Panasonic Holdings Corporation (6752.T) Q3 FY2026 Earnings Call Transcript & Summary

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.]