Panasonic Fiscal 2021 Financial Forecast Documentation
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Fiscal 2021 Financial Forecast. July 30, 2020 Panasonic Corporation. Notes: 1. This is an English translation from the original presentation in Japanese.
Fiscal 2021First Quarter Financial Results Fiscal 2021 ...
4-20.5 1,891.1-350.0 1,391.9-102.2-26.5 FY211Q Sales Analysis (yen: billions） Sales increase/decrease in real terms （excl. special factors) Effect of
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Fiscal 2021 First Quarter Financial Results Fiscal 2021 Financial Forecast July 30, 2020 Panasonic Corporation Notes: 1. This is an English translation from the original presentation in Japanese. 2. In this presentation, "Fiscal 2021" or "FY21" refers to the year ending March 31, 2021. Summary of FY21 1Q Financial Results and Full-Year Forecast � FY21 1Q Financial Results - Overall sales decreased due to deconsolidation in business portfolio reform, and impact of novel coronavirus disease (COVID-19) - Profit decreased with largely decreased sales, despite steady progress in enhancing management structure - COVID-19 impact: both sales and profit have improved since June 2020 � FY21 Full-Year Forecast - Overall sales and profit expected to decrease for the full-year, despite outlook of gradual lessening of COVID-19 impact from 2Q onward - Steadily promote management structure enhancement, etc. as Mid-term strategy initiatives to improve profitability, and strengthen efforts to capture business opportunities from changes in society brought about by COVID-19 Fiscal 2021 First Quarter Financial Results / Full-Year Forecast 1 Fiscal 2021 First Quarter Financial Results Fiscal 2021 Full-Year Financial Forecast FY21 1Q Financial Results � Sales: Decreased due to deconsolidation impact in business portfolio reform and COVID-19 impact � Adjusted operating profit: Decreased with largely decreased sales, despite progress in enhancing management structure such as fixed cost reduction � Operating profit : Decreased, despite achieving profitability by recording of one-time gains � Net profit: Decreased (yen: billions) FY21 1Q FY20 1Q vs. FY20 / Difference Sales 1,391.9 1,891.1 -26% Excl. effect of exchange rates (-25%) Excl. effect of exchange rates & deconsolidation impact (-21%) -499.2 (-472.7) (-370.5) Adjusted operating profit* (Adjusted OPM) -5.9 (-0.4%) 62.4 (3.3%) - -68.3 Other income/loss** 9.7 -6.0 - +15.7 Operating profit (OPM) 3.8 (0.3%) 56.4 (3.0%) -93% -52.6 Non-operating income/loss -0.7 Profit before income taxes 3.1 Net profit attributable to Panasonic Corporation stockholders -9.8 -0.2 56.2 49.8 -95% - -0.5 -53.1 -59.6 Exchange Rates 1 US dollar 1 Euro 1 Renminbi 108 yen 118 yen 15.2 yen Fiscal 2021 First Quarter Financial Results / Full-Year Forecast 110 yen 123 yen 16.1 yen * Adjusted OP = Sales - Cost of sales - SG&A ** Other income/loss = Other income (expenses) + Share of profit of investments accounted for using the equity method 3 FY21 1Q Sales Analysis � Largely decreased due to deconsolidation in business portfolio reform, and COVID-19 impact mainly in Automotive, Appliances, and Connected Solutions � Monthly sales hit at bottom in April and May. Noticeable recovery seen mainly in Japan and China from June 2020 (yen: billions 1,891.1 Deconsolidation impact -102.2 Housing, Automotive prismatic batteries, Security systems Monthly sales 1Q Sales vs.FY20 (excl. effect of exchange rates and deconsolidation impact) -21% April -26% May -28% June -9% -26.5 Effect of exchange rates -20.5 Sales increase/decrease in real terms excl. special factors) COVID-19 impact -350.0 ISIS AAPP AAMM -350.0 LS CCNNS S 1,391.9 Excl. effect of exchange rates and deconsolidation impact -370.5(-21%) -499.2 (-26%) FY20 1Q Fiscal 2021 First Quarter Financial Results / Full-Year Forecast FY21 1Q 4 FY21 1Q Operating Profit Analysis � Adjusted OP decreased due to COVID-19 impact, however, steady progress with initiatives including enhancing management structure, turning profitable in June � OP achieved profitability by recording of one-time gains (yen: billions Measures to businesses with Management structure loss-making structures enhancement (Fixed cost reduction) 8.0 Increases/ decreases in other Deconsolidation impact* businesses Effect of exchange rates -5.6 +0.3 COVID-19 impact** -80.0 56.4 9.0 Breakdown: Deconsolidation impact*:-0.3 Effect of exchange rates:+0.6 Profitability improvement of automotive business 8.0 IS AP AM -80.0 LS CNS Major difference factors Gains from establishment of JV: +27.0 Loss of investments under equity method: -15.0 Other income/loss +15.7 3.8 FY20 1Q Adjusted OP (excl. COVID-19 impact): +11.7 Adjusted OP: -68.3 OP: -52.6 * Housing, Automotive prismatic batteries, Security systems ** Net amount of decreased sales and fixed cost improvement related to COVID-19 Fiscal 2021 First Quarter Financial Results / Full-Year Forecast FY21 1Q 5 FY21 1Q Results by Segment (yen: billions) Appliances Life Solutions Connected Solutions Automotive Industrial Solutions Other Eliminations & adjustments Sales vs. FY20 (In real terms excl. effect of exchange rate) vs. FY20 Difference Adjusted vs. FY20 OP Difference Other income/ loss vs. FY20 Difference OP vs. FY20 Difference 554.7 325.1 185.3 210.8 