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

Within the next 3 years, are you going to be investment? And what return are you going to be gaining? I would like you to share the perspective. But based on what you're seeing, fixed cost has been basically decreased. But going forward for the 3 years, you're going to be increasing the investment. However, the sales and profit is going to be increasing even more than the ROIC, therefore, we're going to be planning to have a better number. And basically, you're saying that R&D fee is going to increase.

And yes, that is so. So we mentioned about prioritization and 4 core businesses. We're going to be weighing more on the core businesses and to sharpen our business. So those are the actions that we aim to take.

I'd like to move on to the next question. Hirakawa from BofA Securities, please.

Hirakawa from BofA Securities. I have 2 questions. Page 8, you're talking about energy saving of the labor saving and improving efficiency. For the sales, this -- the proportion of this segment to the sales, can you please enlighten me? At the same time, your growth, CAGR, the market growth, and this will be growing at the same level as we move toward FY '31. That's my first question. The second question, factor level savings. At the bottom layer, you will be doing this as you explained. Competition, who will be your competitors? Can you please enlighten me? These are my 2 questions.

Thank you very much, Hirakawa-san. First, these 3 areas, how much do they account for on Page 8. As we have shown on Page 7, the 50% of core business -- close to 50% of core business on Page 7. At the same time, CAGR, the same level of growth as the CAGR written here, slightly higher than that because the framework of the business strategy is attractive. The advantage growth and demand exceeding the average and attractive. And as for attractiveness, as I said at the beginning, rich in customers' issues and problems. If there is no problem on the customers and we make proposals that will not do. So rich in problems that the customers have and the industry is attractive. With this criteria, we are choosing the industries. And the products and services that we offer, if they are inferior as compared to competitors, then we are not able to grow in the level of the average industry. So in that industry, are we able to differentiate ourselves and can we turn that into value? With modification of these 2, we have calculated and conducted our business and selected them as core business. Therefore, in the industry that we have chosen, we are going to survive. So growth rate which is higher than as compared to industry average. Who are the competitors, for as to your second question. FA industry as you know, is an area with higher cost. So European giant is not a Chinese giant in the same way as China and Japan. Depending upon the uniqueness of the region, uniqueness exist. And by buyers going across the borders and connecting the plant factories and German companies are making proposals in that way. And the factory as a whole, it may give system proposal. Some people do that align as a whole. So the main players are different for the categories. And with the players of the 3 layers, we are not going to compete on the same playground. We will not be able to win. So in China, machine builder, the lowest layer, motor and sensors, and we already established our share. So the machine builder customers, small and midsized machine builders, we provide best solution, FA solution as I have explained. So main player, please, there's no main player. It's not objective to fight and compete. If we compete, we have to win. So that segment is most important. For FA machine builder, they are in China, that's why we are selecting. Therefore, where are there is big competitor, there are many competitors. But with that philosophy in mind, higher -- connect to the higher layers or easy package for installation and installation time, which used to be 3 weeks, it's shortened to 5 days. And there aren't many proposals made in that way. We have just begun. So this is yet to begin. The speed is crucial. We have to increase speed. And there may be failers, but we will learn from failers and we are going to grow this business.

Next question, Sakae-san from Daiwa Securities, please.

That is Sakae from Daiwa Securities. I have one question. For material informatics, from the last midterm plan, I think looking back 3 years, I think you are advancing. If so, what has been changing? And for future development, are you already seeing some success? So if there's any case that you can share with me, I would like you to introduce. And to start with the material informatics, I think you're very high ranked within the ranking within the world handling material informatics.

