Eco Solutions Company Business Policy May 18, 2016 Panasonic Corporation Eco Solutions Company President Tamio Yoshioka Notes: 1. This is an English translation from the original presentation in Japanese. 2. In this presentation, FY17 refers to the year ending March 31, 2017. Results 1
Results * Based on US GAAP 1,666.0 (vs. -3%) 1,610.8 1,726.0 OP (%) 95.3 (5.7%) 78.4 (4.9%) 104.5 (6.1%) (f) DOWN DOWN Sudden shrink in the domestic residential market for the PV power generation and unexpected delayed recovery of the domestic housing market OP Measures such as streamlining did not offset the impact of decreased sales. 2 Results * Based on US GAAP [ Analysis] 1,666.0 Domestic sales decrease 48.9 Overseas sales +11.6 Price declines 22.5 Exchange rate effects +4.6 1,610.8-55.2 [OP Analysis] 95.3 Domestic sales decrease 17.3 Overseas sales +3.4 Streamlining & Price declines +0.3 Fixed-cost +7.2 Exchange rate effects 10.5 78.4-16.9 3
Results Revenue d if the PV power generation system (Solar Business) is excluded. * Based on US GAAP [Effects of decreased sales in the Solar Business] 1,666.0 Increase in sales excluding the sales of the Solar Business Decrease in sales of domestic Solar Business Increase in sales of overseas Solar Business 1,610.8 4 * Based on US GAAP PV Power Generation System Business (Solar Business) Size of residential market Market unit price* (system) 1,900MW 2,400MW About -50% 2,000MW 1,500-1,600MW (estimate) 100 86 71 62 Market size (in value terms) (compared with FY13) 100 About -25% OP ratio 10% 5% 0 FY13 FY14 0% *Based on the unit price in FY12 which is set at 100. Source: IHS TECHNOLOGY Prices of PV System in Japanese Housing Market 5
Business unit Lighting Business Division Housing Systems Business Division 6 large scale BDs results vs. OP vs. * Based on US GAAP Results of evaluation 320.3 +1% 20.3 +5.4 353.6-4% 14.0 +2.8 [Reference] PanaHome Corporation 353.0 +8% 15.9 +3.1 * BD stands for division 6 10% OP ratio Business Portfolio Panasonic Ecology Systems Co., Ltd. (FY13 ) * Based on US GAAP Energy Systems Business Division Lighting Business Division 5% FY13 *Size of circles indicates amounts of profits. 12 Housing Systems Business Division 7 0 200 400
Toward FY19 8 Goals Minimum 2.8 *Based on IFRS (yen : trillions) 1.9 0.6 1.3 2.0 0.6 1.4 2.3 0.7 1.6 Nonresidential Minimum0.8 Residential 2.0 *Group s total BtoB BtoBtoC Including 0.4 by PanaHome Including 0.4 by PanaHome Including 0.5 by PanaHome FY19(f) Goals OP ratio 4.8% 5.5% 6.0% Minimum 7.5% The sales goal was revised by excluding the noncontiguous growth through M&A, and reviewing of the timing PanaHome can achieve targets (such as the ones of their overseas es), and changes in the domestic market for the PV power generation system. 9
Strategic Framework Priority investment *Based on IFRS FY19 sales Remodeling +145B Yen Growth in residentialrelated Growth in nonresidentialrelated Domestic Domestic Overseas Overseas New contraction and urban development Elderly care Residential energy management Overseas residential-related LED solution Non-residential energy management Engineering Tokyo Olympics and Tohoku region rebuilding solutions +10B Yen +45B Yen +10B Yen +90B Yen +30B Yen +3B Yen +28B Yen +7B Yen Development of new 10 FY17 Business Policy 11
Market Environment *When consumption tax hike is postponed FY17 forecast vs. Japan Overseas 12 New housing starts <Time lag has been considered> Housing remodeling Non-housing starts <Time lag has been considered> Construction investment <ACTION areas + America> *ACTION areas: ASEAN, China, Turkey and India 891,000 +/-0% 6.6 trillion yen +2% 28.32 million m 2 +/-0% The sum of the store, warehouse, office and factory 4,195 billion dollars +6% Market index +1% Source: Estimated by our company based on the reports by Japan Center for Economic Research, Yano Research Institute Ltd., Research Institute of Construction and Economy, and IHS FY17 Financial Target *When consumption tax hike is postponed *based on IFRS 1,592.7 (vs. +3%) 1,640.0 OP (%) 76.3 (4.8%) 90.0 (5.5%) UP Inside Japan, increasing the sales in the growing areas such as the remodeling, and outside Japan, expanding mainly in the strategic regions. OP UP Increasing sales and profit and streamlining to offset the price declines and s in fixed costs for growth. 13