288.6 52.3 -19% (-18%) -30% (-29%)* -27% (-26%) -44% (-43%) -12% (-10%) -11% -133.7 -137.6 -69.9 -166.6 -38.5 -6.2 15.8 -14.7 7.3 -5.2 -16.6 -30.8 -29.5 -19.7 10.7 +3.9 0.8 -0.3 -0.6 -0.1 15.2 -1.7 -1.9 5.6 0.6 +1.1 -16.0 20.0 +20.2 -9.5 -1.5 +0.1 9.2 -0.5 -0.9 0.3 -14.8 -7.1 -29.7 +0.5 +4.0 -1.2 -224.9 - +53.3 5.6 -1.5 -6.6 -2.8 -1.0 -4.3 Total 1,391.9 -26% (-25%) -499.2 -5.9 -68.3 9.7 +15.7 3.8 -52.6 Appliances (Production and sales consolidated) 563.1 -20% (-19%) -144.8 * vs. FY20 excluding the effect of exchange rates and deconsolidation impact: -12 Fiscal 2021 First Quarter Financial Results / Full-Year Forecast 14.3 -14.5 -0.6 -0.0 13.7 -14.5 6 FY21 1Q Sales and Profit Analysis by Segment Major increase/decrease factors Sales decreased: Largely affected by market deterioration from COVID-19 impact, despite recovery trends in some AP products in regions such as China and Japan Profit decreased due to decreased sales, despite efforts to reduce fixed costs and sales promotion expenses, etc. Sales / Adjusted OP Sales decreased due mainly to market deterioration from COVID-19 impact and temporary suspension at factories LS resulting from lockdown measures Profit decreased: Impacted by decreased sales, etc., despite efforts to reduce fixed costs Sales decreased: Mainly in Avionics due to sharply CNS reduced flight operations Profit decreased largely impacted by decreased sales, despite thorough efforts to reduce fixed costs Sales decreased largely due to COVID-19 impact. In Automotive Solutions, steady progress made with product portfolio replacement. AM Profit decreased: Decreased overall due to Automotive Solutions unable to offset lower sales with significant fixed- cost reductions, despite profit of Automotive Batteries maintaining the same level as previous year with improved productivity at North America factory, etc. Sales decreased: Decreased overall impacted by decreased sales for automotive-use products, despite increases in power storage systems and capacitors for IS information- and communication-infrastructure, etc. Profit increased: Efforts to reduce fixed costs and effects of contract alteration of semiconductor business offset decreased sales Other Gains related to joint venture establishment offset income/loss loss of investments under the equity method Sales: Decreased at all segments due mainly to COVID-19 impact (yen: billions) 1,891.1 AP* (production- LS sales consolidated) CNS AM Effect of exchange rates/ Deconsolidation impact 1,520.6 -128.7 IS Eliminations & adjustments, etc.* 1,391.9 Excluding effect of exchange rates & deconsolidation impact: -370.5 (-21 FY20 1Q -499.2 (-26IS) FY21 1Q *Difference between "AP (production and sales consolidated)" and segment information is adjusted in "eliminations and adjustments" OP: Increased at IS, but decreased at 4 segments (yen: billions) 56.4 LS AP* (productionsales consolidated) CNS AM Other income/loss +15.7 Eliminations & adjustments, etc.* Effect of exchange rates 3.8 IS +0.6 FY20 1Q Adjusted OP: -68.3 OP: -52.6 Note: Names of each Segment are as follows; AP: Appliances LS: Life Solutions CNS: Connected Solutions AM: Automotive IS: Industrial Solutions FY21 1Q Fiscal 2021 First Quarter Financial Results / Full-Year Forecast 7 FY21 1Q FCF and Cash � FCF: Three-month accumulated was negative, however recovered to positive in June - Operating CF: Negative due to short-term factors such as COVID-19 impact (Decreased profit, increased inventory, and temporary delay in collection of other working capital) - Investing CF: Positive due mainly to one-time proceeds (Reference) FY21 1Q FY20 1Q 41.2 (yen: billions) � Cash: Maintained sufficient liquidity Gross cash: Secured over 1 trillion yen. No borrowing under commitment line agreements (total of 700.0 billion yen) Net cash: Improved from FY20 due to reduction of lease liabilities (Reference) End of June 2020 End of June 2019 1,097.4 Gross Cash* Increased 739.0 44.1 FCF -98.3 Investing Operating CF CF -54.2 FCF Proceeds from establishment of JV Sale of assets, etc. April May June Fiscal 2021 First Quarter Financial Results / Full-Year Forecast Excl. Lease liabilities -284.9 -206.6 Lease liabilities** -266.1 -645.5 Net Cash -551.0 Improved -852.1 * Total of "cash and cash equivalents" and time deposits and others included in "other financial assets" ** Lease liabilities by applying IFRS 16 8 Fiscal 2021 First Quarter Financial Results Fiscal 2021 Full-Year Financial Forecast FY21 Full-Year Forecast � Sales and profit expected to decrease for the full-year, despite outlook of gradual lessening of COVID-19 impact from 2Q onward � Profit improvement in line with Mid-term strategy: Steadily promote enhancement of management structure, etc. (yen: billions) Sales Adjusted operating profit* (Adjusted OPM) Other income/loss** Operating profit (OPM) Non-operating income/loss Profit before income taxes Net profit attributable to Panasonic Corporation stockholders ROE FY21 (e) 6,500.0 220.0 -70.0 150.0 0.0 150.0 (3.4%) (2.3%) 100.0 5.0% FY20 Difference 7,490.6 -13% Excl. Effect of exchange rates-12%) Excl. Effect of exchange rates/ Deconsolidation impact (-7%) 286.7 (3.8%) -23% 7.1 293.8 (3.9%) -49% -2.7 291.1 -48% 225.7 -56% 11.5% -990.6 -870.6) (-496.3) -66.7 -77.1 -143.8 +2.7 -141.1 -125.7 Exchange