Thank you very much for your comment and question. So you were mentioning about the turning point, and we have been increasing the number of application products. We started from MI, but now the process informatics is with us. The process change itself is important. So we have expanded into both 2 areas. And regarding the success, we have seen large success within the functional capacitor and the electronic materials. And so about those areas where the people needed to be testing or working, those successful area has been successful within decreasing the lead time to half, which is showing a great changes. But as you're aware, this industry is still on its way. So the result and the logic, we have to take a long time and work hard in order to have the intertwining relationship. And if we are not going to be working within this area, we will lose within the competition. Right now, we are now going through the suffering of creating something new. But we have to keep on doing. And by doing so, the accuracy is going to be increased and it's going to be a unique feature for ourselves. Therefore, although we could face difficulties, we would like to continue on with the activities.

The time has come. So we'd like to entertain one last question. Anybody who has last question. No more question? Yes. Thong-san from Macquarie Securities.

I have 1 question. FY '31 -- CapEx plan up until FY '31, can you explain? Of course, this time you have -- you are forecasting -- is making forecast and your factories, the start-up of factories. In other words, semiconductor materials, you are expecting growth and you make investments and the cost of investment is a concern that the investment cost will increase going forward.

As I said at the outset, globally, 55 manufacturing sites we have. And in 9 domains -- we had 9 domains. That's why we have many factories. Rather than establishing a new base, efficiently integrating the existing site is more important. At the same time, amount of investment, I was involved in the battery before. As compared to CapEx of batteries in the device area, the investment amount is much lower or light. So the focus is rather than the risk -- big risk of making large investment into factories, continuously making R&D investment. That is a crucial point for winning or losing.

Now with this, we'd like to conclude the session on Panasonic Industry. Thank you very much.

