billion. Net profit also decreased to a loss of JPY 17.1 billion. Results by segment based on the current reportable segments. Following the launch of the new organizational structure in January 2026, we have begun disclosing our financial results based on new reportable segments effective after the third quarter announcements. Please refer to the reference materials for the results based on new reportable segments.

First, sales by segment. Lifestyle saw overall sales decreased due to lower sales in such businesses as consumer electronics and HVAC, both affected by weaker overseas demand despite higher sales of electrical construction materials supported by favorable sales mainly in Japan. Connect saw sales increase due to higher sales of process automation, capturing demand for ICT, including generative AI servers. Avionics with continued strong orders and Blue Yonder. In Industry, sales increased driven by continued demand growth for information and communication applications such as generative AI servers. In Energy, sales of in-vehicle decreased due mainly to lower sales of North America factory with deteriorated EV market conditions.

Sales of Industrial Consumer largely increased due to continued favorable sales of energy storage systems for data sensors. Within other elimination and adjustments, sales in Entertainment and Communication decreased due to deteriorated market while sales in housing increased. As for adjusted OP by segment, increase in Lifestyle Connect and Industry. In Energy, adjusted OP of in-vehicle decreased due mainly to lower sales in North America and the impact of U.S. tariffs, while adjusted OP of Industrial Consumer increased due mainly to higher sales. As a result, overall adjusted OP increased despite the deconsolidation of Automotive.

As for the results of Lifestyle segment by divisional company in Living Appliances & Solutions Company, sales and adjusted OP decreased due mainly to sluggish overseas sales. Heating and Ventilation AC Company saw adjusted OP remained at the same level year-on-year. In Coaching Solutions, sales and adjusted OP decreased due mainly to temporary lower sales caused by manufacturing issues in North America. Electronic Works Company saw OP increase on higher sales of electrical construction materials in Japan year-on-year operating profit variance analysis from left, increased sales in real terms had a positive impact of JPY 10 billion. Increase in fixed costs had a negative effect of JPY 8.4 billion. Please note that positive effect of JPY 5 billion was recorded due to restructuring.

The net impact of raw materials and logistics prices was negative JPY 4.3 billion. Net impact of price revisions, rationalization and other factors was positive JPY 27 billion. Blue Yonder, negative JPY 4.8 billion, excluding foreign exchange. Effective exchange rate was positive JPY 1.9 billion, mainly in Industry and Energy. Deconsolidation of Automotive was negative JPY 8.2 billion. Impact of US tariffs was negative JPY 4.3 billion. Adjusted OP increased by JPY 8.9 billion year-on-year. Operating profit was down JPY 139.5 billion.

On the left, operating cash flow decrease of JPY 412.4 billion year-on-year due to nonrecurrence of IRA tax credit. On the right, net cash was negative JPY 945 billion. As for the consolidated full year forecast for sales and adjusted OP remains unchanged from forecast announced in October. The forecast for OP and profit before income tax is revised downward by JPY 30 billion due to deterioration in other income loss of JPY 30 billion. Full year forecast by segment. Please note that the figures are presented based on the current reportable segments. The forecast is revised upward for Connect & Industry, downward for Lifestyle.

This shows the forecast of the Lifestyle segment by individual divisional company. Sales and AOP forecast is revised downward in LAS and HVAC and CO CCS, while the AOP profit forecast in Electric Works Company is revised upward. This shows our analysis of the forecast by segment. The Lifestyle overall sales and AOP forecast is revised downward by business. Living Appliance and Solutions Company and HVAC is revised downward due to a weaker overseas demand. CCS revised downward due to a temporary reduction in production in Q3. On the other hand, AOP forecast in Electric Works Company is revised upward due to continued favorable sales in Japan. In Connect, the forecast is revised upward with higher sales of avionics supported by continued strong orders as well as higher sales of the process automation.

In industry, the forecast is revised upward with higher sales of products in electronic devices and materials and driven by the continued demand growth of Gen AI servers. In Energy, overall AOP forecast remains unchanged from the previous forecast. AOP in in-vehicle is revised downward due to the slowdown in EV market condition in North America, while upward that for the industrial and the consumer with higher sales of energy storage systems. This shows our analysis of AOP forecast by factor in comparison to the previous forecast. The upper graph is the previous forecast. The lower one is the revised forecast. Middle row is the revised amount.

As shown in the middle section, operating profit forecast revised downward by JPY 30 billion from JPY 320 billion to JPY 290 billion. An increase of the JPY 30 billion in restructuring expenses currently underway, which is recorded in other income and loss, although the forecast of AOP remains unchanged. This shows the update of the structural reforms currently underway, including restructuring expenses and expected effect. Restructuring expenses are now expected to increase by JPY 30 billion to JPY 180 billion due to the expansion of restructuring. Accordingly, the group-wide effect of restructuring is expected to increase by JPY 5 billion to JPY 42 billion. The group-wide effect is now expected to increase to JPY 145 billion.

From this slide onward, I will discuss the outlook of each individual business. First is in-vehicle in Energy. On the left line graph shows the trend in sales volume of automotive batteries in the North American factories. The bar graph shows EV sales in units in U.S. related to the termination of the IRA Section 30D tax credit for EV purchases at the end of September 2025, there was a last-minute demand in Q2. As a result, greater-than-expected impact, the full year forecast for battery sales volume is revised downward to 39 gigawatt hour from 40.

In our outlook on the EV market, we expect the market to bottom out in Q3 and then overall full year, recovery is roughly to the same level as FY '26. The uncertainty continues, however, we will continue to expand our business in line with the market trends and the customer demand. Next is our outlook for the energy storage system for the data centers in industrial and consumer. Graph on the left shows the sales outlook for the energy storage system for the data centers in pursuing our sales target of JPY 800 billion in FY '29, the possibility of securing nearly JPY 500 billion over the current level has increased significantly. And we have also recently seen the rise in customer inquiries. In response to the surge in demand, we are moving quickly to make decisions on expanding capacity, including repurposing the existing automotive battery assets.

For cell production, we have already begun converting the production lines at automotive battery factories in Japan and plan to begin production for the data center applications sequentially from the Q1. Looking ahead, we will also consider further utilization capacity at our Kansas factory. For module production, we have decided to construct a new factory in Mexico and already launched this project. In addition to address the increasing complex customer challenges in absorbing power load fluctuation, our energy and industrial businesses are collaborating to accelerate the development of the new solutions. We also plan to launch a capacitor backup units, which use our newly developed modularized super capacitors in FY '27. Leveraging our unique expertise in, from the capacitors to batteries, within the company, we are delivering the solutions that only we can provide. By doing this, we maintain our leading market position to drive further business growth.

Next is outlook for the Gen AI-related businesses. We set the target of the JPY 100 billion in FY '31 for existing 2 core products, conductive polymer capacitors and multilayer circuit board materials with various new devices as demand related to Gen AI continuing to expand at the pace far exceeding our initial expectations, we now see the possibility of reaching JPY 100 billion with these 2 existing products alone. We plan to invest in several of our plants, including the construction of the new facility at Ayutthaya plant in Thailand for electronic materials to ensure that we do not fall behind the rising demand.

Furthermore, business opportunities are rapidly expanding in areas where our industrial segment's expertise can be fully privileged, such as super capacitors for CPU, high-voltage devices for supply and other peripheral application. We also actively pursue growth by capturing those opportunities. This is the share transfer of the Panasonic Housing Solutions that we announced on the 17th of [ 11 ]. We are proceeding smoothly with the necessary procedures to close on March 31, '26. Portfolio management review is currently underway.

And this shows the segment changes to Lifestyle segment resulting from the transition to the new organizational structure starting in January this year. The current segments are shown on the left and the new ones are on the right. In addition, we are making some changes to the voluntary disclosed businesses. And from the next results briefing, we will be explaining based on the new reportable segments. And thank you very much for your understanding. That concludes my presentation.

Masami from Nikkei. I have 2 questions. First, I'm looking at Slide 18, Energy. The new plant to be constructed in Mexico. What is the size? When do you start construction? And specifically, where in Mexico and why Mexico? That's my first question.

My second question about the new HR system. Solution Revenue Officer and Chief Revenue Officer are newly established. Could you be more specific in what their respective roles are? And what led to this change in the HR system?

Thank you for your questions. First, for module plants to be constructed in Mexico. You asked about the location and the backdrop. First, in Mexico, we already have a plant. So we wanted to consolidate, expand in the vicinity. And that's why Mexico. We are to expand in 2 ways. At the existing plant, we do have some idle space and capacity. So that will be the priority in our expansion. And in order to achieve the target that we have for FY '29, we need further expansion. As for the timing, JPY 800 billion in FY '29, and we backcast from there for the construction plan.

And for the second question, our CHRO, Kinoshita, would respond.

About the personnel change announcement, especially Solution Revenue Officer and Chief AI Officer. About Solution Officer, we have 3 business areas focusing on solutions, as you're aware. In the solutions area, established a system for go-to market and have the marketing strategy on B2B as a group. So Solution Revenue Officer was established to address that specific mission. Suzuki-san of SAP is to join us given his expertise, key account management expertise in particular. We will refer to his expertise so as to revisit our B2B strategy.

And Chief AI Officer. In the AI area, Matsuoka-san has been leading this effort at Panasonic WELL headquarters to promote the shift to AI in our core businesses, so as to establish the platform as the solution company. This reform was in the innovation and incubation phase so far. And we are going to go into the next phase of AI transformation revolution, especially in solutions area, which is our focal business area, we are to leverage AI and to provide value-added offering to our customers.

And along this line of thought, so far, we had AI strategy development and research capabilities in different regions, different organizations, but we want to consolidate this to AI data platform. And so Panasonic WELL headquarters will be dissolved as of the end of March for further development. And Sakakibara-san, who is the CTO at Connect will be assuming this new responsibility, so as to provide solutions to the customers. And Sakagibara-san would be the CTO at Connect and also CAIO of the Panasonic Group, so that we will have the maximum application of AI expertise under single leadership. I hope that answers your questions.

Next from Toyo Keizai, Umegaki-san.

Umegaki speaking from Toyo Keizai. I also have 2 questions. First is about the headcount reduction. The restructuring cost, I think you changed that upward twice. So maybe more people applied for this plan. So how many people applied or how many people have left? And how do you think of this? Based upon the capital market theory, maybe this would lead to the lower head personnel cost and it's positive. But also, on the other hand, it means that more people wanted to leave Panasonic. So is it possible for the employees to have a more pessimistic view about the Panasonic future?

And the second point is about the direction of the AI. The consumer electronics, especially the B2C business, how do you plan to utilize AI? So more recently, the B2B, the batteries, materials for AI, they are doing well. I understand that. But for the -- when Umi and also Panasonic WELL will be dissolved and Yoky will be stepping down. So does that mean that the new service start-up didn't work very well? Anything that you learned as a lesson? So after dissolving the Panasonic WELL, the strategic alliance with Anthropic, is that going to be maintained?

I like to answer to your questions. The first is about the personnel reduction. Yes, the restructuring expenses has been increased. So as you can guess, the number of people is going to be bigger than what we expected. We mentioned that the 10,000 as a whole number. That was the plan that we showed. And there will be some people who will be applying in the Q4. So it's still uncertain, but it's likely to expand to the 12,000 level.

So how do we interpret this? You also asked about that. I think that the personnel or each employees made this decision after really thinking about this very seriously, and they decided to move forward. And it was a very difficult decision for us, but we'd like to stay closely with those employees who are starting the new path. We would like to support them and also whether we have a pessimistic atmosphere inside the company.

And of course, that -- when many people leave, it is likely to cause some disruption or confusion. But there are people who would like to stay and persevere and work hard. So we would like to consider this as a positive thing so that we can create the new Panasonic Group as one team. That's the first question. And the second is the AI utilization in the area of the B2C. Yohana, Yoky is stepping down. So how do we redefine this? So as we -- it was explained about the changes of the personnel, I think we are moving on to the next phase.

So Umi and Yohana, we need to really stop -- pause and think about this once again from zero. So from 2019, Yoky joined us. And based upon the new hypothesis, we try to challenge this B2C area. And every year, we had a pretty good budget and try to verify the hypothesis, but this Yohana business and also Umi, the scaling and monetization was -- we did not verify the hypothesis very clearly. So we need to pause and think about this once again.

And it doesn't mean that we will stop the AI-related challenge in the B2C area. So in the Smart Life, for example, we will be inheriting this so that we can do the new monetization or a new business model will be generated, and we will continue to challenge. About your question about Anthropic, yes, the Umi, under the framework of the Umi, we were discussing the alliance. But so this would change a little bit. But with the AI platformers and the partners, we would like to work together and we would like to compete against each other, and we would like to do -- continue to do so, and that remains the same as a group.

Next, [ Takeuchi-san ] from NHK, please.

Can you hear me?

Yes.

About the headcount reduction, I have a question on that. More people applied, I understand for the early retirement program. I think you're going to need to improve on the productivity with smaller headcount. Where are you in that effort?

Thank you for your question. Yes, I think this will be a good follow-up to what we were discussing earlier. Increasing the number of personnel at the workplaces where the number has been reduced would be counterproductive. So we will be working on the productivity improvement. And we are having a very in-depth discussion at each workplace. Use of AI at our workplace will continue to be promoted. So we'll do that as part of our efforts to improve our productivity. And that discussion is ongoing at each entity. And selection of where to focus on is another important aspect. We have to be proactive in identifying where we can reduce or terminate our businesses. So those are the things that we are working on. I hope that answers your question, Takeuchi-san?