rates 1 US dollar 1 Euro 1 Renminbi Full-year 2Q onward 106 yen (105 yen) 116 yen (115 yen) 15.4 yen (15.5 yen) Fiscal 2021 First Quarter Financial Results / Full-Year Forecast Full-year 109 yen 121 yen 15.6 yen * Adjusted OP = Sales - Cost of sales - SG&A ** Other income/loss = Other income (expenses) + Share of profit investments accounted for using the equity method 10 Assumptions/Conditions of COVID-19 Impact (Sales) � While gradual recovery is factored in, impact on businesses expected to remain in 2H for: aviation, housing-related, and automotive industries Nature of COVID-19 Impact COVID-19 impact on sales* (%) 1Q 2Q 2H Companywide � Market recovery to continue according to particular situations, e.g. lifting restrictions on movement and resumption of economic activity in various nations. Supply issues expected to recede. Not expecting another major outbreak of COVID-19; -20 -10 to -5% -5 to -3% AP LS CNS � Gradual recovery trend expected in Europe and Asia due to lifted restrictions; however, impact expected to prolong in Latin America and India � For consumer electronics in Japan, recovery trend and demand related to stay-at-home and infection-prevention needs are factored in; at the same time, negative impact from continuing lower demand by overseas visitors and for non-daily-necessity products � Overseas: Despite resuming economic activity due mainly to lifted restrictions in various nations, largescale slowdown in growth is expected � Japan: Due to held-back investment, declines in new residential and non-residential construction starts will continue throughout FY21, and the renewal market is also expected to remain weak � Worldwide air passenger demand for FY21 expected to decline by 50% from FY20 � Chinese domestic demand shows trends of recovery, but full-scale recovery in Europe and Americas only expected in FY22 or later � Information- and communication-infrastructure demand shows growth trends due mainly to working remotely becoming much more common -20 to -10% -20 to -10% -30 to -20% -10 to -5% -3 to 0% -10 to -5% -10 to -5% -20 to -10% -10 to -5% AM � Since mid-May, customers resumed production; recovery trends seen in various markets starting in China, but impact expected to persist in 2H -50 to -40 -20 to -10% -5 to -3% � For automobile production, COVID-19 impact expected to remain during 2H, and weak demand for IS automotive components will continue � Growing demand for information- and communication-infrastructure with working/learning remotely becoming much more common -10 to -5% -5 to -3% -3 to 0% � Weak demand continues for machine tools, but steady for semiconductor production equipment * COVID-19 impact on FY21 sales compared to FY21 sales excluding COVID-19 impact Note: Names of each Segment are as follows; AP: Appliances LS: Life Solutions CNS: Connected Solutions AM: Automotive IS: Industrial Solutions Fiscal 2021 First Quarter Financial Results / Full-Year Forecast 11 Assumptions/Conditions of COVID-19 Impact (Adjusted Operating Profit) � Decreased amount of profit resulting from COVID-19 impact: negative impact expected to lessen in 2Q and toward 2H (yen: billions) 1Q 2Q 0.0 1H 2H 50.0 FY21 100.0 Mainly for automotive, housing-related, & aviation industries (yen: billions) 1Q 2Q 0.0 (Reference) FY20 50.0 Fiscal 2021 First Quarter Financial Results / Full-Year Forecast 1H 2H 12 FY21 Sales Analysis � Sales decreases largely due to deconsolidation impact in business portfolio reform along with COVID-19 impact (yen: billions) 7,490.6 Deconsolidation impact -374.3 Effect of exchange rates -120.0 Sales increase/decrease in real terms FY20 COVID-19 impact excl. special factors +140.0 +13.7 Housing, Automotive prismatic batteries, Security systems FY21 COVID-19 impact -650.0 IS AP AM -650.0 LS CNS 6,500.0 FY20 Excl. effect of exchange rates/ Deconsolidation impact -496.3 (-7%) -990.6 (-13%) Fiscal 2021 First Quarter Financial Results / Full-Year Forecast FY21 13 FY21 Operating Profit Analysis � Decreases due to COVID-19 impact, however, steady progress with Mid-term strategy initiatives such as enhancing management structure OP (yen: billions) 293.8 Adjusted OP (3.9%*) -66.7 Other income/loss -77.1 150.0 (2.3%*) Adjusted OP Excl. COVID-19 impact Excl. COVID-19 impact Approx. 320.0 286.7 +30.0 Increases/ decreases in other Measures to structural businesses +30.3 loss-making businesses -22.0 +30.0 +15.0 Deconsolidation impact** Effect of exchange rates Approx. 370.0 -150.0 IS AP AM -150.0 LS (3.8%*) Management Structure FY20 Enhancement COVID-19(Fixed cost reduction) impact Deconsolidation: approx. -11.0 Exchange rates: approx. -11.0 Profitability improvement of Automotive business +35.0 FY21 COVID-19 impact 220.0 (3.4%*) CNS Adjusted OP (excl. COVID-19 impact) Approx.50.0 Adjusted OP: -66.7 FY20 **Housing, Automotive prismatic batteries, Security systems FY21 OP: -143.8 FY20 FY21 *( ) =margin (%) Other income/loss FY20 Gains from establishment of JV, etc. Restructuring expenses, and others Restructuring expenses Total 122.6 -115.5 (-102.8) 7.1 Other income/loss: -77.1 FY21 Gains from establishment of JV Restructuring expenses, and others Restructuring expenses Total 27.0 -97.0 (-50.0) -70.0 Fiscal 2021 First Quarter Financial Results / Full-Year Forecast 14 FY21 Full-Year Forecast