[ Analysis] 1,592.7 FY17 Financial Target Domestic sales +61.3 Overseas sales Price declines +28.9 22.9 Exchange rate effects 20.0 *When consumption tax hike is postponed 1,640.0 *based on IFRS +47.3 [OP Analysis] 76.3 Domestic sales +22.0 Overseas sales +8.8 Streamlining & Price declines +5.6 Fixed-cost 29.2 Other +5.8 Expansion of (strategic) investment Exchange rate effects +0.7 90.0 14 +13.7 1,592.7 +16.6 Age Free (Elderly care) Remodeling +5.7 +7.5 FY17 Goals Residential energy management (by strategy) Overseas +2.4 Residential-related Decrease in sales of Solar Business and others 2.2 LED solution +12.7 Non-residential energy management Engineering +0.2 +8.2 Tokyo Olympics and Tohoku region rebuilding solutions Non-residential-related FY17 632.7 654.0 *When consumption tax hike is postponed +0.2 *based on IFRS Elimination and others 4.0 1,640.0 FY17 960.0 990.0 +47.3 15
Residentialrelated strategy 1 Remodeling Business 255.9 billion yen in (vs. +7%) Group Goals 350 billion yen Increasing the growth rate by making upfront investments such as the launch of a general remodeling company Offer a wider range of products for remodeling homes Reinforcing designing and construction systems Improving customer contacts Strengthening lineup of mid-to-high end products Cross-Value Creating living space value ES AP AVC Panasonic Home Renovation Co., Ltd. Increase in design staff Strengthening collaboration with the Group and promotion store 4 new LIVING showrooms opened Newly opening 50 directly managed shops Increase in sales staff Customer Reform Club Increase to 400 shops Supporting policies Panasonic Home Renovation Division (Eco Solutions) 16 Creation of living space value Providing Panasonic Group s original new living space value through equipment and building products / electrical construction materials / consumer electronics housing [Skeleton] Equipment and building products [Infill] Constructional materials and exterior materials Electrical construction materials 17 Living space value Consumer electronics
Residentialrelated strategy 3 Age Free (elderly care) Business Expanding the service and leading growth of the Age free Service 37 billion yen in (vs. +25%) Group Goals 50 billion yen Improving the provided values Elderly care services Uplifting CS with work environment improvement +30 sites (total 155 sites) Reducing workload Improving safety The figures indicate the number of opened AGE-FREE elderly care service centers. Elderly Housing with support services +20 sites (total 45 sites) The figures indicate the number of opened AGE-FREE houses. IT introduction for recording work Monitoring with IoT Enriching HR development & training program grew by about 1.3 times in the years from FY13 to and the growth rate is increasing. 18 Residentialrelated strategy 4 Residential Energy Management Business Expediting promotion of HEMS for standardization PV power generation system Maximizing profit by fully utilizing the existing operating resources Increasing domestic share Smart HEMS 103.5 billion yen in (vs. +6%) Improving the system for overall proposal Improving compatibility with the ZEH by proposing total energy management Introducing strategic new products for each market Widely promoting new construction method 19 Pursuing further streamlining Gaining effects of investment for streamlining / s in production (PV power generation + Storage battery + HEMS) [Number of sold Smart Cosmo panels] Creation of an infrastructure is expanding steadily. About six-fold expansion New service applications Increasing speed of promotion