Yes.

Next is Furukawa-san from Bloomberg.

This is Furukawa speaking from Bloomberg. I have 2 questions. The first is on Page 17. North American EV market after the Q3 gradually recover. So what is the reason for this assumption? Is it based on your strategic customer? Or do you see the recovery already in January and onwards? Or are there any other reasons or information?

And also on Page 8, on the right-hand side, about the share transfer, there is a JPY 42.6 billion write-off. Could you explain what this is?

Yes. Let me answer to the question. The first about the North American EV market. As I mentioned, in Q3 went down because Q2 was very strong. So it would gradually recover and we expect that it will go back to the same level as before. And you asked about the reasons. There are multiple factors. And based on those, we made this judgment. Market as a whole for the full year, it's about flat, almost flat or depending on the researches, it could a little bit be a little weaker than the year before. That is for fiscal '27.

And as for the strategic partner, of course, that it is closely related to them, and we are having the conversation with them. And what they wish to achieve is a little bit higher. So their vehicle strategy and also their market share increase, they say that they are confident in doing so. But in our case, we would like to make a judgment based on the multiple perspectives, and we believe that this type of recovery is possible. So that's my answer to your first question.

On Page 8, in other income and loss, JPY 42.6 billion write-off, I think that was your question. And concerning that, as we mentioned Ficosa on the PowerPoint presentation, the Ficosa deal related, the write-off was JPY 42.6 billion in this quarter. So Ficosa fiscal year, we carved out the automotive segment. And Ficosa was one of the business sectors. So this is for the Europe, they manufacture automotive components. So for that, last fiscal year, maybe you remember that at the time of the carve-out of the automotive, we could not carve out everything.

So a partner, of course, based upon the shareholder contract with the partner, it was not possible to transfer that part. So the partner wanted to proceed. It's not -- so therefore, it was not a total carve out. And about this business, this continues to be the noncore business in [indiscernible]. So about the carve-out deals, we try to pursue the different deals. And as a result, this write-off occurs.

About the write-off, Ficosa, we acquired this Ficosa majority shareholder more than 10 years ago and the related business have been damaged to some extent. So as a result of that, there was a write-off.

I see. Just a follow-up question. Just one question. Strategic client, their level of -- the level that they want to achieve, it's high in Q4. And also you can -- you said that the high level is for fiscal '27. Is that correct?

Yes. Your understanding is correct.

[Operator Instructions] is Tarada-san from [indiscernible].

This is [indiscernible]. About restructuring, I have a follow-up question. 12,000 people altogether, you said, I understand this is already exceeding the number you had originally had in mind.

Ultimately, what do you think would be the total number? Or do you think that the headcount optimization has all been completed? And also regarding restructuring, are there anything additional that you can share with us with regards to the progress made so far?

About the personnel optimization, restructuring, 12,000 currently, is it going to be any larger was your question. 12,000 is the forecast on the full year basis. So we are not anticipating any further increase, a big increase from there.

And for restructuring, this is not specific to personnel, but other aspects of restructuring.

Any progress during this quarter?

Well, housing and automotive-related Ficosa deals. These are the new developments that we saw as was included in my presentation earlier.

Question for clarification. So 12,000 people, you don't expect any further increase, meaning that you think that personnel optimization has all but been completed. Am I correct?

Yes, that is correct.

As for businesses, the businesses with issues, I think you had a list on that. How about sales divestiture of those? Any specific progresses made so far?

Specifics have already been mentioned.

So due to the shortage of time, we would like to take one more question. So from Nikkei Business.

Iwato-san speaking, Nikkei business. So personnel related, Matsuoka-san is stepping down. Yohana was not so successful and Umi was not made into the services. I think when Nikko-san said that there were a good level of the budgets. I think it's been 7 years. So what did Matsuoka-san bring to Panasonic? And also Kinoshita-san is joining as an external personnel to Panasonic. So what are the important things for the external personnel to be contributing to Panasonic?

Okay. I'd like to make a comment, and I would -- you asked the question to Kinoshita-san, so I would ask Kinoshita-san to make a follow-up comment.

So what remains after challenging this? As a business, yes, we did have a continued budgets, but it was difficult to monetize or scale up the monetization. And there were some hypothesis, and we needed to pause. And as we face the fiscal year of the restructuring, we made this decision. But it doesn't mean that there is no legacy. So AI-based business, how do you create a platform or architecture design and also the personnel through the various challenges, there are achievements of the things that remain in the company.

So we'd like to make sure that we keep the AI as an important initiative. So what she left as a legacy for the future, we would like to make sure that we would succeed that through the R&D of Panasonic so that we can take advantage of them. Thank you.

And I would hand the microphone to Kinoshita-san.

So as Waniko-san said, yes, Matsuoka-san's office in Silicon Valley and also her team, I met them in Silicon Valley. And Matsuoka-san is really the talent magnet and great AI talents were attracted in Silicon Valley. So those people were attracted to us. So building the AI data platform was what they did.

So unfortunately, we suspended Umi, but about the AI and data business, what kind of personnel do we need? I think that we have made the progress in building the foundation. And we talked about the personnel development. So I think that we have to make sure that we do both. So that is the innovation personnel. We still need more innovation personnel. And Matsuoka-san started so-called Dojo. So the development program was something that she led with passion.

So that Japanese engineers who spent time with her, I think a lot of efforts to retain those people and newly appointed CAIO, Sakakibara-san is also a talent magnet. So in Connect, Sakakibara-san has been leading the AI-related development and gaining the personnel from IBM and others. So in that sense, Sakakibara-san will be succeeding that as Chief AI Officer. Thank you.

That concludes the Q&A session for the journalists. We now move to the Q&A session for institutional investors and analysts. Again, please note that questions are not accepted on the English line.

From Goldman Sachs, Harada-san.

Harada from Goldman Sachs. I have two questions. First is on business risk. Earlier, you did refer to EV. Can we be assured that Q3 would be the bottom? And as for Connect process, we are sure that there will be sufficient capability in terms of procurement. Is there no risk for cost increase or margin reduction. And Anthropic AI SaaS-related share prices are declining today, wouldn't Blue Yonder be affected by that, especially for next fiscal year?

And also on industry for the high-voltage device, I think you said that there will be new products, capacitors, is it 100-volt architecture? What kind of products are you talking about?

Thank you for your questions. First, about the business risk, you referred to various factors about EV, electric vehicle, would third quarter really be the bottom you asked. The slowdown or softening of the market, we need to keep eye on that, but our projection is it is going to get better. Of course, we have to rely on our communication with the strategic partner. We are receiving strong inquiry. And in the third quarter, we had a bit of a problem with ramping up our Kansas factory production, and there is a rather strong pressure coming from our customers to increase our production capacity. So there is a demand on the part of the vehicles, obviously. So there was a rebound decrease that we saw in the earlier quarters, but we think we can be positive about going forward.

And as for the electronics, DRAM, semiconductors, I think we are on top of the materials. And there are some price increases in materials, especially copper, we are paying close attention to the development in the market. But so far, it is not yet a big risk.

And your last point about AI-related, SaaS-related share prices. I think you're talking about the multiple deteriorating. Within the industry, there are some concerns voiced. So it is not just -- it's really an overall market situation.

How do we see that? With AI, we are seeing two opposite directions, the opportunities and threat. I think there is more attention being paid to the threat aspect and maybe that is the reason why it is hurting the multiples of some of the shares. But we're on top of that. Especially the cognitive series of Blue Yonder, AI agent mounted product lineup ahead of our competitors as we have been explaining. So as far as Blue Yonder is concerned, we consider this to be opportunity rather than threat, though, it is really up to the market to see which is the case, but at least that is our viewpoint.

Regarding the devices, especially the high-voltage devices for industry, specific product information cannot be shared at this point in time. Capacitors, relay, we do have these products within our business. And as you're aware, for AI data centers, higher voltage capabilities are being called for.

In e-vehicle and automotive applications, we have built our expertise translated into business opportunities, and we feel there are further opportunities. And we will be sharing further details as they become available.

I see. One question about Blue Yonder. The valuation of competitors are deteriorating. What about the impairment loss risks?

In a nutshell, impairment risk is not what we have in mind. Of course, within valuation, the multiples of our competitors will be part of the factor. That's for sure. So it is going to get tighter than in the past, but overall valuation decrease that we see today is not going to affect us for the time being, that is.

Next, BofA Securities, Hirakawa-san.

This is Hirakawa of BofA. Two questions. First is about the EV batteries. And you mentioned the specifics, but your strategic partner, high-end model is going to be suspended. And then that Suminoe Factory utilization rate might come down. And the Kansas batteries demand is strong, but the Nevada battery demand might come down. So Suminoe and Nevada and the utilization, is there anything that would fill up the decline? And so could you share with us your view on the utilization rate and other earnings?

Second question is about JPY 600 billion as I said, OP and now it's JPY 150 billion. So the fixed cost, JPY 185 billion is now possible. But now that the EV automotive battery is uncertain, CFO said, so that uncertain condition continues. And so JPY 600 billion maybe we shouldn't focus too much on the single year number, but in achieving JPY 600 billion, what are the initiatives that are remaining that you can work on?

Thank you. First question about the EV battery, our strategic partner, high-end model production suspension, the impact of it to us. That was your question. Yes, there is an impact. But concerning that, we have already factored that in. So high-end model production, when it's suspended, the impact, as you mentioned, is that the Japanese plant, the cell production will be impacted. So this quarter, for the first time, the client side, announced that they would make this suspension. But from the last fiscal year, it was already factored in and the volume has been reduced. So we explained that many times. So we don't have to worry too much about that because we already had the expectation. So about this, we already knew this would happen.

So as for the utilization rate of Japanese plant, Mazda and Subaru and other car OEMs, how do we shift to others, and we are talking with them, and we have been discussing about the business. But having said that, EV market has been slowing down, and it's not just our strategic partner, but the OEM as a whole. So concerning that, as I explained, the BBU battery demand is very strong, and we have difficulty satisfying the demand. So we would like to take advantage of our asset and capability that we have in Japan so that we can repurpose it for the CBU and BBU. So from the Q1 of fiscal '27, we would already start the production. So as a total, we would like to hedge risks that way.

The second question, JPY 600 billion, is that something that we are likely to achieve. Yes, we think we can achieve that. First, the restructuring, the expenses is increasing, but the effect of the structural reform will be bigger in the next fiscal year. So this is going to be the main driver. So we are not depending only on that. We are working on the business improvements in other areas. So through the improvements, as you commented, there are some businesses which are a little bit concerning or difficult to grow. There are some differences. But as I mentioned, EV market will be about the same as the year before. And we do not expect this to go down compared with this fiscal year. And also the BBU business growth would be much bigger than this fiscal year, and we are getting that reaction.

So if we -- when you look at the total picture in addition to the effect of the restructuring, we think we can expect that the increase of the base business.

[Operator Instructions] Nakane-san of Mizuho please.

Nakane from Mizuho. One question. I have a related question to what Hiraka-san asked earlier that is, are we really okay for next fiscal year? Cold Chain and life application downward revision was made. In the third quarter, what happened? And why are the figures looking that way? And I understand that there are no additional restructuring planned so far. But even with that, do you think you can achieve the figures that you envision for next fiscal year? Or is there anything else that you need to implement?

Thank you for your question. For the third quarter, in the Lifestyle, especially Cold Chain, yes, rather sizable downward downside. What happened? It was your question. And what about next fiscal year?

So let me try to answer those questions. First, in the third quarter, as was explained earlier, on the production side, we had a temporary hiccup setback, which limited the production and sales negatively affecting our results. So this was the production system that was related to manufacturing. So there was a supply side issue. And so temporarily, we had to control the production volume.

So what about next fiscal year? These are the supply side factors. So there was some inconvenience on the part of the deliveries. And it might be difficult to make up for the difference in Q4 only, and that is the reason why we made the downward revision in our full year forecast. But there is demand on the part of the customers, and we will satisfy them next fiscal year.

As for Lifestyle business, last C&C -- on the full year basis, some softening is taking place and maybe that's why you have a concern. But we have been implementing various measures, the global cost or what we call the China cost strategies. And with the restructuring effect in place, we do expect these efforts to bear fruit. So JPY 600 billion for next fiscal year, we believe is achievable.

Next, Yasui-san from UBS Securities.

Yasui speaking, UBS Securities. The BBU for data centers, the beginning of the fiscal year, I think that positive 50% and this time, 70% was revised upward to 80%. So I think there could be further upside. So based on your understanding, the part that upward revision is continuing, are there any factors that is continuing to be strong? And maybe next year, you can double this. So what would be the expected revenue? So Rubin will be coming out. So maybe it's not going to be switched over within this year, but could you talk about the outlook for fiscal '27?

Thank you for your questions. concerning that, for this fiscal year, what you said is correct. So 1.8x bigger than the year before. That's what we are showing. At the beginning of the fiscal year, we said 1.5x. And in the previous briefing, it was 1.7 and this time, 1.8. So each quarter, the demand is becoming stronger. And including the background, in our view, I think that the GenAI-related infrastructure investments are happening and customers want these products. And that I think we believe is the reason. So it's not really the reason due to us. I think that because of the demand in the society requiring our products and services.