by Segment (yen: billions) Sales vs. FY20 (Excl. effect of exchange rates) vs. FY20 Difference Adjusted vs. FY20 OP Difference Other income/ loss vs. FY20 Difference OP vs. FY20 Difference Appliances 2,370.0 Life Solutions 1,480.0 Connected Solutions 900.0 Automotive 1,250.0 Industrial Solutions 1,200.0 Other/ Eliminations & adjustments -700.0 -9% (-7%) -23% (-22%)* -13% (-12%) -16% (-14%) -6% (-5%) - -220.3 -438.6 -134.7 -232.4 -82.7 +118.1 73.0 +1.9 75.0 -23.4 15.0 -61.0 -30.0 +0.5 55.0 +17.4 32.0 -2.1 -18.0 -2.6 55.0 -0.7 -30.0 -111.7 45.0 -135.1 -2.0 -18.0 13.0 -79.0 -4.0 +12.1 -34.0 +12.6 -12.0 +21.0 43.0 +38.4 -4.0 +22.1 28.0 +20.0 Total 6,500.0 -13% (-12%) -990.6 220.0 Appliances (Production & sales consolidated 2,410.0 -9 (-8%) -251.3 * vs. FY20 excluding the effect of exchange rates and deconsolidation impact: -7 Fiscal 2021 First Quarter Financial Results / Full-Year Forecast 71.0 -66.7 +2.5 -70.0 -19.0 -77.1 150.0 -143.8 -3.6 52.0 -1.1 15 FY21 Full-year Sales and Profit Analysis by Segment Major increase/decrease factors Sales: Decreases at all segments due to COVID-19, etc. Sales decreases: Despite outlook of recovery trend in 2H (yen: billions) onward, COVID-19 impact expected to be significant AP mainly at Smart Life Network Profit increases through initiatives to enhance 7,490.6 management structure mainly with air-conditioning and white goods businesses, despite sales decrease Sales decreases due mainly to COVID-19 impact, LS despite strong air quality-related business in Japan Profit decreases: Fixed cost reductions, etc. unable to AP* (Production LS and sales consolidated) CNS AM Effect of exchange rates / Eliminations & adjustments, Deconsolidation impact etc.* 6,994.3 -494.3 IS 6,500.0 offset impact of decreased sales Sales decreases: Sales of Avionics, etc. largely impacted In real terms excluding the effect of exchange rates and deconsolidation impact: -496.3 (-7) Sales / Adjusted OP by COVID-19, despite sales increase at Process CNS Automation due to favorable sales of mounting machines Profit decreases: Efforts to reduce costs (mainly personnel costs) unable to offset decreased sales by FY20 -990.6 (-13IS%) FY21 * Difference between "AP (production and sales consolidated)" and segment information is adjusted in "eliminations and adjustments" COVID-19 impact Sales decreases at both Automotive Solutions and Automotive Batteries due to COVID-19 impact. Steady progress in product portfolio replacement at Automotive OP: Decreases overall due mainly to decreased profit at CNS, etc. and rebound from one-time gains in the previous year, despite AP and IS achieving increases Solutions. (yen: billions) AM Overall loss expected to be at same level as previous year: Decreases at Automotive Solutions due to efforts in reducing fixed costs unable to offset COVID-19 impact, but increases at Automotive Batteries with improved 293.8 LS AP* (Production and sales CNS AM Eliminations & adjustments, etc.* -11.2 -77.1 productivity, etc. at North America factory Sales decreases: Decreased sales of automotive-use products due to COVID-19 impact, despite favorable demand of products for information- and communication- consolidated) IS Effect of exchange 150.0 rates Other income/ loss IS infrastructure Adjusted OP: -66.7 Profit increases: Fixed cost reduction and business restructuring effects (e.g. semiconductor business) offset FY20 OP: -143.8 FY21 decreased sales Other income/loss Impact from one-time gains in the previous year, despite restructuring expenses to decrease Note: Names of each Segment are as follows; AP: Appliances LS: Life Solutions CNS: Connected Solutions AM: Automotive IS: Industrial Solutions Fiscal 2021 First Quarter Financial Results / Full-Year Forecast 16 FY21 FCF � From 2Q onward, promote securing profit, optimizing inventory level, improving working capital and narrowing down capital investment � Execute strategic investment within the proceeds generated by business portfolio reform and sale of assets For the full-year, aim for FCF above the level of net profit � Secure profit � Optimize inventory level � Improve working capital � Narrow down capital investment � Execute strategic investment within proceeds generated by business portfolio reform and sale of assets Aim for the level above net profit Operating CF Investing CF Fiscal 2021 First Quarter Financial Results / Full-Year Forecast FCF 17 Business Portfolio Reform Progress since FY20 Investment for growth Gemba (operational frontlines) process business - Made strategic equity investment (20%) in Blue Yonder, a leading supply chain software provider (July 20, 2020) Enhance competitiveness through Co-creation Improve profitability Automotive prismatic battery business - Established Prime Planet Energy & Solutions Inc., a joint venture with Toyota Motor Corporation (April 1, 2020) Town development business - Established Prime Life Technologies Corporation, a joint venture with Toyota Motor Corporation (January 7, 2020) Completed in FY20 Security systems business - Completed strategic capital alliance procedures co-investment with Polaris Capital Group Co., Ltd. (November, 2019) Completed in FY20 Semiconductor business - Announced transfer of semiconductor business (November 28, 2019). Received approval related to competition