This is Higuchi from Panasonic Connect, and thank you very much for your daily support. From my side, I will be discussing about the FY '23 and 3 years onwards for the Panasonic Connect. I'd like to explain about the mid- to long-term strategy. So the other day, April 4, we had a launch of Panasonic Connect, and we held a press conference. At that time, we mentioned that Panasonic Connect also purpose value and introduction and strategy was explained at that venue. And we have been having a [indiscernible] campaign, especially the purpose video. At this point today, it has been viewed by 16 million people. So we have been working very intensely for notifying this Panasonic Connect. And the press conference video was also shared to the analysts. Maybe you have seen this already. So within our position, this is an independent company now. And it will trigger that we are going to be promoting on the 2 businesses that are already shared. For the left-hand side, we indicate the growth businesses based on software base. Blue Yonder is going to be the center for the supply chain businesses. And in the press meeting at May 11, we shared the notion that we are going to aim for the stock listing. So once again, the evolution of this industry is very fast. So in another way, if we can make a decision-making at a timely point and manage ourselves, we can greatly grow and software ratio is around 80%. And we -- there's a possibility of people transition to the cloud. And therefore, we want to keep a very central position and we can keep on with the central position. Thereby, being speedy and being the autonomous decision-making, we can also grow synergy between the Panasonic and ourselves in tandem. And on the right-hand side, this is indicating about the core businesses, which is based on hardware-based businesses. In the past 5 years -- it took 5 years and we have been working on prioritizing and we have been converting to 9 businesses, either by transferring the businesses and others. And as a result, we came to narrow down into 4 businesses. These 4 areas are the area where we can sustainably gain high profitable profits. And from going forward, there could be some narrowing down for our concentration. However, basically, we are going to be sharpening the hardware area. So I think our conditions are very clear in our direction. So whether it be the growth businesses, core businesses, we will be making investment. So JPY 150 billion will be an investment upon the ordinary investment in order to intensify the growth area within the next 3 years. The core business of JPY 50 billion increase for investment is what we are thinking. In each of the hardwares, hardwares must be sorted. And to be in detail, the Avionics. Avionics must go through more lighter systems, including the info system, having it much more lighter. And the system itself is becoming much more sophisticated. Therefore, we have a lot of things to do. The hardware itself is -- having digital services itself too, is asked for a more sophisticated system. Therefore -- so it should be connected on the devices. So the system itself needs to be sharp and the need is very high. Rapidly, the demand is coming back. The Media Entertainment, the projector business, especially for the higher trend it is -- this is an area where it is used in a very high mission-critical area. Therefore, the product -- it's not only the product, but we have to be expanding businesses from starting the maintenance and provisions too, for the new solutions, new solutions also must joined too. Regarding Mobile Solutions, and our core technology should be deepened to sharpen the product itself. Upon that, we must work on the operational excellence by being lean and mean. We still have a lot to do for the becoming lean. The SK number is inflating. And so there, we need to be nailed down. So we are looking for a JPY 10 billion management effect within the next 3 years by looking at the expenses. Process Automation, we now are running the business on a very good location. As notified, this area is cyclic. Every 5 years or maybe 3 years recently, it is cyclic. And from here on, looking at the 5 years, 7 years, going forward, the EV and the data center and the device electrification and sophistication is going to be happening. So from these high clicks that we haven't seen, it is becoming -- showing a different tendency. So the semiconductor manufacturer is having a higher investments. Therefore, we would like to invest too in order to expand our capacity. We are thinking about JPY 100 billion investment for the growth area for all of the investment. This is going to be invested from the growth investment framework or utilizing our own cash flow in order to invest. And this is going to be invested in a timely manner. The Blue Yonder explanation, especially on the growth business. We did have some time to explain. Therefore, today, I would like to explain much more on the core business. For the 4 area of work, the 2 businesses, EBITDA and the margin ratio is over 10% already. And on '21 business and the next fiscal year, there's going to be the Mobile Solutions. Therefore, in fiscal year 2025 for 4 businesses, we are targeting to be beyond in 10% for the EBITDA margin. For the 4 businesses indicated, we aim to be global #1 or else as #1 in the Japan category. Already, we are in a strong standing. However, we need to be sharpened focusing on specialty. And promoting the Blue Yonder time by time in order to sharpen ourselves and make things solution-wise, system-wise and to make some combination with other products. So from 3 perspectives, we would like to trigger the drive. I would like to go one by one. First of all, for the Avionics. From the past in the share, we have been enjoying the share, a high share from the past. But the deal that we have been securing so far, we are now offered a more higher share. With the COVID-19, we are much more lean and the product offering is strengthened. Currently, the number of passengers utilizing Avionics is recovering rapidly. And demand is also following suit. So the parts are in shortage, which is the bottleneck, which is a headache for us. So going forward, the Avionics will be focusing on the narrow-body. So narrow-body demand will be expanding. So we will be focusing that. And the demand for digitalization will follow. The software services will also be on high demand. Especially, for the software, it's going to be in modular. And hardware, we would like to answer to the needs of the users by not creating the parts differently from each of manufacturers, but we would like to make it modular. This area on ground, the smartphone or devices, the broadband will be accessing to your terminals directly. But then the aircraft, this area is the only area where [indiscernible] cannot connect directly. So there, we can enjoy a high market share. And therefore, various things could be considered that we will be able to do. We will not take that for granted and will work diligently. Next is Media