So what about the next fiscal year, getting to JPY 800 billion? I think that we already talked about how we are likely to achieve that size. And if everything goes, I think that doubling everything will be difficult, but big growth can be expected. There is no question about that. And as I mentioned, each quarter, the demand is becoming stronger. So rather than downward, it could go upward. It is possible. So concerning that, we cannot control the demand. So I'd like to make sure that we talk with our customers and lock in our customers, and that is our core. So we'd like to take advantage of the strong relationship so that we can get the information quickly.

And also how do we set up or build up our production speedily. I think that would be the key because about the cell because it takes a lot of time, the automotive demand -- the battery side needs or demand is slowing down a little bit. So we'd like to be able to quickly respond. And we mentioned the module plant in Mexico. Module is in comparison to cell is asset-light. So inventory investments in the period needed to be smaller and shorter. So we want to make sure that we would not fall behind to catch up with this expansion.

So what about the timing to switch over to Rubin? Is there any time frame that you have expectations for? About the customer solution switchover or shift, we do not disclose that information, and we would just make sure to respond to the demand of the customers.

Thank you. We are already running over time, but we would like to take questions from two more persons. Ayada-san from JPMorgan.

Ayada from JPMorgan. Blue Yonder third quarter sales on a U.S. dollar basis increased by 5%. What's your view on that? $1.47 billion is the annual production, no change, which means that in Q4, you may have to increase by 15%, which seems rather challenging. The cognitive pipeline shifting to the actual sales, is that taking place steadily? And in SaaS area, with heated competition over AI, maybe the customers' investment timing may be pushed back. So is that having an impact?

We are showing the results by quarter. So when you do the subtraction from the full year basis, you think that fourth quarter is going to be challenging. Yes, we are aware of that structure. Cognitive was launched in the first half of the year, which would result in actual sales over 6 to 9 months. That is a lead time. And Blue Yonder is running the business on a calendar basis, which means that October, December is the peak period. So we were anticipating that there will be more results, more bookings recorded in the fourth quarter.

In terms of SaaS sales growth, it is growing, but booking growth was not as high as we had originally anticipated, but business pipeline is being solid. So for the fourth quarter, we are trying to achieve the full year target one way or another.

From SMBC Securities, Katsura-san.

This is Katsura. Slide 20, I have one point of clarification. So YKK, JPY 60 billion in other income and loss in relation to this. And I think JPY 100 billion effect. So this fiscal year, you mentioned Ficosa, that was not something that we did not expect and its number is pretty big.

And about the restructuring, you mentioned that YKK and others, there will be a good prospect. And for -- with the increase of JPY 30 billion, that is a restructuring cost, you made the revision. Maybe that's the net basis. But everything included on that? Or are there any other structural reform related or portfolio management-related factors that will be impacting in the coming years?

About the PHS, the Housing Solutions, the impact of -- the impact. And both profit and loss and balance sheet, this would be impacting for fiscal '26. And JPY 100 billion net cash increase. The closing is the 31st of March. So as of that time, there will be a positive impact in terms of the capital.

And as for the Ficosa and other income and loss, Ficosa was factored into the overall forecast. So even with this Ficosa impact, we are not going to make any revision. So it's just related to the overall structural reform. And we did receive some questions on this point, but we could not really mention the specific name. And this housing JPY 60 billion profit is here. So there must be the negative number, and we did have that kind of question.

So our expectation was already included, but until we complete the deal, we could not really mention the name. There are several factors. And now this has been already realized. So on the net basis, this is the number that we are sharing with you right now. So -- but that was already factored in. Thank you.

We apologize for running over time. With this, we conclude the online briefing on the financial results for the third quarter. Thank you very much for your participation.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]

Hello, everyone. This is Yuki Kusumi. Thank you very much for attending Panasonic group IR day despite your busy schedule. Today, I'd like to explain the Solutions Area, which we announced last February as a focus area. But before that, I'd like to say a few words about the Housing Solutions business, which we announced recently on November 17, amid a decline in new housing starts in Japan.

We believe this will benefit not only PHS, but also YKK AP as it would allow us to accelerate our nonresidential and overseas expansion and become a one-stop comprehensive building materials manufacturer with a wider range of products for our customers. So we proposed this to YKK and YKK AP in November of last year. There's so much work to be done before the closing, but we can now share the details with you all.

As we mentioned in our earnings briefing, we are also taking nonsequential actions, involving discussions with other partners. And as with this case, we will make announcements when signing agreements are made. Today, I have to explain that the Solutions Area, we have businesses with solid strengths and the potential to increase our earnings power. I presented a similar chart in February. And I believe the essence of business in this area is to continuously contribute to the profits of our customers' businesses and continue to receive compensation for that.

Therefore, our competitiveness is contributing to the profits of our customers' businesses and our competitiveness in the operational efficiency that enables this. And this is directly linked to our earnings power. We have many strong businesses that can compete globally, including businesses in which we had top market shares. Many of our businesses are still based on the sale of hardware, and there is significant room for improvement in terms of continuously contributing to our customers' profits.

I believe that as you listen to our briefings today, you will understand that we are on the verge of achieving this. The first of these 3 businesses is energy storage systems for data centers by ensuring safety and evolving technology to absorb the increasingly volatile power consumption of AI servers.

Due to GPU advancements, we guarantee maximum power consumption below peak power per rack reducing the contracted power consumption of the entire data center, contributing to the improvement of profitability. This is a mission-critical area and by adding functions to solve new power challenges arising from AI advances, we are ensuring continuous stable operation.

The second is the Electrical Construction Materials business aimed to layer on solutions that enhance the value created while the building is in use. That is the lifetime value. Currently, as we are leveraging connectivity, including centralized control rooms within buildings, we will develop solutions that optimize energy consumption while improving the well-being of users.

The third is SCM software that autonomously solves customer issues in the ever-changing supply chain. We will explain Blue Yonder's current and dramatically enhanced cognitive solutions, including examples of collaborations with other businesses within the group. This is today's agenda, and the speakers have already been introduced by the moderator.

I hope this will help you deepen your understanding of the strength and growth potential of each of our solutions businesses, so as to feel excited about the group's growth. I look forward to hearing your frank feedback during the Q&A session. Your valuable feedback shall be incorporated in our management to enhance the corporate value of the entire group. That is all from me.

This is Kazuo Tadanobu. Now regarding the strategy for our data center energy storage system, I would like to start my presentation. First, regarding the market environment surrounding data centers. As you are aware, the AI server market is expected to expand rapidly due to demand for generative AI, projected to grow from $52 billion in 2023 to $224 billion in 2028, with an annual growth rate of 34%, it's also anticipated to see significant demand growth.

Meanwhile, market and customer needs are becoming more sophisticated, driven by the large-scale computations are required for AI. Demand for power solutions are becoming increasingly sophisticated. As GPUs evolve, server racks are becoming higher powered and power supply requirements now include beyond backup to include peak power suppression and smoothing of sudden voltage fluctuations.

Big power suppression helps data center operators reduce contracted electricity costs and voltage fluctuations then contributes to stable server operation by preventing momentary power shortages caused by increased GPU power assumption. The power supply systems, therefore, provide advanced management capabilities, including high output and fluctuation absorption. However, we believe a distributed system located near servers within the rack is considered advantageous. Demand for power solutions is rising. We maximize our contribution through evolution of unique strength and providing solution proposals and ability to supply. We aim at becoming power solution provider for the data center with a safe battery centered in the power system.

As our value proposition, we proactively propose solutions for increasingly complex customer challenges and flexibly supplying capabilities to meet surges and fluctuations in demand. We will continue to uphold industry initiatives and maintain our industry leadership. We believe our company possesses 3 key strengths that significantly contribute to realizing these value propositions. The first is our strong customer base with industry leaders and delivery experience, we have built strong relationships of trust with hyperscaler customers. We worked alongside customers to develop solutions, even before distributed power source became widespread and our pioneering solutions have earned high recognition.

We believe we hold approximately 80% of market share in this field as of this year. The second is our design proposal capability to solve customer challenges. By anticipating increasingly complex customer power supply issues and continuously proposed systems that translate required functions into specifications ahead of competitors and continuously propose systems that lead the industry.

Furthermore, our deep understanding of the systems allow us to independently determine specifications for cells, power units and other components and integrate them optimally. The third is the ability to materialize [indiscernible] products. We achieved performance, safety and reliability through sophisticated manufacturing capabilities, in particular, to meet the higher safety standards required for server rooms, we combine the quality and safety of individual cells backed by our long history in the battery business with patented safety mechanisms at the module level.

Our integrated development and production system covering everything from sales to modules enable us to supply products at the timing and volume requested by our customers. Next, we will explain our midterm outlook and enhancement measures to achieve our vision.

First, we aim to achieve sales of approximately JPY 800 billion by FY '29. To achieve this, we will not only respond to the rapidly growing demand for existing products but we will also introduce next-generation products to the market, such as CBUs using capacitors, and BBUs for dedicated power supply racks, which are our next generation products to drive growth. Furthermore, including next-generation products, over 80% of sales through FY March '29 are secured through awards. And we already possess the foundation to achieve the JPY 800 billion scale.

To solidify this foundation, we will advance 2 key enhancement measures. The first is supply system enhancement. We will rapidly expand production capacity in Japan and North America as global supply hubs and build a system capable of flexibly responding to rapidly increasing demand. Second is strengthening proposal and development capabilities for the next generation, leveraging both internal and external resources and technologies across systems and devices to provide more advanced solutions in a timely manner.

Through these metrics, we will flexibly respond to increasingly sophisticated customer needs and market changes and enhance our competitiveness. Starting next page, we will explain details. First, regarding measures to strengthen our supply system, we will utilize and expand our existing bases in Japan and North America. We will make efficient investment and acquire scalable supply capabilities that meet customer demand. Regarding our approach to production basis to efficiently increase capacity in response to certain demand, we will make effective use of existing sites, including automotive. We will also establish supply chains and BCPs in the U.S., the region with the highest customer demand and to shorten supply lead times, we will expand our production base in North America.

As a specific implementation plan, we will address the immediate surge in demand within Japan while advancing our North American expansion in the medium to long term. First, in Japan, we will triple our cell production capacity by fiscal year in FY '29 compared to FY '26. In addition, expanding lines at existing sites, we are also modifying lines for automotive applications with production scheduled to begin in the first quarter of FY '27.

In North America, to prepare for future demand growth and supply chain development, we are looking into partial utilization of our automotive site in Kansas. For modules, we plan to expand existing lines at our Mexico plant and establishing a new second area to further increase production capacity. By efficiently establishing the global supply system, we will respond flexibly and promptly to rapidly increasing demand. Next, I will explain our efforts to strengthen proposal and development capabilities for the next generation.

To achieve further value enhancement at an early stage, we are strengthening our foundation and the thorough utilization of external resources and technologies. First, as an evolution of our value proposition, we anticipate increasingly complex power supply demands and provide the systems our customers' desire. Specifically, we will evolve our systems from BBUs to shelf and rack configuration and simultaneously evolve the devices.

For example, to absorb power load fluctuations, we are developing a device called super capacitor and plan to offer it as a CBU system compatible with current shelves. For improving power efficiency within data centers, we envision a new form factor, a dedicated power rack supporting high voltage and plan to offer systems incorporating corresponding ultra-high-power devices. To strengthen these proposals and development capabilities, we are implementing a significant shift in human resources and increasing the number of power supply and system engineers through collaboration with the Panasonic group.

Regarding technology acquisition, we are working to create new value through collaboration with industry. And the CBU mentioned earlier, combines our proprietary capacitor integrated unit with the industry, which possesses capacitor technology and mass production is scheduled to begin in FY '27. We are also strengthening collaboration with external partners, such as power supply manufacturers. Through these initiatives, we are proactively addressing the advanced power requirements demanded by data center and enhance our solution capabilities.

Finally, we will explain our management targets. For FY '29, we aim to achieve sales of JPY 800 billion and ROIC of 20% or higher. Customer demand is exceptionally strong, and we expect sales for current fiscal year to reach the upper JPY 200 billion range. In FY '29, we will achieve high growth expanding to approximately 3x in scale. Regarding ROIC, we will achieve 20% or higher by establishing the supply system through highly efficient investments while maintaining and improving our current high profitability.

This concludes our explanation of the data center energy storage system. Thank you for your attention.

This is Kiyoshi OtakI from Electrics Works company. Thank you very much for your continued support to our company. Thank you very much indeed. Today, I will discuss our company's strategy titled Growth and Reform of the Electrical Construction Materials Business. I will focus on these 4 points you see on the slide. First, the business overview. Electric Works Company has 4 factories in Japan, 76 sales offices and 34 affiliates. At overseas, we operate in 101 countries and regions through 16 affiliates.

Last fiscal year, we recorded sales of JPY 1.715 trillion and adjusted operating profit of JPY 76.7 billion. In particular, our overseas electrical construction materials business accounted for 24% of the total sales of JPY 261.9 billion and our Indian business reached JPY 100 billion positioned as important pillar for our future growth. Our business areas are concentrated in lighting and electrical consumption materials. We hold a top market share in both areas in Japan. We also have second largest market share globally for wiring devices. We also both leading domestic product lines related to systems and energy.