law from Taiwanese and Chinese authorities, and proceed toward completion in September 2020. *Announced transfer part of discrete semiconductor business (April 23, 2019). Completed November 2019. Liquid crystal display panel business - Announced end of production of liquid crystal display panels by 2021 (November 21, 2019) Solar business - Resolved to end partnership with GS-Solar, a Chinese photovoltaic module manufacturer, agreed in May 2019. Aim to restore profitability by FY23 looking into every possible measure including new business collaboration with other partners (July 30, 2020). - Announced to wind down production in Buffalo, NY, USA. (February 26, 2020). Scheduled to cease production by the end of June 2020 and exit the facility at the end of September 2020 Smart Life Network business (TV business, etc.) - Aim to eliminate losses during FY22 through structural reform Lighting business - Announced share transfer of European lighting device company (February 5, 2020). Transfer completed (late February 2020) Completed in FY20 Note: Changes after FY20 full-year announcement are underlined Fiscal 2021 First Quarter Financial Results / Full-Year Forecast 18 Key Initiatives for FY21 Execute Mid-term strategy and countermeasures to COVID-19 to overcome low-profitability structure Mid-term Strategy Enhancement of management structure � Fixed cost reduction � Taking measures to businesses with loss-making structures Improve profitability of automotive business � Focus on areas where we have advantages/ Improve efficiency of development � Improve productivity Business portfolio reform � Invest for growth � Enhance competitiveness through collaboration � Improve profitability Fiscal 2021 First Quarter Financial Results / Full-Year Forecast Execute countermeasures to COVID-19 Respond to business risks � Temporary � Medium-term � Cost reductions (mainly fixed costs) � Accelerate and promote countermeasures responding to structural changes Capture business opportunities � Expanding investments in information- and communicationinfrastructure � Increasing demand related to public health/ air-conditioning and indoor air quality � Develop products & services, invest in expanded capacity 19 Disclaimer Regarding Forward-Looking Statements This presentation includes forward-looking statements about Panasonic and its Group companies (the Panasonic Group). To the extent that statements in this presentation do not relate to historical or current facts, they constitute forward-looking statements. These forwardlooking 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. Such risks, uncertainties and other factors may cause the Panasonic Group's actual results, performance, achievements or financial position to be materially different from any future results, performance, achievements or financial position expressed or implied by these forward-looking statements. Panasonic undertakes no obligation to publicly update any forward-looking statements after the date of this presentation. Investors are advised to consult any further disclosures by Panasonic in its subsequent filings under the Financial Instrument and Exchange Act of Japan (the FIEA) and other publicly disclosed documents. The risks, uncertainties and other factors referred to above include, but are not limited to, economic conditions, particularly consumer spending and corporate capital expenditures in the Americas, Europe, Japan, China and other Asian countries; volatility in demand for electronic equipment and components from business and industrial customers, as well as consumers in many product and geographical markets; the possibility that the spread of the novel coronavirus infections may adversely affect business activities of the Panasonic Group; the possibility that excessive currency rate fluctuations of the U.S. dollar, the euro, the Chinese yuan and other currencies against the yen may adversely affect costs and prices of Panasonic's products and services and certain other transactions that are denominated in these foreign currencies; the possibility of the Panasonic Group incurring additional costs of raising funds, because of changes in the fund raising environment; the possibility of the Panasonic Group not being able to respond to rapid technological changes and changing consumer preferences with timely and cost-effective introductions of new products in markets that are highly competitive in terms of both price and technology; the possibility of not achieving expected results or incurring unexpected losses in connection with the alliances or mergers and acquisitions; the possibility of not being able to achieve its business objectives through joint ventures and other collaborative agreements with other companies, including due to the pressure of price reduction exceeding that which can be achieved by its effort and decrease in demand for products from business partners which Panasonic highly depends on in BtoB business areas; the possibility of the Panasonic Group not being able to maintain competitive strength in many product and geographical areas; the possibility of incurring expenses resulting from any defects in products or services of the Panasonic Group; the possibility that the Panasonic Group may face intellectual property