This presentation contains consolidated financial results for fiscal 2014, ended March 31, 2014 and the current forecast for fiscal 2015. 1
First, the financial results for fiscal 2014. 2
This slide shows three main points regarding fiscal 2014. Firstly, operating profit increased significantly from last year. This was due mainly to the expansion of housing/automotive-related businesses and improvements in unprofitable businesses such as TV/Panel. In addition, undertaking company-wide fixed-cost reductions and streamlining initiatives supported overall profit increase. Secondly, additional and brought forward business restructuring were carried out. Setting direction of major challenging businesses has been completed such as reorganization of semiconductor business and termination of PDPs. Finally, financial structure has improved significantly. The levels of net cash and shareholders equity ratio have improved steadily. As a result, the Company s mid-term plan targets will be achieved more speedily. 3
Consolidated group sales were up by 6% compared with the previous year. However, in real terms (excluding the effects of exchange rates) consolidated group sales decreased by 3%. Operating profit increased from last year. Pre-tax income and net income attributable to Panasonic Corporation moved into the black, showing major progress from last year when there were huge losses. Compared with the FY14 forecast, sales increased due mainly to a demand surge prior to the consumption tax increase in Japan. Operating profit also improved owing to sales increases. However, pre-tax income was slightly lower than the forecast due to additional and brought forward business restructuring. Net income attributable to Panasonic Corporation exceeded the forecast mainly as a result of improvement in the provision for income taxes. 4
This slide shows sales analysis by major product compared with last year. Sales in real terms (excluding the effect of exchange rates) increased steadily in housing/automotive-related products such as energy/housing systems and automotive infotainment. However, weaker sales in digital consumer-related products such as TVs, and business transfers impacted negatively on overall sales which declined in real terms by 191.6 billion yen from last year. 5
Next, operating profit analysis compared with last year. Although profitability declined by 67.0 billion yen due to sales decreases in real terms, it improved by 50.0 billion yen as a result of corporate-wide measures, including bonus reductions, and by 98.2 billion yen due to other fixed-cost reductions. A 40.0 billion yen benefit from restructuring was included in the fixedcost reductions. A 43.0 billion yen improvement due to streamlining on materials which exceeded price declines, and a 20.0 billion yen benefit from yen depreciation also contributed to the overall operating profit improvement of 144.2 billion yen. 6
Next, operating profit analysis by segment. Overall operating profit growth was led by significant improvements in profitability in Automotive & Industrial Systems due to automotiverelated business growth, and in Eco Solutions due to capturing of demand in the housing-related business prior to the consumption tax increase in Japan. Profitability in AVC Networks improved considerably due mainly to business restructuring reforms. Lower profitability in Appliances was caused mainly by a decline in air-conditioner business. 7
Next, sales and operating profit results by segment. Operating profit in the Eliminations and adjustments improved by 33.9 billion yen from last year due mainly to the improved profitability in consumer-related sales division. Business promotion through integration of production and sales management is now bearing fruit, showing steady profit improvement. 8
Next, pre-tax and net income analysis. Non-operating loss was 98.9 billion yen. A 78.7 billion yen profit on sales of Healthcare business and a one-off gain of 79.8 billion yen from changes in Corporation pension scheme were recorded. Meanwhile, business restructuring expenses of 207.4 billion yen were recorded. As a result, pre-tax income was 206.2 billion yen and net income attributable to Panasonic Corporation was 120.4 billion yen. Pre-tax income increased significantly compared with the previous year when large-scale business restructuring expenses were booked. Net income attributable to Panasonic Corporation also increased considerably due not only to the aforementioned reason but also to the valuation allowances to deferred tax assets which increased last year. 9
The breakdown in the business restructuring expenses by segment are shown here. In the AVC Networks, impairment losses for fixed assets relating to flat- panel business were incurred. In impairment losses for fixed assets in the Automotive & Industrial Systems, a 21.7 billion yen for circuit board-related and a 20.1 billion yen for semiconductor-related were included. 10
Next, free cash flow, net cash and shareholders equity ratio. Free cash flow on the left hand side of the slide was 594.1 billion yen, exceeding the Company s original target significantly due to company-wide cash generating measures. As a result, net cash on the right hand side of the slide was minus 47.6 billion yen at the end of fiscal 2014, showing a major improvement which exceeded the Company s mid-term target of minus 220.0 billion yen. Furthermore, shareholders equity ratio was 29.7%, making a substantial improvement from the end of fiscal 2013. 11
Next, financial forecast for fiscal 2015. 12
Consolidated group sales of 7,750.0 billion yen and operating profit of 310.0 billion yen for fiscal 2015 are forecast, showing moderate increases from last year. Pre-tax income is expected to be 120.0 billion yen, a decrease from last year, while net income attributable to Panasonic Corporation is expected to be 140.0 billion yen, an increase from last year. 13
This slide shows the forecast of operating profit analysis for fiscal 2015. Negative impacts on operating profit are as follows: - Effect of business transfers, including Healthcare business: 10.0 billion yen - Termination of corporate-wide measures: 50.0 billion yen - Fixed-cost increase, including strategic investment: 20.1 billion yen On the other hand, positive impacts on operating profit are as follows: - Benefit from restructuring: 55.0 billion yen - Streamlining which exceeds the impact of price declines: 25.0 billion yen - Positive impact of exchange rate: 5.0 billion yen As a result, overall operating profit is projected to increase by 4.9 billion yen. The impact of sales increase/decrease on profitability in real terms is not shown in this chart. This is because sales fluctuations are expected to be small, if impacts of exchange rate variability and business transfers are excluded. 14