Our strength lies in building ecosystem with stakeholders and delivering a wide variety of products on time with the quality our customers expect. By strengthening our competitiveness, domestic sales have grown steadily at an average annual rate of 4.9% over the 3 years from FY '23 to FY '25. India, the driving force behind our growth, grew at an average annual rate of 10.6% over the same 3-year period, exceeding the real GDP growth.

We believe our strategy is bearing fruit. Next, our perspective on business environment. While the number of new construction stores in Japan is declining, we expect a slight increase of 0.7% favor driven by the 30% expansion of high-value markets related to energy management and well-being. In today's human capital management, improving employee engagement and reducing turnover have become important corporate priorities and investment in office environments aimed at improving employee comfort and productivity has become prominent.

Meanwhile, overseas, particularly in the Indian market, population growth and expanding domestic demand are driving continued GDP growth, forecasting a remarkable growth of JPY 3.6 trillion or JPY 2.15 trillion by FY '31, a CAGR of 9.1%. Based on this environmental recognition, we aim to improve profitability in Japan and grow sales overseas. As shown in the profit pool for domestic electrical construction materials, we will increase the solution sales ratio to 50% and strengthen profitability by changing our business structure.

Solution sales refer to package sales based on proposals for clients and designers that address well-being energy management and other needs as well as sales of engineering, maintenance and service capabilities. For overseas electrical construction materials, we will pursue sales growth, securing market position, particularly in the Indian market. We aim to increase the overseas sales ratio to 35% with sales in India reaching JPY 200 billion, doubling the current levels.

Next, let me give you the specifics of our strategy. First, regarding our Indian business, which is the core of our overseas growth strategy, we aim to increase sales to JPY 200 billion by FY '31 and establish a strong market position. The growth engines for this are: first, strengthening our aftermarket electrical construction business. We will further increase our wiring device market share, expand cross-selling and develop lighting into our next pillar. We also believe that we can further increase our market share by strengthening our sales structure in the southern region where competing national manufacturers are strong.

To strengthen proposal capabilities number two, we will broaden the range of products for upstream designers and strengthen our collaboration with our major regional developers to comprise our customer base to capture the market. To accelerate these strategies, we will actively consider mergers and acquisitions and minority investments. Some examples of case studies. Building projects range from apartment complexes to hospitals and offices.

Many of our products, including wire and devices, distribution boards and system components have been adopted in projects by well-known developers as shown on the left. Furthermore, as shown on the right, our advanced technologies, such as LED floodlights are being utilized in stadium projects, including cricket grounds. We will strengthen our marketing efforts by expanding our presence through these studies and leverage our robust sales channels.

Next, domestic solutions strategy. In the domestic market, we will contribute to improving building LTV or the lifetime value in response to increasingly sophisticated needs. Building LTV refers to the total value of building generates throughout its lifetime. The value we provide is to enhance the value buildings by continuing to connect with customers and providing optimal solutions such as economic rationality, asset value optimization and well-being for each stage of the building process. Before the construction completion, we will strengthen package sales with high-value proposals centered on well-being and energy management.

After the construction, we will strengthen our engineering and maintenance and service capabilities and promote optimization through data utilization. This is supported by product and activity. We propose products that connect our products to network and enable real-time information exchange and control, by visualizing and utilizing equipment status, power consumption thermal [ comfort ] of the office environment, CO2 concentration and other data, we can achieve labor savings and increased asset value as shown here.

And we see a double-digit or a higher profitability in other areas, and we can enhance the overall profit in this area by concentrating on this area. Here are some specific examples. In the office sector, as shown on the left, our automated lighting control system introduced to improve energy efficiency and employee comfort. And the proposal to Mitsubishi Real Estate, we do have advanced networking for the common networking and systems. In the sports and entertainment sector, LED floodlights and our live video production platform, Kairos, were adopted at Toyota Arena Tokyo, which opened in October. This enables us to achieve both powerful visual effects and energy saving and has been recognized for improving the excitement and experience value of each visitor.

These examples demonstrate our strength in providing solutions that continue to connect with our customers even after the product delivery. Finally but not the least, I'd like to talk about the business effect. We will achieve our fiscal year 2030 -- 2025 forecast of adjusted operating profit of JPY 83 billion and an operating profit margin of 7.6% and aim for further growth toward FY 2031.

Regarding KPIs, we aim to increase the overseas sales ratio to 35% by FY '31. We will double sales in India, our growth engine to $200 billion. We will increase the domestic solutions sales ratio to 50% by FY '31 and promote a shift toward higher value. We will achieve sustainable growth in corporate value through both overseas sales growth and strengthened profitability in Japan. That concludes my presentation. Thank you for your attention.

This is Higuchi from Panasonic Connect. I will explain our Blue Yonder business in the supply chain management domain. We are to focus on the solution areas. That means to make a shift from hardware business, we ought to shift the portfolio. This means that the revenue will shift from one-off to recurring and customer churn costs and barriers to exit will be higher. And this makes it difficult to get caught up in pure price competition. With this context, supply chain management is increasingly becoming a strategic core element of our customers' business operations.

Consequently, in this area of uncertainty, the need to properly manage the entire supply chain is growing. Here, too, software plays a crucial role. Software handles the entire process of understanding, monitoring and controlling the supply chain status. Software also connects the front and back of the chain. This software plays a vital role in supply chain optimization, which is management agenda.

This is further enhanced by the addition of AI and multilayer networking with suppliers, carriers and others, increasing the value added. Panasonic Connect focuses on innovating our customers' field processes and supply chain management always sits at the top level of these field processes. Unfortunately, developing globally scalable standard software organically from Japan is generally very difficult.

So we have added them to our portfolio through M&A. This is public data for the supply chain market and supply chain management standard packaged software market, which is projected to grow at a CAGR of approximately 15%. Furthermore, considering that custom products exist outside this market and that standard products are migrating from on-premises to private clouds and public clouds, there is a large untapped potential market.

On the other hand, the market is fragmented. In this space, as a pure SaaS player, achieving scale and securing market presence can realize high business value. Here, we are showing sales force for customer management system and Workday for human capital management. We are aiming for a position similar to top players in each category, such as ServiceNow, Office 365 and SnowLake, which have achieved high corporate value. Blue Yonder positioning and potential is already the largest pure-play supply chain management software provider in terms of revenue and customer count.

Furthermore, it is the only company that can provide a true end-to-end solutions offering demand planning, supply planning, warehouse management, transportation management and return management plus supply chain network functionality that connects suppliers, customers and carriers. The dots in the table indicate middle class capabilities. Blue Yonder serves approximately 3,000 customers across retail, manufacturing, consumer goods, and logistics sectors with deep penetration into top-tier companies as shown on the right.

Therefore, the company is uniquely positioned to provide globally optimized solution. Even if competitors possess supply chain network capabilities, they cannot immediately achieve true end-to-end integration. While Manhattan is primarily a point solution focused on warehouse management, Blue Yonder solution is end-to-end, offers a broad product range and has a solid customer base. However, the biggest issue, frankly, was that due to repeated acquisitions and being under private equity ownership, where long-term investment was suppressed, software investment was not made and the architecture was outdated.

Therefore, we thought that the winning strategy would be hiring an excellent industry-proven team, including Duncan, who succeeded in starting up [ Infor ] to elevate -- evaluate the situation. As the market matures, we would fundamentally rebuild the architecture, acquire missing pieces through M&A, integrate one network and build a solution that fully and natively incorporates Gen AI.

The integration of acquired company solutions and the incorporation of AI capabilities due to the emergence of generative AI extended the investment period slightly beyond the initial plans and increase the investment amount from $200 million to $300 million. However, this allows us to aim for a higher level. First, regarding cognitive-enabled solutions.

Cognitive refers to AI that understands trends with human-like intuition akin to human cognitive abilities. This means interpreting the meaning of information and data understanding patterns rather than merely making fixed judgments based on past data or future predictions to detect anomalies. However, generative AI alone is not sufficient.

Blue Yonder, enriches its full potential by natively embedding AI with its existing machine learning and individual optimization engines along with end-to-end supply chain data. Currently, Blue Yonder performs 25 billion predictions daily by fully leveraging AI in each and every one of these predictions, we achieved greater flexibility, effectiveness and accuracy.

To maximize this cognitive capability, we have invested in building a robust integrated platform that serves as the enabler. This is where we have been investing. This platform delivers an integrated data foundation, microservices, multi-tenancy, cloud native architecture, event-driven capabilities and interoperability between solutions. No other SCM vendor is building a platform that fundamentally delivers this level of scalability, end-to-end capability and cognitive AI.

We believe this is difficult to achieve immediately at this point. In summary, with this vision, Blue Yonder aims to become a top SaaS player in the SCM software domain, the necessary requirements to achieve this are as follows. First, we are aiming to become a true end-to-end solution provider, incorporating not just point solutions but also enhanced SCM network functionalities, return solutions and CO2 emissions visualization capabilities acquired through the $1.1 billion acquisition of 5 companies. Second, we are to maximize SaaS capabilities by establishing a highly responsive interoperable integrated platform that enables scale expansion with minimum incremental cost.

Third, to boost customer value by embedding generative AI into Blue Yonder's existing SC execution resources, machine learning, optimization engines, workflows rather than adding them as add-ons, thereby achieving cognitive AI approaching human cognitive level. This is the vision, and this is truly unique. This slide illustrates the components that make up the vision, the foundational platform and supply chain network have already been developed.

The supply chain network is already connected to over 150,000 suppliers, significant benefits such as inventory reduction and decreased out of stocks can be achieved Developments of planning systems, execution systems, order management, return management, UX and AI agents are also nearly complete, including the remaining development, full completion is scheduled within fiscal year '28, the FY '26. The blue part indicates the respective functions to be realized, but the key emphasis remains to the end-to-end integration of execution and planning systems throughout the platform.

We have announced 5 engines, and we are also looking ahead to implementing conversation and collaboration between autonomous agents known as agent-to-agent communication, which will be a major strength. So far was on the product development investments. Other activities, including hiring a Chief Transformation Officer, fully leveraging AI, optimizing functional staffing and achieving $150 million in annual fixed cost reductions. Looking ahead, we plan to further optimize personnel in the technology development field through AI utilization.

Furthermore, along with the completion of strategic developments, we will reduce development resources targeting annual cost savings of $65 million to $80 million. Regarding investments, while past focus was on the product themselves and tuck-in M&As, the emphasis will now shift to go-to-market activities. Since new products inevitably face initial customer hesitation, we will promote programs to facilitate early adoption of new products by customers.

We will drive initiatives to accelerate migration from on-premise private cloud and traditional SaaS through cognitive solutions. Through these initiatives, we aim to increase adoption of our highly acclaimed cognitive AI products, enhanced communication of Blue Yonder visions and goals, deepen customer understanding, boost top line revenue and profitability and simultaneously improve product margins by scaling through our integrated data and cloud platform.

Executives who have already experienced and successfully executed this process at SaaS vendors have joined Blue Yonder. They are resonating with its potential and are actively contributing. Here is the lineup of the powerful leadership team these leadership team and members will promote the measures to increase the revenue.

And this graph shows the forecast fundamentally due to pre-transaction solicitation regulations. It is difficult to present future forecasts. However, within these limitations, we wish to convey the best possible picture we can at this time, which is why we are presenting this graph.

Development investment will peak around '25 with the remaining developments scheduled for completion within '26, year '26 will be a period where we will not sell all products, but must launch new ones. This period will involve investing in initiatives to promote customer adoption of the new products. Following this, we will enter the period where we begin to realize the profit-generating effects mentioned earlier.

Regarding strategic investments in product development, while this is still conceptual, we plan to reduce them after peaking in '25 and began generating profits. Rather than suppressing investment to boost EBITDA and artificially inflate enterprise value without making the right investments to scale as a SaaS vendor, the Duncan and his team is rigorously executing the fundamentals of cloud business, making the right investments and building the business.

As mentioned, customers resonate with Blue Yonder vision. Consequently, we are seeing a growing trend where customers entrust Blue Yonder with the end-to-end operations. They aim to achieve a highly accurate and efficient and autonomous supply chain using cognitive AI while also networking with suppliers and carriers to pursue total optimization. As a result, deal sizes are increasing with the number of large deals exceeding $1 million, growing to 2.8x last year. This is Honda's example.

Honda U.S. has comprehensively adopted Blue Yonder solution. This aims to improve sales production and supply chain efficiency through enhanced forecasting accuracy, scenario planning and comprehensive visibility. This addresses challenges such as increasing production complexity across multiple vehicle models and ensuring better alignment with consumer demand. Simultaneously, it drives the shift toward cross functional automated collaboration.

Additionally, one of the world's largest automakers as well as other clients, including Heineken and Morrison have similarly decided to use Blue Yonder comprehensively. Panasonic Group is also implementing this internally. While here, we are introducing 4 locations. Both planning and execution solutions have begun live operations. And at 4 additional locations, we are currently considering additional implementation. We are beginning to see the management benefits shown here. And frankly, we are surprised by the significant impact, especially at the first 2 sites. Synergy with Connect is also being promoted.

On the left, the yard management solution is expanding its use across industries such as retail, logistics and automotive. It enables automated trailer gate checks and continuous tracking within the yard and integrates with Blue Yonder warehouse management system. Additionally, there are 4 joint solution projects currently underway. On the right is Robo Sync announced in October. Developed by Connect, this new technology enables intuitive control of robots in factories and warehouses across multiple vendors.