infringement claims by third parties; current and potential, direct and indirect restrictions imposed by other countries over trade, manufacturing, labor and operations; restrictions, costs or legal liability relating to laws and regulations or failures in internal controls; fluctuations in market prices of securities and other financial assets in which the Panasonic Group has holdings or changes in valuation of non-financial assets, including property, plant and equipment, goodwill and deferred tax assets; future changes or revisions to accounting policies or accounting rules; the possibility of incurring expenses resulting from a leakage of customers' or confidential information from Panasonic Group systems due to unauthorized access or a detection of vulnerability of network-connected products of the Panasonic Group; as well as natural disasters including earthquakes, prevalence of infectious diseases throughout the world, disruption of supply chain and other events that may negatively impact business activities of the Panasonic Group. The factors listed above are not all-inclusive and further information is contained in the most recent English translated version of Panasonic's securities reports under the FIEA and any other documents which are disclosed on its website. (Reference) FY21 1Q Operating Profit Analysis (yen: billions) Sales increase/decrease in real terms 56.4 -137.2 Fixed cost +72.3 -0.3 Deconsolidation impact Effect of exchange rates +0.6 +15.7 Other income/loss Price declines/ rationalization/ sales mix, etc. -3.7 Housing, Automotive prismatic batteries, Security systems 3.8 FY20 1Q Adjusted OP: -68.3 OP: -52.6 Fiscal 2021 First Quarter Financial Results / Full-Year Forecast FY21 1Q 22 (Reference) FY21 1Q Operating Profit & Net Profit (yen: billions) Operating profit FY21 1Q 3.8 FY20 1Q 56.4 vs. FY20 Difference -52.6 Non-operating income/loss -0.7 -0.2 -0.5 Profit before income taxes 3.1 56.2 -53.1 Income taxes Net profit Net profit attributable to Panasonic Corporation stockholders Net profit attributable to non-controlling interests Fiscal 2021 First Quarter Financial Results / Full-Year Forecast -10.0 -6.9 -9.8 2.9 -2.4 53.8 49.8 4.0 -7.6 -60.7 -59.6 -1.1 23 (Reference) Segment Information Overview (yen: billions) Sales Adjusted operating profit (Adjusted OPM) Other income/loss FY21 1Q 563.1 14.3 (2.5%) -0.6 vs. FY20/ Difference -20 (-19%) -14.5 -0.0 Appliances (Production and sales consolidated) Sales: Decreased, largely affected by market deterioration from COVID-19 impact (e.g. lockdowns), despite recovery trends in some products in regions such as China and Japan 707.9 Home Appliances Commercial (yen: billions) Heating and Cooling Solutions Refrigeration & Food Equipment Effect of exchange Smart Life rates 563.1 Network Others** Operating profit (OPM) 13.7 (2.4%) -14.5 * In real terms excluding the effect of exchange rates Major increase/decrease factors FY20 1Q FY21 1Q Sales / Adjusted OP � Sales and profit decreased: Stable sales of room airHeating and conditioners in China; in Japan, recovery trends seen in Cooling May onward, but sales impacted by market deterioration Solutions due to lockdowns in Europe, Asia, etc. and by a temporary suspension at factories in Malaysia Home Appliances � Sales decreased: Despite stable sales of personal-care products in China, COVID-19 mainly affected refrigerators and washing machines in Asia and Latin America � Profit increased due mainly to reducing fixed costs and sale promotion expenses, despite decreased sales � Sales and profit decreased: Digital still camera sales Smart Life decreased due to market deteriorated mainly in Europe, Network along with TV supply shortage caused by temporary OP: Decreased due to decreased sales, but negative impact mitigated by management enhancement initiatives (e.g. reducing fixed costs and sales promotion expenses) 28.2 Home Appliances Commercial (yen: billions) Refrigeration & Heating and Food Equipment Effect of Cooling Solutions Smart Life Network exchange rates 13.7 Others** Other income/ loss suspension at factories and other factors Commercial Refrigeration & Food � Sales and profit decreased mainly in showcases for large-scale stores affected by COVID-19 in Japan and Equipment North America Other income/loss - FY20 1Q Adjusted OP: -14.5 FY21 1Q OP: -14.5 ** Refrigeration and Air-Conditioning Devices BD, Smart Energy System BD, sales of other Divisional Company products, headquarter-related, eliminations, etc. ID rId22 Fiscal 2021 First Quarter Financial Results / Full-Year Forecast 24 (Reference) Segment Information Life Solutions Overview (yen: billions) Sales FY21 1Q 325.1 vs. FY20/ Difference -30% (-29%) Sales: Decreased due to deconsolidation (e.g. Panasonic Homes) as well as decreased sales affected due to market deterioration, etc. caused by COVID-19 (yen: billions) 462.7 Energy Systems Housing Systems Others** Adjusted operating profit (Adjusted OPM) Other income/loss Operating profit (OPM) 7.3 (2.3%) -1.7 5.6 (1.7%) -5.2 Lighting Panasonic 325.1 -1.9 Ecology Systems Deconslidation impact Effect of exchange -7.1 rates * In real terms excluding the effect of exchange rates / -12% excluding the effect of exchange rates and deconsolidation impact Major increase/decrease factors FY20 1Q FY21 1Q