Entertainment business. Just like Avionics division, we were hit very hard by the COVID-19. The event -- number of events were decreased. And it was hit very high around amusement parks. And around 2025, we forecast that we are going to be enjoying the level higher than pre-COVID. The EBITDA margin is currently over 10%. But for FY 2025, we are aiming more higher. Just likewise, the Avionics, the recovery is very fast. The demand is recovering very fast. We can just sensor that, therefore, I think this is going to be fast recovering. We will be focusing on the very first in the industry and have a launch of #1 new products within the industry. In order to draw growth, so remote maintenance and servicing businesses, subscription businesses, such as cloud businesses. Those are the businesses we would like launch. Next is about Mobile Solutions. This is following with -- in 2025, the support and services of Windows 10 is going to be finished. And following that finish, this is going to be a growth area for us. For instance, the no personal computer and the product line: let's note, tough-book and the transaction terminal. Within the 3 categories, this area we will be very careful by being a commodity. But we need to sharpen our unique position. The lean and mean operation should be done thoroughly within all the 4 businesses almost. By introducing Blue Yonder, the stagnant inventory and the accuracy of the movement is very well captured. Therefore, we are going to be maximizing our works. Currently, we are rather confused because of the parts shortage, but this is going to be increased. And this is going to be a JPY 10 billion event in process auto. Process Automation. The server and EVs and welding machine and multi-machine, as we move towards EVs, needs for welding will also change. So new needs for welding is emerging. The reason being 2020-'30 the arc welding robots and welding system, CAGR of 5% growth is expected for long term. Hardware will be further enhanced hardware with high competitiveness, and we are going to increase the amount of solutions that we can offer. And the new platform, NPM-G series was announced in spring this year, which has had higher margin speed and 5M, which is a variable element in the production side, is autonomously controlled. So this is a new platform. And there are great expectations to this. And symbolically, this is the sophistication of the hardware and the mounting machines, welding machines, direct diode and the semiconductor process. In these areas, we are going to further enhance the specialty. Process Automation. Autonomous factories concept is launched. And in production, Gemba, very low factor. 5M, the machine, the materials, people and measurement will be autonomously controlled. And the needs of the customers and change of the supplies will be automatically responded to. That is ideal. And this is the example of mounting machine. Mounting machines and production line will be will be optimized, and this will be realized in the physical space. And also in the cyber area, management of planning will be done and AI machine learning is also incorporated. Autonomous factory, if automatically factory is made, then autonomous supply chain, higher layer, Blue Yonder, it will be connected to Blue Yonder. That is a long-term idea we have. Lastly, about growth business, I would like to touch upon. Already stand-alone performance of Blue Yonder has been announced. And I would like to touch upon this. In January to March this year, the sales is 111% as compared to the same period last year. Double-digit growth is maintained. And the ratio of SaaS sales is increasing. And currently, it's up to 39%. SaaS ARR, annual recurring revenue is 36% increase year-on-year. SaaS backorder is 144% compared to the same period last year. So the result is far spacing what was expected at the time of acquisition. So momentum is there, and there will be -- the momentum to drive the recurring ratio is strong. SaaS business. We are going to achieve results here. R&D will be strengthened this area. And microservice negative SaaS, the kind of investment for -- investment is already made. And missing parts are to be collected by M&A investment. And the second point, Gemba collaboration, data collaboration. This is where the technological capability of Panasonic is there. Collecting with Gemba data and it's flown into SaaS, Blue Yonder SaaS to increase further value-added. Sensing. Sensing and the industrial engineering that we have noted from manufacturing, and Gemba optimization solutions. Such high-precision data will incorporated into Blue Yonder's platform. And the feedback will be established. With Blue Yonder already, we started a project. Blue Yonder is competing in Manhattan, Kansas against the software competitors, we can contain the customers, and the customers who will be Blue Yonder people say that it's possible to encircle customers. And white space, the Japanese market for Blue Yonder, utilizing customer base and the brand talent of Panasonic Group. Japanese business will be driven. I became Chairman of Blue Yonder Japan and I am at the helm. I touched upon this earlier, R&D, the investment [indiscernible] and micro investment and modules licensing to other companies and license revenue will be enjoyed. M&A, especially in the area of e-commerce and last 1 mile supply network -- supply chain network will be adding missing parts. As a result of these activities, where are we headed for? What are we aiming for? The same as what we have announced in April 4, JPY 1.17 trillion for FY '24. The sales, EBITDA and cumulative cash flow of JPY 260 billion. We are going to achieve this. Recurring ratio is currently 44% for growth business, and we're going to increase this to half of the sales. EBITDA, 13%, is to be increased to JPY 150 billion. What are the key levers? Of course, first and foremost, we have turned around the loss-making business. And then it's the recovery of Avionics and the growth of Blue Yonder. These 3 are the major levers. Of course, organic growth of core business will be driving the growth. And so with these 3 levers of growth, the probability is very high. So first, we will achieve JPY 150 billion EBITDA and aim for excellent company. We laid the foundation for becoming an excellent company. Lastly, the left-hand side shows the growth business. Blue Yonder, Panasonic execution there is incorporated, and cyberphysical growth is to be made as I have already explained. Conversely, right-hand side, hardware is to be refined and 4 businesses is a cloud-type sales business opportunities exist in plenty. And rather than bottom-up, Blue Yonder's cloud SaaS-type business and KPI platform, agile development, human resources, know-how, these will be shared. So that's our core business. Hardware will be refined. But in addition, add-on we've done from Blue Yonder and have the synergy. Already, we have sent people to Blue Yonder and there's exchange of human resources. So over this, I have explained the medium-term plan.