It allows control of robot arms, hands, cameras and sensors from various manufacturers through a single control platform. Its ability to connect seamlessly with Blue Yonder and Raputa robotics has been very well received, and we are already collaborating with 26 SI partners. We will continue to accelerate the collaboration with -- between Connect and Blue Yonder. Thank you for your attention.

From Goldman Sach, Harada-san, please.

Harada from Goldman Sachs Securities. I have 2 questions. First, on energy. Data center was focused in your presentation, which is good news, of course. But for -- in vehicle battery production line, it's to be used you said, especially for Kansas, which should ramp up in a large scale going forward. While in vehicle battery is sluggish over a medium to long term, for data center applications. To what extent do you expect the capacity in Kansas to be filled by this data center demand. That's my first question.

My second question. You focused on 3 businesses today. I understand that they are the priority areas. And today, I suppose it will be retained within Panasonic Holdings asset businesses. Still, I can't really get the feel of the synergy amongst different businesses, so to reduce the conglomerate discount for the holdings itself. How do you plan on doing that? I understand that for Blue Yonder, there isn't much that you can talk about because it is prepared from the listing. So can you again explain the reason why you decided to focus on those 3 companies -- 3 businesses today?

Thank you for your 2 questions. First is with regards to energy, the data center, the Kansas plant to what extent that the capability at Kansas plant will be used for data center applications over medium to long term. Your second question was a rather nuanced question as to what will be retained and what will not be retained going forward? So first, I'll give the floor to Tadanobu-san for the first question on energy.

Thank you for your question. First, so production is rapidly expanding. And we would ramp up in accordance with the speeds required by the customers. And of course, we will enhance the capability of the existing lines in Japan as well as to use part of the in-vehicle battery production lines. But you asked about Kansas, for the cylindrical batteries, it's not separated between e-vehicle and data center. Of course, it could be used for both purposes with minimum investment for modification of the production lines.

As you are aware, for in vehicle, towards the next growth, this proprietary phase is continuing a bit longer than we had expected. So it's not a question of in-vehicle versus data center, we will just be looking at the demand in North America. To be more specific, currently, for sales that are currently in production, more than you think the gigawatt is smaller, maybe a 5 or less gigawatt or so. And with that, we are thinking of using the capability of Kansas to a certain extent.

Thank you, Tadanobu for the response. And Harada-san, your question, your nuanced question about what will remain, what will not remain. You used a rather sensational expression. We are working on the group management reform, trying to optimize our resources. We're in the midst of that effort. So as we have been saying for the inorganic actions, we are partly looking into these possibilities, and we will give you the details once we are ready to make such announcements. Basically, of these 3 businesses, you said there isn't much synergy. True in our presentations today, there was no emphasis on synergy. But as Otaki san explained the Toyota arena case. And [ Mike ] business, also talked about the [ Askanfield ] in [indiscernible]. So these are the cases in which EW and Connect had synergy. And in terms of energy, energy storage and energy management systems and devices for that purpose, Otaki san company and Tadanobu-san company do have synergy, although we didn't talk about that this afternoon.

And by addressing deals within solution area, we have to make sure that there will be synergy. I'm not sure if synergy is the right word, but [indiscernible] proposal capability is what we would like to really exercise going forward. And Otaki-san, if you have anything to add, I'll ask you to do so later.

Regarding the listing of Blue Yonder, that policy remains unchanged for it to be listed. But as Higuchi-san said earlier, the Blue Yonder business is part of the integrated solutions. So over the long term, this is going to be a continued effort. And we would like to think of the listing within the framework.

But the realm that Blue Yonder is doing business in, we have seen continuous mergers and acquisitions, including rather high priced ones. Should this continue then depending on the status of our capital allocation, we might try to get external financing as well, including what we will get in relation to listing.

So when time comes, we will look into these possibilities more solidly. Otaki-san, Higuchi-san, anything to add

Thank you. Otaki, from Electric Works. As Kusumi-san said -- well, in addition to what Kusumi-san has already mentioned. Within group, the energy storage systems of Tadanobu san company. And for the improvement of the power generation capability of housing and also regarding the hydrogen fuel battery, we do have the first in kind of system being developed that will combine the energy distribution, energy supply as well for the first time next year. And we are promoting the establishment of customer data infrastructure within EW company.

And we do have the data -- customer data totaling over hundreds of thousands, so as to make the lifetime value by customer being visualized. And we will be leveraging those capabilities for the continued growth of the group.

This is Higuchi. Additional comments. As I briefly mentioned earlier, it's really hard to see software vendors out of Japan. -- originating in Japan. We tend to customize and we're still in the Galapagos state. And from Blue Yonder, we are learning a lot in terms of the software development and others as Pansasonic Group have added value on cloud or the regional services based on the same infrastructure will increase going forward.

So the state-of-the-art Blue Yonder thinking and platform could be leveraged in that sense.

We will take a question from the next person, Okazaki san of Nomura Securities.

I'm Okazaki of Nomura Securities. My question is on energy this time, as a next generational product, CBU and BBU for the rac was introduced and supercapacitor, put what's also mentioned, what kind of technological advancement is incorporated in this area? If you could explain more on capacitors in your industry capacity, you have been working on that. But the super capacity seems to be different. Can you build that in-house? In some cases, it may be better to procure from outside for ultra high output, the cell level -- at cell level existing product, what kind of evolution are you planning to introduce.

You have additional questions. My second question is on Blue Yonder. This time investment recovery road map was presented. At 2026, you are to still improve the revenue. And I think it is delayed. And what do you -- how do you see the risk of further delaying the generation of the profit.

Thank you for your questions. For Energy super capacitor, there are so many things I would like to talk about, but I will let Tadanobu answer that question and investment recovery of Blue Yonder, Higuchi san, please.

Thank you for the question. 2 technologies were introduced today. One is using capacitor, building new racks and also towards the future, we are to implement in new racks. So your question was technical question. On capacitor, we are developing sales together with industry. For material technology, it is done by industry and the finished product is covered by the energy that is the roles and responsibilities. You talked about procuring from outside.

But actually, we use capacitors principle, the evolution of the material technology and having uniqueness of the data center for data center, usual capacity cannot cover. In that part, we are to develop original product and finishing into the product. So originally, on in-house, we are developing and then to complete the product development under energy. Another point to install in racks. One aim is for the 2 generation into the future, there will be power racks and 800-volt will be our assumption -- assumed standard for the future power rack. High voltage management is necessary and such PDU will be developed and further value add will be incorporated together with the customers.

On sales, are there any evolutions? The GPUs requirement in a given generation for the data center, new cell recipe development is already completed, and that will also be implemented in the high-voltage area. So in both sides, the devices will be evolved.

Okazaki-san between capacitor and cell, capacitor is way large in terms of the size of the energy for the current takeout instantaneously. And with such a large capacitor, then we can leverage on the technology built through the battery development.

Higuchi san, please reply on the Blue Yonder investment recovery question.

Well, let me talk about Duncan's personal story. From the university days, he has been learning the supply chain software. And after becoming CEO of Blue Yonder, it's his dream to create a world's top supply chain software company. So he's going to rewrite all the softwares and he is determined to do this, rewriting software. This is a very difficult task. And on top of that, there's generative AI. So that is to be incorporated and 5 acquisitions, they are to be integrated. So that is the development underway.

In 2025, majority of development investments are already made and we have actual products. They are visible. In 2026, we will focus our funding on go-to-market. Future investments in other areas, we are not considering at the moment, the probability of emerging risks in other areas is very low. What about the pipeline? Are you feeling the success in the cognitive area?

Yes, as much as I can share. if you -- well, we cannot have -- we cannot show the data. But in terms of the pipeline, we are feeling good reaction. At the end of '24, there was a security incident, and there were some customers who canceled due to such factor concerns are being raised. But this is a temporary matter. In the future, the pipeline will lead to revenue. That would be the reality. Duncan joined and he said he -- the software need to be rewritten entirely. At the time of the acquisition, we could not recognize. From your perspective, the -- it looks that -- looks like the investment recovery is being delayed compared to the initial assumption or.

Okazaki san, did this answer your question?

Yes.

We'll move to the next person from JPMorgan, Ayada san from JPMorgan.

Ayada from JPMorgan, I have 2 questions. First, on energy, JPY 800 billion sales is the target that you presented. To achieve this, how much investment increase is projected or how much increase in fixed cost is projected if you can share anything? You did talk about the expansion of the production facilities and development as well as human resources. So on the expenses side, I think the big items, what are the big items. If there are any numerical information, you can share with us.

And when JPY 800 billion sales is achieved, would the profit margin improve compared to what it is today. That's my ultimate question. A second question, again, related to profit.

Blue Yonder, you disclosed today? The margin before adjusted, I think, about 5%. And after adjustment with R&D, maybe 19% or less. Manhattan, I think, is close to 30% and Blue Yonder at the time of acquisition. Compared to that time frame, I think now it's lower. I'm looking at Slide 11. For FY '28 onward or calendar year '27 onwards, do you expect the margin to improve. I don't think that would be achieved just by making R&D expenses.

So what are the other factors that are needed for profit increase? Would it simply be an increase in top line? Or are there any other factors that are needed for the margin improvement?

Thank you. The first question goes to Tadanobu-san,, Second question to Higuchi san.

Thank you for your question. Fixed cost investments was your question. First, I think it was asked in the earlier question as well, the cell. The initial investment amount is large. By FY '29, we're not expecting large investments. We'll be using existing facilities and we would be optimizing the assets. So we are not thinking of any major investments for now. So it is going to be investment light. And in terms of amounts already sized in terms of gigawatt is not that large. It's hard to really give you maybe the double-digit billion at most.

To achieve the JPY 800 million sales that is 2.5 to threefold increase, the investment is not going to be that large. As for fixed cost, for the labor-intensive part, that will be the assembly for the Mexican plant, it's not going to be that large. Automation is progressing. I can't give you the figures. But in terms of operating profit, what we do disclose for energy. The profit margin that we have today would be secure, and we're hoping for higher than that.

So even with the increased sales, we plan to at least maintain the current profit margin.

For Blue Younder, our CFO, Higuchi san would respond.

For fiscal or rather calendar '27 beyond margin improvement, there are 3 factors. First, as you said, Ayada san, development costs will no longer be incurred. That's a big factor. Another is an improvement in the marginal profit. With the increase in the size of SaaS sales that will be the beauty of software business. The marginal profit or the marginal cost is very small. So the marginal profit will increase. And as for the new platform, we can move -- expect the customers to move from the existing platform to a newer platform with better marginal profit.

And as for the fixed costs, the ratio would go down because of the economy of scale. So the fixed cost factor will go down. So these 3 factors will drive the margin improvement. If I could add from conventional SaaS to native SaaS, the margin, which improved quite a bit just by that factor. And that is part of the story. And with the completion of the cognitive solution on a per customer basis, the number of modules adopted will increase. And when one is adopted, that could lead to more modules being adopted.

At least we'll have more opportunities for that. What do you think?

Yes, exactly. Still Manhattan is a point solution. So it's on a unit-by-unit basis. So they can sell rather in a speedy manner, whereas Blue Yonder still has issue with the speed. So that's where the energy is now concentrated on.

We will take a question from next person, Ms. [indiscernible].

I'm [indiscernible] from Nikkei. My first question is on Blue Yonder. My question is to Higuchi san of Connect. On the profit improvement. The image is presented, but I'm interested to know more recent numbers. Blue Yonder consolidated adjusted operating profit. When will that turn to Black Inc.

Well, I tend to speak too much. I checked with my CFO sitting next to me, and he said that we cannot provide answer to -- it is complex with the regulation. So we would like to refrain from making such a comment. Your thoughts, the outlook that as well, difficult to answer. Internally, of course, we set our own forecast, but we would like to refrain from giving a clear answer. Ms. [indiscernible]. There's a vehicle or regulatory constraint before listing. So that is why we cannot comment.

My second question is to Kusumi-san. Structural reform progress. I would like to understand further details the businesses that are growing were covered today. In the previous round of earnings call, you already presented on the businesses with -- which are not successful or others that are being restructured. What is your thoughts on that?

And this is not related to today's main topic. But if I were to make a comment.

Well, Mr. [indiscernible] san, there's no additional comment on top of what we announced previously. For TV, we are to go higher than the hurdle so that we can maintain the business, and we are in the process of achieving major reform in the operation and refrigerator kitchen, we are to broadly proceed with China shift, and we are to surpass the hurdle rate.

Within 2 businesses under industry, there are partial challenges, and we are looking at nonlinear measures as well. And once we conclude the contract, we will be ready to disclose.

I'll move to the next question from [indiscernible] Toyo Keizai.

Maki from Toyo Keizai. I have 2 questions for Kusumi-san. First, continuing from the earlier question. Please correct me if I'm wrong. In February, you talked about FY '26. There are 7 businesses on which the direction is to be decided. And at the end of October, you talked about 4 of them. And then there was a PHS announcement in November. So meaning 5. So remaining is HVAC and 1 more. You have yet to talk about this. I think this will be your last presentation or briefing Kusumi-san for this fiscal year. And you said that you will talk about the direction by the end of this fiscal year. So does that still hold?