Residentialrelated strategy 5 Overseas Business 162.5 billion yen in (vs. +9%*) *Effects of exchange rates are excluded. Growing in ACTION areas + North America. Potential in Middle East and Africa. Action areas North America ASEAN, India and Turkey Reinforcing promotion of wiring equipment and expediting new es Increasing share in the wiring devices market Newly developing the es of LED lighting, etc. Collaboration with PanaHome for promotion in ASEAN China Expediting development of e-commerce Wiring equipment, lighting fixtures, air cleaners, etc. Accelerating expansion of ventilating system + full-scale development of PV Establishing Made in market system State of Baja California, Mexico PV : Promotion of HIT superiority Middle East and Africa Expediting the market development and starting the full-scale promotion Establishing the marketing controlling company Use of Anchor, ViKO 20 Non-residentialrelated strategy 1 LED Solution Business 258.8 billion yen in (vs. +5%) Capturing demands for LED and realizing strong growth Development of each market & strengthening the proposal function [Changes in Panasonic s market share in non-residential market] 50% 40% ~ FY13 FY14 Business of lighting fixtures in Japan No. 1 second to none Facility and emergency lighting Improving cost competitiveness and promotion of value-added products Store lighting Expanding the rendering lighting Outdoor lighting Improving proposal for each application. Expanding product lineup. Reinforcing the proposal teams Overseas LED equipment Increasing the speed of promotion in China, Indonesia and India <China> Expanding lineup of the performance-prioritized products in the retailer field <India> Responding to rapidly expanding LED market <Indonesia> Strengthening of design and proposal teams. Improving lineup. 21
Non-residentialrelated strategy 3 Engineering Business Advancing challenges in new areas based on the domestic engineering Environmental engineering Expansion of chemical recycling Developing application of water solution technologies 132.6 billion yen in (vs. +7%) Overseas engineering PV solution in North America expansion of about 22 times in 4 years Expansion of 22 times Entering the livestock industry Establishing know-hows for dairy/poultry farming through collaboration with external partners and groups FY13 FY17 (f) Electricity storage solution Establishing the basis of electricity storage solution 22 6 large scale BDs Lighting Business Division [OP Margin] *Figures for FY17 are based on IFRS. *Based on IFRS vs. 5% 0% 23 FY13 [OP Analysis] Implementation of structural reforms FY14 Streamlining & Price declines +11.3 Profitable growth Exchange rate effects, expenses, *Based on IFRS 24.3 Fixed-cost etc. +1.0 13.0 +6.2 4.5 +8.6 338.8B yen +18.5B yen OP 24.3B yen +11.3B yen growth by enhancing LED lighting performance [Changes in Panasonic s market share in domestic LED products market] [ of Lighting BD] [LED lighting sales ratio of whole Lighting BD sales] 70 300 (%) Existing 50 lighting source products, etc. LED 30 ~ 0 FY14 *Figures for FY17 are based on IFRS. 50 (%) 40
6 large scale BDs Housing Systems Business Division [OP Margin] 5% *Figures for FY17 are based on IFRS. *Based on IFRS vs. 370.0B yen +2.9B yen 0% Implementation of structural reforms FY13 [OP Analysis] FY14 Streamlining & Price declines Fixed-cost Gaining effects *Based on IFRS Exchange rate effects, price revision, etc. 13.7 +0.4 +0.8 16.4 +6.9 5.4 Operating profit 16.4B yen +2.7B yen Profit improvement by shifting to mid-to-high end product strategy (Expanding remodeling ) [ ratio of remodeling products] [ of strategic products *] 100 [Mid-to-high end product sales of whole strategic product sales] (%) 40 30 (%) 30 24 +2.7 20 ~ 0 FY14 * Modular kitchen systems, modular bathroom systems and floor materials *Figures for FY17 are based on IFRS.
Disclaimer Regarding Forward-Looking Statements This presentation includes forward-looking statements (that include those within the meaning of Section 27A of the U.S. Securities Act of 1933, as amended, and Section 21E of the U.S. Securities Exchange Act of 1934), as amended about Panasonic and its Group companies (the Panasonic Group). Panasonic discloses its consolidated financial forecasts for fiscal 2017 based on International Financial Reporting Standards (IFRS). To the extent that statements in this presentation do not relate to historical or current facts, they constitute forward-looking statements. These forward-looking statements are based on the current assumptions and beliefs of the Panasonic Group in light of the information currently available to it, and involve known and unknown risks, uncertainties and other factors. 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