Ono-san from Morgan Stanley, please.

This is Ono from Morgan Stanley. I have 2 questions. One is about core business and the other one is the growth business. Regarding core business, on the very last end on Page 7, you have been indicating, but my question is about the processed mobile solution and the aviation and the media is existing for our businesses. And so far, [indiscernible] has been working on the changes of the location to improve the profitability. Going forward, how much room are there in order for you to make changes? For instance, which is a higher layer. I would like to know about the time line. Each time line will be probably different by business. And I would also like you to share with us what businesses, what potentiality has related to the businesses? That is my first question. Second question, the Blue Yonder Central, the supply chain management development is going on. And you had edge device. And you had soft and Blue Yonder acquired. And you are emphasizing on your strength. Currently, companies such as Sony, the competitor using sensors and using 0 of Microsoft. Likewise, supply chain is developing on their side, which covers the supply chain to some extent. The source of competitiveness of the edge device, what is your in grounds to what you are saying that you have a strong coverage against Sony? And what do your point as an edge device on your side? What is going to be the source of competitiveness if you have the edge device and not?

So regarding the second question, so Mr. Akiyama-san is here representing the area. So therefore, I think that should be covered by Akiyama after myself. So first, starting from the core business and the location. The part cloud service area or the positioning according to businesses, it could be different. And like platforms other than KAIROS, there's already a hardware existing. And the visualization of the hardwares or the control or the feedback feed forward, what should we do? And if there's some demand of the visuals that the customers would like, all these will be employed within our services to create a platform from bottom up. So those are how we are developing. And we need monetization and scalability, but it is difficult to, honestly, share with it -- share with you right now. Like the U.S., if there is a common denominator and create products from the application layer and then scale all over the world, that is different or difficult for Japan to do. That is why we have acquired Blue Yonder. So it's probably difficult for us from Japan to work organically in that sense. But it is definitely going to be contributing to the customers. Therefore, anything upon the hardware, if we have any experiences, know-hows, we're going to be connecting to the Blue Yonder. And other then KAIROS, the monetization is not that large. But the value add for the hardware and the value add portion of the software are going to be growing. That is definitely true. That is something that I would like to pursue. The edge technology for ourselves and technology research and development division, what they working on is not working on the stacking of the hardware, but focusing on the software. For instance, the camera vision is going to be utilized. So meaning that what is the image taken by the sensor is going to be used. The software portion is meaningful. Therefore, the area where hardware could be coming from any areas. But having said that, anywhere that the hardware needing the capability of Panasonic, we will be working. And Akiyama-san is working on such area. Therefore, I think he's going to be explaining, sharing with us the strength of the edge.