And Panasonic Go and B2C AI service Umi that you talked about at the beginning of the year, especially for Umi, the service was to start during this fiscal year FY '26. We're in November -- or we were in December now, and you have yet to make any announcements. Is there any delay? Or has there been any change in the policy itself.

Thank you. Your first question about consumer electronics overall as well as HVAC. For consumer electronics for our TVs and kitchen appliances, other than those, the hurdle rates have really gone up, and they have been exceeded. So while that is to be resolved and when the group -- as a group that could be optimized, then they are no longer the businesses with issues. As for HVAC, air to water did not grow as much as we expected and the commercial user or the operational use, air conditioning systems didn't do well.

For air to water, market is beginning to recover and as for professional use HVAC, which was suffering, in Japan, but there is an early pickup, and we are seeing signs of recovery towards profitability. And Katayama-san, we actually have to give him a credit for that and still HVAC can satisfy the hurdle rate.

Regarding the Panasonic Go, it's not just Umi, no, but we are talking about AI used to change the business as well as their operations. This will be implemented steadily for sure. For the consumer electronics, we are strong in Japan, even here, we will use AI. In that sense, regarding Omi, I do see the need to really show the direction. So I'm going to ask CSO, Sumitaka-san to comment.

Thank you for your question. Kusumi-san has already covered most of it. As for itself, we have already made announcements regarding the use of AI for group overall, not just the consumer electronics, but to change the existing businesses as well as operation. On this movement, we are continuing to see acceleration. For Umi, particular application for consumers, how we can provide businesses using AI. That's something that we continue to look into follow-up regarding Panasonic Go.

Do you have any specific actions taken or initiatives? That's what I wanted to hear about. And as for Umi, it's not likely to start by the end of this fiscal year. I correct?

Thank you for your questions. Well, internally, -- this is internal, and that's why we haven't really made any announcements. But for Panasonic Go, we already do have the organization established to cover the entire group and initiatives are being implemented, and we have also started to look at the possibility of turning this into business and we will make announcements when things become more clear.

As for Umi product development, that's not going to be completed by the end of this fiscal year.

We will take a question from the next person, Hirakawa san of BofA Securities, please

I'm Hirakawa of BofA Securities. Question is energy related. The sales up to FY '29, the awards have been acquired for next-generation product, how much visibility you have on the sales? And in FY '29, 1/5 is made up of next-generation product. The current 80% market share in the next generation, what is your assumption of the share in making this calculation?

Thank you for the question. In FY '29, we will shift to next GPUs from the currently produced items. And we are acquiring awards and how much those will penetrate and what will be the probability. That was the gist of the question. Capacitor units we showed today and high-voltage BBU development, we have acquired award with Priority. And last process is to finish the technology with the customers and 80% is the weight of those products. The 20% are the areas where we have not finalized the specification with customers and the rack design is yet be done. We are yet to acquire awards, and we are discussing on the new solutions from FY '28 to '29. And we are hoping that we can contribute in those areas as well. The projected share in the future it is uncertain how the competitive landscape will be. But the share weight of this industry, the general perception is 7 to 2 to 1.

First, vendor takes 70% and then 20% and 10%. Of course, we assume that we make full contribution, but we are the first vendor. That is the assumption in that simulation.

we'll Now go to the next person, Yasui san from UBS Securities.

My first question is on energy. Basically, just 1 big question about market share. If you look into detail cell module and eventually CBU and BBU as an integrated solution. So cell, where are the areas where you can maintain the large market share? You talked about 70%, 20%, 10% or 7, 2, 1. So where are the areas where you can't avoid losing a certain market share. And regarding the margin with the market share going down, how would your operating margin go down?

My second question is on Blue Yonder. The multiple of the industry overall is high. But when it comes to service with -- it becomes more commoditized. So maybe CRM and other applications will be replaced by generative ones. So the [indiscernible] application or the applications that are closer to Gemba may not be competitive anymore. So would AI be good news or bad news. And I think industry multiple is high today. But can we expect that AI is not going to be a negative factor. In other words, not going to replace.

First to Tadanobu san, second to Higuchi-san.

Components market share, our business itself is not selling cells stand-alone or software stand-alone products. Now we provide the most efficient backup units modules with the power supplies for the customers. So there would not be any change in terms of what the market share is going to be per these components. Yes, there are some factors that will distinguish ourselves from others. But in all areas, we do have proprietary technologies. So I believe that we do have strong capability to sustain our market share. So we have the vertical integration from materials to sell to a battery to capacitor.

We are the only one in the world, so we are to be the provider that will continue to provide value to our customers as a package. The trusting relationship that we have built with our customers is very strong. So there are future challenges, future aspirations. We are well aware of what customers want. So we will continue to try to satisfy those as we plan our future. The more recent trend is the operational cost of our customers to make a contribution in that respect.

So it's not a question of whether the market share is going to go up or down slightly. Whether what is most reasonable for the customers in terms of the total cost, I think, would be an important one. And I think we do have a capability to maintain the balance in terms of profitability. And so that's what we retained even under JPY 800 billion.

If I could add, Tadanobu san, for capacitors, what kind of AI accelerators customers use. What will be the GPU road map of Nvidia. These plans if the customers are there. And if we are to satisfy this, we need capacitors. And for that, we need these capacitors. So that is the thinking process of our development.

So why provider? Well, the customers with the evolution of semiconductors, their challenges, issues are becoming more complex. And so we want to be proactive in addressing these questions. Instead of being reactive, we want to be proactive in making solutions, providing solutions to customers, emerging challenges, including the control capability. And that cannot be supported by conventional capacitors. We felt the need to develop a new principle for capacitors.

And so we use our internal resources, expertise for the early development. It's not just synergy.

Well, Tadanobu san were in the capacitor business yourself.

Right.

And Higuchi san, the second question.

If you can look at Slide 7, Slide 7, the orange portion on -- there are 3 parts on the left-hand side is the engine for the supply chain execution. Machine learning, Blue Yonder to be optimized to workflow for execution. And this is the world word where the fixed formula is due to the calculation. But the threshold is exceeded, what do you do is what we are talking about here. So it's a preset. So this is really about numbers. And as for generative AI on the right-hand side, we are talking about the sensitivities that are close to human thinking when things go up, that you really need to watch out.

So you really don't need threshold. So this is more non-engineering. And when there's 2 are combined, that will result in a very strong AI. People talk about physical AI. On the left-hand side, we are showing many things that are executed physically. And so this is going to be placing logistics and robotics and others. And this is not add on AI but native to connect the 2 sides. So that is the beauty of Blue Yonder solution. So in many ways, AI is going to be functioning very strongly. For example, if you feel that demand is going to go up, looking at the [indiscernible] messages, changed the planning or the state of the traffic or airport or road, and change the distribution plans or on the supply side, they are all connected.

So you can see where inventories are. Or if you do have the temperature control, the temperature and the allocation could be combined to make a very high precision decisions. So generative AI is not going to be disruptive, whether it will be supporting your decisions. That's where we expect enhanced value.

I have a question. Follow-up question on Tadanobu san. CBU and BBU integrated solution. I think controlling that is a possibility as well, meaning the added value might go up. Would it be Panasonic that will do the control? Would it be hyperscale or others that will take care of that?

Thank you for your question. It's not yet 100% clear, but maybe turnkey with more efficient solutions. So these possibilities would be taken into consideration. And we will be deciding what to do in not so distant future.

We will take the next question. [Operator Instructions] question to just 1 Ono-san from [indiscernible].

I'm Ono from [indiscernible] My question is related structural reforms. And I would like to ask about the qualitative area for our solution area you have presented today in progressing as planned. Now what is the meaning of completing the structural reform and the purpose of the structural reform.

The group management reform is progressing and the personnel optimization, this is actually improvement of the profitability.

As I have said in the beginning, in case of our company, during the past several years, COGS rate has risen. So we first need to suppress and make the organization lean. Another aim is to change the work style to improve the efficiency. Also, we discontinue work that does not generate value and also accelerate the utilization of generative AI, the solution areas that we presented today, what to do with each of these areas, that is a separate axis. Did this answer your question?

Understood

next person. Nishimura san from Okasan Securities.

One question about Electric Works, EW improvement in profitability going forward. You mentioned various factors. Solution, higher added value and increased sales of overseas ratio, what are the factors that you are currently focusing on, especially regarding the solution, expanding the sales and marketing resources. And I think you were talking about these initiatives already. So what are the challenges that you see.

Otaki san, please?

Thank you for your question. For profit improvement going forward. the sales or the growth in Japan and growth overseas are to be combined, we are going to do both, especially for overseas, we will be focusing on India, especially. In 2007, we acquired the local company and payback period is now already behind us. And we are seeing increased growth in profit already in The order of several hundred kilometers, the language changes, culture changes. That's the market characteristics of India.

So we'll have to think of the ways to win in that kind of market for the wiring equipment devices alone. We are currently producing worth JPY 600 million. And about 2 years ago, we made the digital investment quite a bit. So we are really covering the entire market company. And we are making sure that there are no areas that we are missing. So all this infrastructure is already being established. And so 10,000, 20,000, and 300,000 electric engineers and the total population is 300 million. That's how large that market is.

So improving the efficiency of design and use of module design to reduce the cost to become even more competitive as what we'll be working on. And for nonresidential and project markets,, we are partnering with various players to make sure we are capturing the region specific local specific needs to make sure that we win. So we'll be spatial development and long-term reliability and lifetime cost reduction, all those factors that we have been talking about in Japan and other sectors that Japanese customers want are being well in Indian market as well.

And so we are committed to the success in India. So we'll be proactively addressing M&As, and we will accelerate those efforts. And as for Japan, we are to increase the cases and businesses, examples of which I talked about today. The solutions ratio has now improved over the last 3 years, consulting as well as post market operation, their profitability is improving. So we would like to increase the ratio from 30% to 50%. So we are enhancing the human resources to enable this. Engineering capability, digital human resources over the last -- or last 3 years, we have been making necessary investments for future growth, especially for Energy Management.

The question is whether we can monetize this at a low voltage BPP. And we are doing a demonstration with some partners, and it takes some time, but verifying the results and should we find that this is going to be feasible and successful, then that will be part of our next growth strategy. As an opportunity side from -- there is a movement towards LED from fluorescent light. So consumption, power consumption within the building needs to be addressed, and that is the tailwind. 5. In fiscal '28, the sales of fluorescent lights will be banned. And currently, there is still 600 million that remained in Japan.

So we have been expanding the capacity to produce LED facilities 10 years ago. And we are getting many order inquiries of these lighting vectors together with air conditioning. So LED replacement and combined should contribute to improve profitability. And we are to realize energy consumption, not only in this, but customers want the well-being to be addressed concurrently as well.

And we are getting relevant inquiries rather strongly now. So in the area of lighting, we are the global company. We do have the flat technology and beam-free technologies. And these technologies will be used for the lighting fixtures as well. I hope that answers your question.

Yes.

We will take the next question is Ezawa from Citigroup Securities.

I'm Ezawa of Citigroup Securities. I have 1 question on batteries. In FY '29, ROIC of 20% or higher is the target, can you break them down to explain what are included in this target? And what kind of forecast you are setting. Large CapEx will not take place. That is what you have been explaining. Energy Solutions, capital invested, the battery factories in Kansas for EV or domestic battery factories, the switching the purposes of factories. Those investments are not included. That is why ROIC is high or the profit margin is very high so that ROIC can go higher than 20%.

Tadanobu-san please answer this question.

I'm not going to cover the details of the numbers, but that both of the points, as Ezawa mentioned, would be true. This time, all of the changes reformed our products are included. And the conversion from automotive to data center are included. The sales growth is not just driven by the sales of the cell as a stand-alone product. So there are upsides and the gross margin will rise and along with the growth, we can -- we have good visibility that we can secure 20%.

I would like to ask for some additional explanation. Data center battery business is going to expand quite rapidly and other Panasonic Energy ROIC as the company. The rest of the business, the improvement will not -- is not expected. Just Energy Solution will grow. It's not going to be the picture.

Probably not improving. It will not be true, but looking at the efficiency. Currently, the data center is large in scale when it comes to JPY 800 billion.

In scale, in FY '29 as a snapshot, we will grow larger. And right now, cancers is to be utilized fully, and that will contribute to the improvement. And in FY '29 all of the assets will be fully utilized, although the nature of the utilization may change. So overall, we expect growth.

We're getting close to the end time. So we will only take 2 more questions. From Nikkei Business, [indiscernible].

[indiscernible] from Nikkei Business. I have a question for Kusumi-san. Solution, I think, is defined differently from business to business and strategy differs from business to business. Conventionally, you talked about in-vehicle as the growth area and making focused investment. Do I understand correctly that going forward, it will not be that specific. In other words, you will not be focusing on particular area. Solutions sounds too broad. So I was wondering what kind of image you have as corporate balance.

Thank you, Wata san. Yes, solution could be conglomerate to a large extent. Integrating them all for synergy is not really a story here. If you look at specific pieces, there are various combinations that you can think of. And rather than separating them all, we want to focus more on what we can do as a group facing the customers. And including what was mentioned earlier, that's what we want to enhance.