Sales / Adjusted OP � Despite sales decrease due to weak demand caused Lighting by COVID-19 and business transfer in Europe, profit OP: Decreased due mainly to decreased sales caused by COVID-19 impact, increased with lower manufacturing costs and reduced despite progress in efforts to reduce fixed costs expenses, etc. � Sales and profit decreased due to decreased sales (yen: billions) 12.7 Panasonic Energy from COVID-19 impact, including market deterioration Ecology Systems caused by lockdowns and temporary suspensions at factories (e.g. India) � Sales decreased due to decreased sales of in door air Lighting Systems Energy Others** Effect of exchange rates Other income/ loss Panasonic Ecology Systems � quality (IAQ) business in Asia and North America, despite sales increase of Ziaino air purifier/sterilizers in Japan Profit increased: Efforts to reduce fixed costs, etc. Systems Housing Systems Deconslidation impact 5.6 Adjusted OP: -5.2 offset decreased sales Housing Systems � Sales and profit decreased due to market deterioration caused by COVID-19 impact and delayed product supply, etc. FY20 1Q OP: -7.1 FY21 1Q Other income/loss � Restructuring expenses, etc. ** Bicycle, nursing-care, sales & marketing, eliminations, etc. ID rId22 Fiscal 2021 First Quarter Financial Results / Full-Year Forecast 25 (Reference) Segment Information Connected Solutions Overview (yen: billions) Sales FY21 1Q 185.3 vs. FY20/ Difference -27 (-26) Sales: Decreased mainly at Avionics, affected by sharp decline of flight operations (yen: billions) 255.2 Process Automation Mobile Solutions Adjusted operating profit (Adjusted OPM) Other income/loss Operating profit (OPM) -16.6 (-8.9%) 0.6 -16.0 (-8.6%) -30.8 +1.1 -29.7 Avionics Media Entertainment Others**** 185.3 PSSJ Effect of exchange rates * In real terms excluding the effect of exchange rates Major increase/decrease factors � Sales decreased due to decreased sales of IFEC**, hardware, FY20 1Q FY21 1Q and repair & maintenance services, caused by airline Avionics companies holding back investment, etc., due to sharp decline of flight operations � Profit decreased despite thorough efforts to reduce costs, OP: Decreased: Thorough efforts to reduce fixed costs, etc. unable to offset decreased sales from COVID-19 impact mainly personnel costs (yen: billions) Process Automation � Sales and profit decreased due to weak automobile market conditions, despite increased sales of servers and mounting machines for 5G base stations in China 13.7 Avionics Sales / Adjusted OP Media � Sales and profit decreased with decreased sales of projectors Entertainment etc. resulting from event cancellations worldwide Mobile Solutions � Sales and profit decreased: Notebook PC demand increased with more people working remotely; however, a negative impact was felt relative to last year's special demand for the end of Windows 7 support; furthermore, production affected by component procurement issues PSSJ*** � Sales and profit decreased: Delays in project promotion activities caused by COVID-19, and negative impact relative to special demand for the end of Windows 7 support Media Entertainment -16.0 Process Automation Mobile Solutions PSSJ Effect of exchange rates Other Others**** income/ loss Others � Deconsolidation of security systems business, etc. Other income/loss - FY20 1Q ** IFEC (Inflight entertainment and connectivity) *** Panasonic System Solutions Japan Co., Ltd. **** Other businesses, eliminations, etc. Adjusted OP: -30.8 OP: -29.7 FY21 1Q ID rId22 Fiscal 2021 First Quarter Financial Results / Full-Year Forecast 26 (Reference) Segment Information Automotive Overview (yen: billions) Sales Adjusted operating profit (Adjusted OPM) Other income/loss Operating profit (OPM) FY21 1Q 210.8 -29.5 (-14.0%) 20.0 -9.5 (-4.5%) vs. FY20/ Difference -44% (-43%)* -19.7 +20.2 +0.5 Sales: Nearly halved due to COVID-19 impact; In Automotive Solutions, steady progress made with portfolio replacement to IVI, which is our focus area 377.4 (yen: billions) Automotive Batteries Others*** Automotive Solutions Effect of exchange rates 210.8 * In real terms excluding the effect of exchange rates Major increase/decrease factors Automotive Solutions Sales � Decreased largely due to COVID-19; steady progress made with portfolio replacement to IVI**, on which we focus our resources within infotainment products Profit � Significant fixed-cost reductions with accelerated management enhancement measures unable to offset decreased sales from COVID-19 impact ** IVI: In Vehicle Infotainment Sales / Adjusted OP Automotive Batteries Sales � Decreased largely due to COVID-19; North America factory for cylindrical batteries resumed production at beginning of April; all production lines returned to near-normal capacity. Profit � Same level as previous year with rationalization efforts at North America factory for cylindrical batteries; improved productivity and reduced losses offset COVID-19 impact � North America factory for cylindrical batteries returned to profitability in June on a single-month basis FY20 1Q FY21 1Q ***:Others: sales of other Divisional Company products, etc. OP: Decreased in Automotive Solutions, significant fixed-cost reductions unable to offset COVID-19 impact; achieved same level as previous year in Automotive