This is Akiyama, and we have a very big pillar for the mounting machine. The key, I think, are 3. One is the edge device, the spec. These days, it is becoming much more smaller. And looking at the consumption of the energy, the process is now asks for a higher spec. The fine process should be prepared in the level of the world #1, that's a big condition. And the other thing is about the edge device that has an addition of the IoT connection. The plug out was just about delivery and the cost and the quality. But starting from business model, we will recalculate from the business model in order to utilize our edge model. So the edge device searching and created the profitability about maintenance part. The marginal profit is very high business. We would like to shift in those area. And if so, the hardware has to have a preventive maintenance and the software should be designed into it, meaning that business model software, hardware in that order. Each layer has to be IoT and then has to be connected and embedded within the hardware. That's one thing -- one function that is asked for. And lastly, on that, meaning that at the plant, at the management level, this is something very much asked for. So autonomous edge devices with the surrounding devices, the automation devices that decreases the number of headcount. And in the ultimate sense 24/7, the plant must be running automatically, which is going to be a big value add for the edge device. So those are the 3 points I would like to focus on.

Next question, please. Okazaki-san from Nomura Securities.

Okazaki from Nomura Securities. My first question, Gemba Solution Company, progress of this company. For other existing business, you have introduced your thinking. Blue Yonder -- before Blue Yonder came in, in IRD, Gemba Solution potential was emphasized I believe. But now how much was it sharpened? Going forward, with the new company or supply chain, you are considering the specifics. But the collaboration with the Blue Yonder of Gemba Solution and the potential for that, can you please allow enlighten me? My second question is Avionics. With COVID-19, the demand has come down, and it's easy to imagine the recovery from this. But even before COVID-19, for example, onboard entertainment, demand did not grow so much and is replaced by the devices that individuals hold. So how is this discussion going? Can you please explain and enlighted me?

Your first question -- the latter half of your question, I missed your point.

Gemba Solution -- progress of Gemba Solution, and collaborating with Blue Yonder. And Gemba Solution Company, how much potential is there?

Thank you. Let me make some comments and ask Harada-san to follow up. Gemba Solution Company, PSSJ -- the former PSSJ, so the business is really outsourced and the developing products, individual products, one product. But that are on scale is not sufficient. Bulk users, loyal users, we have loyal users, so strong, solid demand, not just selling products but solutions and systems are sold, which resulted in us securing profitability. On the cloud base, increasing recurring ratio and scalable, how are we going to increase this? Phase recognition is turned into module And can be used in easy and simple manner. And testing is to be incorporated into module. We are doing that. Gemba optimization and Gemba facing solution as we call them. We cannot expect to see rapid increase, but we keep saying recurring. Like mantra and looking back, it -- the level increases gradually. So that portion is gradually increasing. In the meantime, from -- we learn from Blue Yonder, and there has been failers for example, new sockets module was made. But now development method and development environment of Blue Yonder, we learn from them. And we have to make sure that we do not become a Galapagos Island. We have to do it in a manner which is recruit assets and driving this move. Supply chain, Blue Yonder Japan's pipeline is filled with Panasonic's customers and projects from Panasonic, a considerable portion of pipeline and the partner collaboration indeed is also increasing from this. So Gemba Solution Company and Blue Yonder Japan and IBM, Accenture partner -- in collaboration with the partners. There are great expectations for this collaboration. And it is starting up well. Rather, there's a shortage of resources. Hardware, shortage of parts. And software, we have the shortage of human resources. Sorry for the lengthy response. Now after acquisition of Blue Yonder and the collaboration, especially from the perspective of Gemba Solution Company, there are 2 areas of expectations. One, the foundation, we enter into the very core of the management of customers. Gemba Solution Company has a contact with the customers and the areas which are closely linked to the management of the company and also delivering products, selling products. Blue Yonder, as you know, goes into very foundation of management. So we talk with the management of Gemba Solution Company, and they would like to go more into the core of the management Blue Yonder and Gemba Solution Company together enter into the very core of the management of the customer company, then we will become inseparable with the customer -- from the customers. And then supply chain SCM. For the past 1 year, manufacturing and logistics, retail, and we have been explaining to Blue Yonder that, that is not all. Three -- it's not just the 3 businesses which are faced with supply chain, Gemba Solution Company's customers for them. It's not just manufacturing, logistics and retail, things are moving, and there's increasing needs to deal with their problems. So Blue Yonder solution and as Higuchi said, process in Gemba, not production and logistics and retail, but we make improved processes of customers and make a proposal. There's increased potential to make such proposals for the customers. We cannot talk about the stock listing. But Blue Yonder and the Gemba Solution Company's multiplier effect, we can expect greatly. Avionics, your second question. At one time, bring your own device, and there was a discussion that everything was replaced by bring your own device, including economic class. Unless there's some kind of display, people are not able to -- they become in-patient with COVID-19, the expectation is increasing. So bring your own device, bringing device, and from satellite connectivity is provided and distributed content or onboard WiFi and distribute content. But then, our system is needed in either case. That's one way of doing it. But with 4K, good year picture and set back a big screen and need is very high for that, vis-a-vis, this need the many companies, which are generating profit from the onboard sales of goods and providing various services on the display. Bluetooth. One-to-one pairing of Bluetooth to all the passengers there's the interference. Technology to prevent interface has developed. So obviously, bottom Bluetooth tethering is possible with technology of Panasonic. So depending on companies, different views exist. The economic class display on the feedback in some company and other companies which will bring your own device, but business class and first class, big screen display. The system that goes onboard, we have the technology. Therefore, these opportunities will not go away. I hope that answers your question.