Lastly, Katsura-san from SMBC Nikko Securities>

I'm Kato of SMBC Nikko Securities. I have 1 question on energy. And the concept is what I would like to know, 80% share. In this definition, the sales -- well capacity will triple and the revenue will be JPY 800 billion. How -- do you see this to be realized? Or in my view, you may be able to shoot for higher to the demand from the peak is high. So we may expect further revenue increase from that. And the pieces disclosed are not connected in my mind. So that is the reason for asking this question.

For sale basis, if the output is high and then a particular player can get a larger share. And in the market, the current position may decline. There is such a major concern. So what is your rebuttal on such a concern? And what are the risk side.

Tadanobu san will talk about the details.

Big shaving -- peak shaving. I think that relates to capacitor. Firstly, our contribution include along with the evolution of GPU, there will be new concerns, so various concerns and platformers, when it becomes difficult to efficiently design comprehensively by themselves, then we can go in as the solution provider, the 80% share, well, well, the 70% that I mentioned, we will aim at that level.

But if our -- if there is no solution identified, we will need to get in and provide our solution. Our recognition is that sophisticated, complicated systems are to be built and battery cells and BMS to manage them and system to manage the peak and also the units well sophisticated integrated suppression of the power will be needed. It's not that particular cell battery manufacturer is superior, but rather, we are positioning ourselves as the overall solution provider share is determined by the customers.

It's not for us to answer. But our recognition is that the development we are answering to those challenges and we are positioned at the top. And we have acquired awards and customers recognize our service. And we would like to strengthen the relationship with customers and build further. I wouldn't say we will monetize, but rather, we will continue to aim at keeping that top position.

Thank you very much. That concludes our Q&A session. Thank you for your participation.

And with that, we have completed the entire program for the day. Once again, we thank you very much for joining us today despite your busy schedule.

And this concludes today's briefing. Thank you for your participation.

Hello. This is Waniko. 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 nonoperating income and loss. Operating cash flows decreased year-on-year due mainly to the Automotive deconsolidation.

For the 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 forecast 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 JPY 1,896.7 billion, while sales excluding automotive increased by 2% year-on-year. Adjusted operating profit increased to JPY 91.5 billion. Operating profit increased to JPY 86.9 billion, and net profit increased to JPY 71.5 billion. These are results by segment.

Next few slides provide the year-on-year variance analysis for sales and 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 OP increased, offsetting the deconsolidation of automotive.

As shown in the graph above, adjusted OP 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 & Solutions, Heating and Ventilation AC and electric work companies. Cold Chain Solutions Company posted lower sales and profit due mainly to the nonrecurrence 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 JPY 30 billion, increase in fixed costs, negative JPY 12 billion, including the positive effect of restructuring of JPY 2.1 billion. The net impact of raw materials and logistics prices, positive JPY 14.7 billion; price revisions and rationalization, positive JPY 2.8 billion; impact of U.S. tariffs, negative JPY 5.8 billion, mainly affecting Energy and Connect. Blue Yonder, negative JPY 6.5 billion on constant currency due primarily to increase in strategic investments such as security enhancement. The effect of exchange rates, negative JPY 6.4 billion, mainly affecting Industry and Energy. The deconsolidation impact of Automotive, negative JPY 9.6 billion; and other income and loss, negative JPY 4.1 billion, including restructuring expenses of JPY 2.2 billion, resulting in the operating profit increase of JPY 3.1 billion.

This shows the cash flows and cash positions. On the left, operating cash flow for Q1 was JPY 180.3 billion with a year-on-year decrease due mainly to the deconsolidation of automotive. On the right, net cash was negative of JPY 745.7 billion.

Next, the consolidated financial forecast for fiscal 2026. This 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 U.S. 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 2 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 cells.

Following this trend, we forecasted annual sales volume of 4- gigawatt hour for fiscal '26 in the forecast of May. giving consideration to customers' demand. However, following the rapid changes in the U.S. 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 IRA 30D 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 full 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 full 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 U.S. 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 9 forecast.

That concludes my presentation. Thank you for your attention.

From Bloomberg, Furukawa-san, please.

This is Furukawa from Bloomberg. Am I on?

Yes.

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 the time line going forward? And also, the Wakayama plant, the description exactly the same for 4680 from 3 months ago. Can you give us the update on that?

Thank you for your questions. First, regarding the EV battery, 30 gigawatts or when -- 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. And 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 our customers and the quality confirmation, we are still in preparation, but we will be starting the shipments on schedule.

Next, from [ Gen-san from Denki Shimbun ].

Yes. This is Gen-san from Denki Shimbun. Two major questions. First, this probably is not related to the business results, so you might not be able to answer this. But I think there was a press release for the new organization for next year. So B2C, the consumer electronics and TV company, there used to be a Smart Life company. And now that it will be the same name, Panasonic Corporation. Could you explain the reason for that? That's my first question.

And another question, a very specific question about the consumer electronics. So for example, there have been some topics in relation to that. So for example, there's an enhancement of the cooking appliances and how do you plan to do so? And what is the current situation? And there has been a lot of competition. So how much growth do you see in this business?

Yes. Thank you. To your first question, the press release, this is from April and onward. This is about the new organization, and we issued a press release about the names of the companies. And there used to be a Smart Life company, but concerning this, this would become the Panasonic Corporation. So that's included in the press release. And concerning that, I think that for the market in order to promote our consumer electronics products using the name Panasonic is important. And also transferring from the past, I think we want to lower the transfer cost and by keeping the same name, and that will be a more rational way from the cost perspective. So due to those reasons, we keep the same name, Panasonic Corporation.

The second question about the TV, air conditioner and kitchen appliances. Concerning those, Q1, the Lifestyle, Page 7, actually, if you look at Page 7, there are some details. And so we want to make sure that these divisional companies have achieved a higher profit. Now about the cooking appliances, this is under the lifestyle appliance company and the higher sales and higher profit. So this business has been recovering since last year. So this is in relation to the enhancement of the kitchen appliances.

So since last year, about the sites of the kitchen appliances, we have been emphasizing and focusing around the fixed costs. We have been trying to improve the strength. And we are starting to see the results of those efforts in the Lifestyle business. And as for the TV and air conditioner, I can explain about the air conditioner on the same page. So this is under HVAC company. And here again, the higher sales and higher profit were achieved, driving the overall better performance of this Lifestyle segment.

So concerning this, as you mentioned in your question, because of the heat wave, the room air conditioners are very active and selling well. And air to water in Europe, there has been the stagnation of the demand, and we are starting to see the good recovery. This led to the higher sales and higher profit. And as for the environment-related engineering area, I think that we have regained the strength. So that led to the better performance for the HVAC company.

As for TV, about the various reforms, including the cost reduction, we are working on that. And we are not disclosing the divisions, each division, but we are not seeing any worsening, and we are making the steady progress in this business.

I see. So air conditioner in Japan, how much of the growth are you achieving? Could you talk about that?

The most recent trend of the room air conditioners in Japan or actually about 120% year-on-year or 20% higher than the year before is being achieved.

Next is from [ Toyo Keizai, Umegaki-san ] please.

Umegaki from Toyo Keizai. Two questions. First, the full year forecast, the gain on the sale of projector business in Connect has been revised, and you are still looking for JPY 50 billion positive for others. And I think at the last meeting, you assumed that the impact of the U.S. tariff would be about 1% on a consolidated basis. What is the update? Is it getting better? Or is it getting worse?

And regarding the personnel, HR announcement made today, you are on the Board. So I think you were involved in this question. So I'm wondering why Toyoshima-san was selected as the CEO of Panasonic Corporation and Mr. [ Sing ] for other companies. So could you give us the reasons why this 2 were chosen?

Thank you. Your first question, the gain on the sale of projector business, JPY 50 billion gain and JPY 50 billion in others. That is the projection on a full year basis. And the revision in the connector segment is directly as a result in relation to the projector business. At the beginning of the year, we were incorporating that. But now that has been terminated, we made the revision accordingly. As for others, JPY 50 billion reversal, I cannot give you the specifics. But on a year -- on a full year basis, we are still looking at the details. And so looking at this one case alone, we did not feel that the revision for the whole company would be warranted.

As for the impact of the U.S. tariff, initially, we were saying within 1% of the full year sales revenue. And in our announcement today, we are not incorporating the impact. We are trying to get hold of what the situation is, trying to update our information almost on a daily basis. But basically, we expect the impact would be smaller. If it's just the updating on the tariff rate, maybe the impact is limited. But the question is what kind of countermeasures would be needed to address changes in the tariff rate. We feel that we have to have all these details confirmed before we make any announcement. So as we become ready to give you a more quantitative response, we'll do so. So that's my response to your first question.

Secondly, regarding the announcement of the changes in President and CEO, Panasonic Holdings will be headed by Toyoshima-san and connect by Kenneth what are the reasons is your question. As for Toyoshima-san, as you know, he was in the entertainment and communication company. He was leading that business as President. And there are many reform needs to be implemented in the Panasonic Holdings or the Panasonic Corporation. And his experience is going to be very beneficial, and he has a strong passion to lead this initiative. So that is the reason why he was chosen to lead the new Panasonic Corporation.

As for Connect company, Higuchi-san will be succeeded by Ken saying. As you can see by looking at his CV, he has been on the Board of the Connect. So he has been involved in the management, and he has been leading the avionics. And as for the avionics business results, we were suffering in pandemic, but with the proactive lineup change, the reform has been implemented under his leadership. In the avionics area, we need the integration of both hardware and software to improve the business profitability. So we're hoping that his expertise will contribute to changing our business going forward.

Next, from [ Yomiuri Shimbun ], we have [ Tata-san ]

Yes, Tata from Yomiuri Shimbun. I have 2 questions. First, what you announced in May, the 10,000 people personnel optimization, I'd like to know the progress so far. And once again, could you explain the aims of the purpose of that? And second is about the new organization you announced today. I'd like to know the purpose of that. And toward April next year, this -- there was an announcement of the leaders. So about the time frame, is it moving on track? And there is also a restructuring portion, but if you can talk about those progress.

Yes. Understood. So first of all, in May, we announced the optimization of the personnel by 10,000 and how are we doing on that? There are different movements in Japan and abroad. As for Japan, right now, the operating company -- each operating company is working on this. Depending on the needs of each operating company, they are promoting this optimization, explaining them to the unions and explaining to the employees. So we just started this plan. So concerning that, in Q3 and onwards, we would hear from all the employees. So in Q1, if you asked about the progress, so far, we have not made any major progress. So please understand this as a process.

As for outside of Japan, it's not something that we do at one time. So depending on each company outside of Japan, they will be moving based upon their own timings. So how many people from how many companies in which regions, I cannot say, but they are making progress earlier than Japan. So as for your second question about the purpose of the new organization and the time frame, concerning those, we will be doing various reforms and about the organization, the name of the company and human resources.

We would like to communicate that earlier than later so that we can move forward. So as a I think we made this announcement at the early timing. So when you ask whether we are on track or on schedule, yes, we are proceeding as we expected or as we planned.

Just one follow-up about the reduction of the headcount. Could you once again explain the aim or the purpose of that?

On the 9th of May, Kusumi-san already explained this. But I think when you consider to become the sustainable company in 10 years, 20 years and continue to develop as a company, we think that we need to make the organization leaner and look into the cost. So with such determination, we have decided to do this.

Next is from Nihon Keizai Shimbun, [ Sakamoto-san ] please.

Sakamoto From [ Ni Kei ]. Earlier, regarding the Panasonic Connect new President, and you gave us the reason why Mr. Sing was selected. In your response to your question to a question by Toyo Keizai. So I understand why Mr. Sing, but could you explain the reason why you need to change the leadership?

Thank you for your question. It's not in relation to any particular incident or event. It has to do with the term. We feel that leadership needs to change -- need to rotate with a certain period. So that is the basic understanding. [ Higuchi-san ] has been leading Connect since 2017, leading the reform efforts. As you are aware, he modernized the management from culture to portfolio, the business. So he made a great impact to our company, and we are certainly appreciative of that. But it means that he's been with the company for 9 years altogether. So while we thank his contribution so far, his achievement so far, we feel that this would be the right time to have a new leader.

Next, from Asahi Shimbun, we have [Seiyi-san ].

Seiyi from Asahi Shimbun. So for each segment, the full year forecast, the Lifestyle part and other income and others, it's about the minus JPY 80 billion negative. So could you give us the breakdown of it because it's a big number. So that's my first question. Should I go one by one?

Yes, please continue your questions.

I see another question on the impact of the U.S. tariffs. So with the agreement between U.S. and Japan, the tariffs, including the automotive is 15%. So without an agreement, of course, it would have been 25%, which is lower than that. So with that, your impact from this, would it be smaller? Is that the correct understanding? And talking about this impact, rather than paying for the additional tariff, but whether the demand will be impacted from it. So how -- what would be the mechanism of the impact of the U.S. tariffs? So those are the 2 questions that I wanted to ask.

I see. So first question about the Lifestyle, the full year forecast out of that other income, JPY 80 billion negative. What is the breakdown of it? There has been any changes, so maybe same explanation. But for this fiscal year, we have been conducting the various reforms. So cost restructuring costs are included in Lifestyle. So -- and the second question, now that the tariff level is 25% to 15%, is the impact from it going to be smaller? Yes, at 15%, the impact to be smaller. And how would that actually impact us? There are direct impact and indirect impact. So I think that there will be larger direct impact.