Batteries through improved productivity at North America factory for cylindrical batteries, etc. (yen: billions) FY20 OP: +0.5 FY21 1Q 1Q Adjusted OP: -19.7 Automotive Solutions Other income/ loss -10.0 -9.5 Other � Automotive prismatic battery joint venture equity method loss, and income/loss profits from transactions related to joint venture establishment Automotive Effect of Batteries exchange Note: Grouping of Businesses whose sales are disclosed rates [Automotive Solutions] Automotive Infotainment Systems, HMI Systems, Automotive Systems, Ficosa [Automotive Batteries] Tesla Energy, Automotive prismatic battery business ID rId22 Fiscal 2021 First Quarter Financial Results / Full-Year Forecast 27 (Reference) Segment Information Industrial Solutions Overview (yen: billions) FY21 1Q vs. FY20/ Difference Sales: Decreased with weak automotive-use products (e.g. relays) impacted by COVID-19, despite growth in power storage systems, capacitors, and circuit board materials for information- and communicationinfrastructure 327.1 (yen: billions) Sales Adjusted operating profit (Adjusted OPM) Other income/loss Operating profit (OPM) 288.6 10.7 (3.7%) -1.5 9.2 (3.2%) -12% (-10) +3.9 +0.1 +4.0 Systems Devices Others** Effect of exchange rates 288.6 Sales / Adjusted OP * In real terms excluding the effect of exchange rates Major increase/decrease factors � Systems Sales decreased with automotive-use products (e.g. relays) impacted by COVID-19; however, profit increased with increased sales of power storage systems for data centers and growth in industrial- use motors, and efforts to reduce fixed costs offset decreased sales � Devices Sales and profit decreased mainly with weak sales of automotive-use products (e.g. coils, sensors) impacted by COVID-19, despite growth in capacitors and circuit board materials for information- and communication-infrastructure FY20 1Q FY21 1Q OP: Increased with increased sales of power storage systems, etc., fixed- cost reduction and improvement of semiconductor business reform offsetting decreased sales of automotive-use products (yen: billions) Others** 9.2 Effect of Other 5.2 Devices exchange rates income/ loss � Sales decreased due to market deterioration, but profit Others increased due mainly to reduced fixed costs and contract alteration effect of semiconductor business Systems Other income/loss - Note: Grouping of Businesses whose sales are disclosed [Systems] Electromechanical Control, Industrial Device, Energy Solutions [Devices] Device Solutions, Energy Device, Electronic Materials ID rId22 Fiscal 2021 First Quarter Financial Results / Full-Year Forecast FY20 1Q Adjusted OP: +3.9 OP: +4.0 FY21 1Q ** Includes semiconductor, LCD, sales of other Divisional Company products, eliminations, etc. 28 (Reference) List of Sub-segments (formerly Businesses whose sales are disclosed) in FY21 AP LS CNS Sub-segments Major Business Divisions, etc. � Heating and Cooling Solutions : Heating and Cooling Solutions BD � Home Appliances : Kitchen Appliances BD, Laundry Systems and Vacuum Cleaner BD, Beauty and Personal Care BD � Smart Life Network : Smart Life Network BD � Commercial Refrigeration & : Cold Chain BD, Hussmann Corporation Food Equipment � Others : Refrigeration and Air-Conditioning Devices BD, Smart Energy System BD, sales of other Divisional Company products, headquarter-related, eliminations, etc. � Lighting � Energy Systems � Panasonic Ecology Systems � Housing Systems � Others : Lighting BD : Energy Systems BD : Panasonic Ecology Systems Co., Ltd. : Housing Systems BD : Bicycle, nursing-care, sales & marketing, eliminations, etc. � Avionics � Process Automation � Media Entertainment � Mobile Solutions � PSSJ � Others : Panasonic Avionics Corporation, Avionics BU : Process Automation BD : Media Entertainment BD : Mobile Solutions BD : Panasonic System Solutions Japan Co., Ltd. : Other businesses, eliminations, etc. � Automotive Solutions AM � Automotive Batteries � Others � Systems IS � Devices � Others : Automotive Infotainment Systems BD, HMI Systems BD, Automotive Systems BD, Ficosa International, S.A. : Tesla Energy BD, Automotive prismatic battery business : Sales of other Divisional Company products, etc. : Electromechanical Control BD, Industrial Device BD, Energy Solutions BD : Device Solutions BD, Energy Device BD, Electronic Materials BD : Semiconductor, LCD, sales of other Divisional Company products, eliminations, etc. Other � Sales of raw materials, etc. Eliminations & � Revenues and expenses which are not attributable to any reportable segments for the purpose of evaluating operating results of each segment, adjustments consolidation adjustments, and eliminations of intersegment transactions. Notes: 1. Sales and profit of China & Northeast Asia Company are mainly included in AP and LS segments. Sales and profit of US Company are mainly included in AP and AM segments. 2. Panasonic Homes was deconsolidated in January 2020. Automotive Energy BD was deconsolidated in April 2020. Share of profit of investments accounted for using the equity method for Prime Life Technologies Corporation and Prime Planet Energy & Solutions Inc. included in "Eliminations & adjustments" and "AM segment," respectively Fiscal 2021 First Quarter Financial Results / Full-Year Forecast 29