Next, operating profit analysis by segment. Operating profit in Eco Solutions is expected to be lower due to decreasing demand after strong sales in fiscal 2014 prior to the consumption tax increase in Japan. The decrease in Other is forecast due mainly to business transfer. Results by segment follow later. 15
Profit improvement in major challenging businesses is expected to contribute significantly to the overall operating profit increase. Other factors are also shown here. 16
Next, pre-tax and net income analysis. Pre-tax income is expected to be 120.0 billion yen as business restructuring expenses of 90.0 billion yen are planned. Net income attributable to Panasonic Corporation is forecast to be 140.0 billion yen as a decrease of 120.0 billion yen in valuation allowances to deferred tax assets for Panasonic Corporation on a consolidated basis is expected. 17
Next, forecasts of free cash flow and net cash. In fiscal 2015, the Company continues to generate cash through Company-wide activities, aiming for free cash flow of more than 100.0 billion yen. With these activities, net cash is expected to be positive. 18
Next, changes in segments. Firstly, associated with reorganization of Appliances Company, some businesses have been transferred to this Divisional Company from other segments and this is reflected in the fiscal 2015 forecasts, shown here. Following unification of all consumer electronics businesses in Appliances Company, with regard to consumer-related business, only the Appliances segment will be disclosed on a production and sales consolidated basis. Secondly, the disclosure of information for the range of Business Divisions will be changed as a consequence of the results of fiscal 2014 and the new business structure following the reorganization of the Divisional Companies. 19
This chart shows the comparison of fiscal 2014 results in new and old segment frames. Forecasts for fiscal 2015 will use the new segment basis. 20
Full year forecasts for fiscal 2015 on a new segment basis are shown here. Next, forecasts by segment. 21
First, Appliances based on a production and sales consolidated. Sales are expected to decline slightly by 1% compared with the previous year. Favourable overseas sales and BtoB business expansion including cold-chain would not be able to offset the impact of decrease in demand after the consumption tax increase in the consumer electronics business in Japan. On the other hand, overall operating profit is forecast to increase due to profitability improvement in challenging businesses including airconditioners and TVs. 22
Next, Eco Solutions. Although housing improvement-related business and overseas sales are expected to increase, overall sales is forecast to decrease by 2% from last year due to lower new housing starts in Japan after the consumption tax increase. Operating profit is expected to be lower due mainly to weaker sales and price decline centering on solar panels. 23
Main business of AVC Networks is now BtoB solutions following reorganization. Overall sales will be affected by lower sales including PDPs and smartphones for consumer use due to restructuring of challenging businesses. However, based on core technologies such as imaging, communications, and downsizing/ruggedization, the Company will expand its solution business for a wide range of industrial customers such as convenience stores and logistics. Accordingly, sales are expected to increase by 1% on last year. Operating profit is expected to grow due to sales increases in BtoB business where profitability is relatively higher compared with BtoC business. The restructuring effect on challenging businesses such as termination of PDP business will also contribute to overall operating profit growth. 24
Next, Automotive & Industrial Systems. Sales are expected to increase by 1% on last year. Although sales decrease is projected due to business contraction such as circuit boards, overall sales are expected to increase due mainly to a sales increase in batteries for automotive and to the positive impact of yen depreciation. Operating profit is forecast to increase due to improvement in profitability as a result of restructuring reform. An increase of profitability in batteries, capacitors and automation controls for the growing auto and industrial use also will contribute to overall profit growth. 25
Next, major challenging businesses. Sales in Air-Conditioner BD on the left hand side of the slide is expected to increase by 9% from last year by enhancing overseas sales centering on China for both household and industrial use. Operating profit is projected to return to the black due mainly to improvement of marginal profits through rebuilding business in China and rationalization. Total operating loss in TV/Panel business is shown on the right hand side of the slide. Although the loss is expected to remain in fiscal 2015, the level of loss will improve significantly from last year. Profitability in the set/distribution business is predicted to improve due mainly to sales increase in value-added models and the impact of rationalization. In the panel business, profitability is also predicted to increase due to business expansion for non-tv applications and fixed-cost reductions. 26
Lastly, Semiconductor BD. Total sales are expected to increase by 3% on last year due to sales increases in the automotive and industrial fields. Although operating loss is likely to continue, the level of loss is set to improve significantly due to last year s restructuring reform. 27
Fiscal 2015 is the second year of the Mid-term Plan and the year to solidify the foundation for achieving the targets. As shown here, free cash flow has reached the level where it is almost achieving the Mid-term plan target ahead of schedule. The Company will strive to increase free cash flow further in preparation for strategic investment for the future. The Company also continues to implement measures for improving operating profit. In fiscal 2015, it will endeavour to complete its remaining business restructuring and strengthen profitability in each Business Division. At the same time, by planning ahead for the next step to growth, it will draw up a road map towards achieving the Midterm plan target of more than 350.0 billion yen in operating profit. 28
Thank you for your continued support. 29
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