So when we say direct impact, -- so going through the customs and by moving those products, there will be direct tariffs to be imposed. So that portion, as I mentioned earlier, if we do not do anything, that will hit our profit and loss numbers directly. But we'd like to make sure that as we mentioned at the beginning of the fiscal year, we will discuss with the customers about the price policy so that the customer would pay a certain level of the burden so that we can minimize the impact. So that's what we are trying to do.

As for the indirect tariff, so for example, the U.S. as a whole, the economy becoming worse. And because of that, the demand for our products coming down indirectly. So whether the economy struggled because of the tariff or not, it's very difficult to discern. So as we explained, mainly we explained about the direct impact rather than the indirect impact.

I'm afraid we are running out of time for the journalist questions. So we will only take one -- just one more question from the journalist. [ Kwajima-san ] from [ Sankei Shimbun ] please.

Looks like there is a technical problem with our system. Kwajima-san?

Yes. Can you hear me?

Yes.

We apologize for the inconvenience. Please go ahead. Related question to the last question regarding the tariff impact. Now that the tariff rate has been agreed to 15%, impact will be smaller than what you originally expected. And as your material indicates, mostly avionics in Connect and Energy, I understand. For energy, for example, production in Japan, example, batteries for EVs. I suppose that export portion is rather limited. So I'm wondering if you can make any comments related to that.

Do you have your second question or just one question?

Just one question.

I see. Thank you for your question. Let me try to respond, especially the impact of tariff on energy business, what is the volume of our business of export from production in Japan to U.S. market. As I explained in my presentation, for the in-vehicle battery and industrial and consumer data center business, these are the businesses that we are in. Production in Japan to be exported to U.S. For in-vehicle, it's mainly manufactured in Nevada plant in the U.S. and therefore, the impact is more in relation to the components and materials.

And therefore, not much impact on those that are produced in Japan to be exported to the U.S. But for -- that is as far as the in-vehicle batteries are concerned. But for industrial and consumer batteries, the energy storage system, we are manufacturing cells mostly in Japan to be exported to the U.S. And so impact is going to be rather sizable if you just look at industrial and consumer. So with that, we conclude questions from the journalists.

Now we'd like to take questions from analysts and investors. We are taking questions only in Japanese. From Goldman Sachs Securities, we have Harada-san.

Yes. Harada speaking from Goldman Sachs. Two questions. The first question is about the Blue Yonder. -- after adjustment and also excluding the ForEx impact, the profit is down. So could you explain the reasons and also the environment of this industry? Second question is about the industry. So here, I think we are seeing better improvements, but content of Gen AI related is the major driver. Is that right? And FA and others are also improving? -- the structural reform from that perspective, I think that there are some issues with those businesses. So whether there will be some impact from them?

Thank you for your 2 questions. About the Blue Yonder, first of all, as we showed you the numbers, Q1 profit from the year before, there has been slight decline. And concerning that, the industry as a whole I think you asked about that. And the industry as a whole, I think there has been some strength. And our specific reason for us, the strategic investment, especially in the area of the security, we mentioned that we are making the investment, and that led to the smaller profit.

But as for the strategic investment, 3 years, we will be making steady progress. So SaaS cloud-based products for this fiscal year, we will be launching many ones. So we plan to do so. So more recently, for the new launch of the product, we are getting very strong inquiries and our pipeline is growing. So in the second half and onwards, I think that our top line will recover from it. So that's about Blue Yonder.

Second, about the industry. Yes, we are seeing the good improvements, as you commented. And there are different reasons. But as you mentioned, the generative AI-related device business growing and pushing our revenue, I think that is the major factor. In relation to FA, we have a site in China. And rather than having a major improvement, we are improving in a steady manner. So we are seeing such trend from last year toward this year in FA business. And as for the electronic -- well, it's included in the electronic device business. So it's difficult to separate.

So not everything is going very well, but automotive-related devices, we continue to struggle since last year. So in industry, of course, there are some areas that we need to reform. And since last year, we do -- we have recognized that. So we don't want to mix everything together. When there are some issues, the businesses with issues, we would like to continue to take initiatives.

So about Blue Yonder, so adjusted EBITDA, excluding the strategic investment, it's still negative. So could you explain this further?

Well, adjusted EBITDA, excluding the strategic -- last year, there was an acquisition of one network. And so in Q2, we made that acquisition. So in Q1, we did not have that. So after the acquisition or through the acquisition, there have been various cost, depreciation costs and amortization. So aside from the strategic investment, those have been the negative factors based upon the year-on-year comparison. I see. So the actual business is not getting worse, excluding those factors.

Next, from JPMorgan, Ayada-san, please.

Ayada from JPMorgan. I have 2 questions as well. First is on energy, the forecast for this fiscal year. You did not revise your forecast. And what will be the nuance of the background? There is a slight downturn risk for in vehicle. But currently, you assume that, that could be made up for with data center business. Or is it that because you're still verifying the impact on in vehicle, you did not revise the forecast, which is it? And also in relation to the data center applications, I think maybe was 1.5x. But for the second half, it looks like you are keeping that forecast. But if it's doing better, what is the upside is my question.

And another question is in relation to the tariff impact. You said less than 1% on the annual basis. Are you talking about the growth amount? Or are you talking about within 1%, including the effects of the countermeasures? For the first quarter, the impact was negative JPY 5.8 billion. Is that on a gross basis? That is my last question.

Thank you. Regarding the energy forecast. In vehicle is trending downward, while data center energy storage business is on the upward trend, as I mentioned earlier. What we did not clearly state in our presentation is whether those are going to offset each other? Or is it that we are taking much time trying to figure out the situation? And the answer would be the latter. In other words, we're not still clear as for what the impact is going to be. And of course, there's always the offsetting nature in our businesses. If one business is doing better, the other would be covered by that. So the state of sense of balance is very important. For example, the termination of 30D IRA tax credit was only announced this month. So we have yet to really analyze what the impact is going to be.

And as for data center review, you said that, that 1.5x has not been updated or is not reflected. Here, again, we're still looking at the details. So we can't say exactly. what is the scope of the increase at this point in time. But as I said, the order inquiry is much larger than what we had anticipated at the beginning of the year, but we're trying to quantify exactly how much. And as for the tariff impact, gross or net is your question. The answer is it's on a net basis. Gross calculations, if we just multiply by the tariff rates, then we can give you the answer immediately. But in addition to that, we have to take actions to make a recovery. And we feel that all those need to be clarified before we can give you an explanation. And therefore, we are trying to speak on a net basis, which includes the recovery effect as the full year forecast. And that is true for JPY 5.8 billion for the first quarter as well.

Next, from SMBC NIKKO, Katsura-san.

This is Katsura speaking. I have 2 questions. First is about Connect, the projector business. So this time -- or joint venture started in April, but it was terminated. So once again, what are you going to do about this business? And what are your views as of now? That's my first question.

As for the numbers, the technical sales is JPY 65 billion and then it came back. And after the adjustment, that hasn't changed. So it's down to 0. And the JPY 50 billion, the gain on sale was excluded. I think that's how it is explained. So from including the organizational change of the Panasonic Corporation, should we understand the positioning of this business? And after this making the announcement, it was terminated. And so maybe it has to do with the conditions with ORIX and the reason why you made this decision, I'd like to know the reasons.

The second question is about energy. On Slide 13, I think, earlier, I think that the review has not been changed and the automotive hasn't changed. So it has -- it's unchanged. But as an understanding of the environment compared to 3 months ago, in terms of magnitude, so how do you see the environment right now? I think they are positive and negative. So the performance of the Q1 or you can talk about in comparison to the expectation, and I'm sure it's difficult to talk about the full year, but if you can talk about the first quarter.

Okay. So the first question about the project business deal, why did we end this or terminate this? So it was a very difficult decision to make. And as for the background, last fiscal year in the first half, we made this deal and we reached an agreement, and we made announcement to you. That was the beginning. And then after that, spending 6 months, finally, we decided to terminate this. So during the 6 months, what were the changes that we saw? -- overall market conditions quickly deteriorated.

And because of this, the project business last year in the first half compared to that, I think that the business environment and the performance expectation became very tough. And the project business, we do have a big business in North America, and there has been the impact from the tariff, and there have been a lot of quick changes, and this was a headwind for this project. And of course, that when -- it is not as simple as terminating the deal because of the changes in the environment. So to what extent was the environmental reason, to what extent was our own reasons. If we talk about the details, it will be very difficult to separate those 2. But of course, that with our partner, there were some differences of the views, and we had a thorough discussion with them.

But as I said, who is responsible for how much, it's difficult to draw the line quantitatively. So the negotiation of the deal to linger it, of course, that from April, the project people were determined to start this business. And we -- rather than continuing with this discussion, we wanted to make a decision so that we can move forward as a company. So that's why it was a very difficult decision for us to make.

And so as a segment in Connect, so we made a revision to the impact that we expected at the beginning of the fiscal year. Second question, including Page 13, the EV battery and including the performance of the Q1, there are several things. But as I explained earlier, compared with our expectations, the recent trend, our forecast of the sales have softened or weakened somewhat. And based upon the Q1 results, we do disclose that, and we are showing that in this -- on this page. So 10.1 gigawatt was the production sales in Q1. So compared with the year before, 1.4 gigawatt higher in revenue and in profit. So this 10.1 gigawatt level the start-up of the Kansas, if it starts up steadily, then the 46 gigawatt hour was not difficult, but we needed to make a modification to that.

So what would be the size of the modification? We are currently scrutinizing that. We are not showing the numbers right now. But we -- the volume will be higher than the year before. So that will be within what we expected. So fiscal '25 graph, if you look at that graph or line, our strategic partners, their car sales were stagnant last fiscal year. And each quarter, we try to increase the production and sales position, and we achieved that. And as we explained since the past, the total demand of the vehicle rather than that, our we wanted to manufacture and sell those products locally, and that was highly valuated from our customer and our share increased.

So I think that there has been some little gap between the vehicle side and also our product side. And a comparative advantage that we have or IRA30D is going to be terminated, but the 45X will continue. And this is a major thing for the local production manufacturer. And in addition, Kansas, the mass production it's 2170 is the same cell, but -- and we have a higher capacity. As I mentioned, it's 5% higher. So technology is more evolved. So those are the cells that we manufacture in Kansas, and we are getting a very strong inquiry from the customers to provide the cells early. And of course, that our customers need to evolve their cars.

So as a partner, we are cooperating to startup Kansas. So having the continuous incentives and also our technology and capacity being accepted, and we are getting a strong inquiry. So it will be slower than what we expected originally, but the volume will be higher than the year before. So that's the kind of the current understanding of the recent movement.

We are getting close to the end time. So we will only take 2 more questions, 1 each from 2 people.

Nakane-san from Mizuho, please.

One question. Okay. Connect, Mr. Sain is going to be the new President. He's from Avionics and not Blue Yonder Gemba Solution. So it looks like they are very far. So including the plan to list the Blue Yonder share, should we assume that everything -- all the strategies would be considered from scratch, in other words, without any prior notice? And also next year, in April, he is going to be a President. Would there be any chance for us to meet him in advance?

Thank you for your question. Yes, Connect will be headed by a new person. Would there be any changes to the policy and strategy of Blue Yonder? No, we're not going to change Blue Yonder strategy, the new -- I mean, the company under the new leadership is going to continue with the conditional policy on Blue Yonder. Now before next April, would there be any opportunity for you to meet Mr. Sain? Well, we are making this announcement rather early on. And so we would like to make sure that there is sufficient preparation ramp-up being made before April. So all this preparation would proceed.

Last question. From Citigroup Global Markets, we have Ezawa-san.

This is Ezawa speaking. One question. About the projector related and also the management as a whole, I'd like to hear from Waniko-san. Now projector at the very end, I think this was a major matter because you were unable to sell this. So structural reform is something that you have been working on and you're proceeding with it. And in relation to that, maybe selling this business even at loss would have been better as a third party. So what you are focused upon as a management team? Is it changing slightly?

So looking at the business performance this time, Blue Yonder, the performance is not very good. And Higuchi-san have been leading is now going to resign. And the batteries, I think there has been some activities, good and bad. So the consolidated guidance remains the same as of now. So it seems that the quality of the management is being questioned, frankly speaking. So aside from the short-term results, the improvement of the management structure and the enhancement, if you can mention something, some changes that you can expect or some views or plans, something that you can talk about now?

About the projector, this is something that we have been working on. And at the very end, it was terminated. And of course, we have to make the overall group reform, and we not doing as we mentioned. And we are not changing our attitude at all. And as a result, this project business was terminated. But this was, again, as I said, was an extremely difficult decision for me. So if we -- to explain each detail of the background, of course, that's not suitable for us to do because there is a partner. And the situation becoming worse, and it was not an easy decision for us.

So once again, you mentioned that we should probably consider the lower price. And we actually repeated the negotiations many times. And in our Board meeting, we did discuss this. But at the very end, we had to make a decision and what do we choose? And as I said, those employees who were willing to work, we wanted to make sure that they can move forward, and we needed to make a decision for that. So the quality of the management changing, maybe you had such image. So that is not the case, and we are working on this reform for this fiscal year, and we will continue to do so. Thank you very much.

Thank you very much. With this, we conclude the earnings briefing for the first quarter of the fiscal year ending March 2026. Thank you very much for your participation.