Next Ayada-san from JPMorgan Securities from online, please.

Ayada from JPMorgan Securities. I have 2 questions. One is about process automation. You mentioned about autonomous factory and I would like to know about the logic, that the PA business of yours is about a welding machine and the mounting machine. That image is very strong. So the -- including IoT, it's not, honestly speaking, not visible for me. And within this area, other companies like Siemens and Mitsubishi Electric or Hitachi, they might utilize different wordings, but they have similar concepts, I suppose. Therefore, I would like you to share with you your strength by comparing your competitors. And according to CEO, Higuchi, the coordination with Blue Yonder seems to be something in the near future, not currently happening. So is it because of the touch point of the management is different from Blue Yonder's or the touch point of the Process Automation with Blue Yonder is something that I would like to know. Second issue. Please refer to Slide 5 about core business portfolio. And within the core businesses, the business synergy, are there existing for business and synergy? So when we look at this, it's focusing on the client and the business area, but it seems to be dispersed. It's not seemingly overlapped. Therefore, I would like to know about the reason about this portfolio. If there should be any synergy among the businesses, I would like to know, too.

So Akiyama-san, maybe the first question, please?

Yes, this is Process Automation, Akiyama. The concept of autonomous factory, it's about the overall manufacturing and we are not thinking that it is going to be a rippling effect for the whole manufacturing. But the strength that we have, such as welding machine and mounting machine, and I would like you to understand that this is the autonomous factory for the customers that we have within the physical area and the cyber area. Many players are existing. There are so many players existing. And why is it that we are focusing and narrowing down the customers and narrowing down the services for autonomous factory? We are not selling the equipment. We are selling the process for the equipment. Therefore, if there's deficiencies or any challenges at Gemba, the edge equipment that I have shared and the software, by accumulating the data autonomously, the improvement point will be indicated by the system utilizing the AI technology. This is intrinsic within the edge-type technology, so not everybody can work even though they can apply the AI technology. And the mounting machine and the welding machine has a process that we have been following for 50 years, 60 years. Embedding these well-known machines for us within the plant makes the plant autonomous. You mentioned Siemens and other companies. For those companies, they are working on the layers not having an edge equipment. So we have the edge equipment. And plus that, we have fine process control and know-hows and the 5 Ms that CEO mentioned. By all these autonomous control, the plant is going to be autonomously run, which is unique for Panasonic. For the customers for mounting machine and welding machine, that is what we would like to provide and that is what we call autonomous. About the connection point of Blue Yonder, the -- I don't know about the flow of how much it is flowing end-to-end and the process like chemical, which is flowing and the assembly type, there could be some work in process and batch process in between. So there could be some manufacturing process that is not slowing. So the process type that is slowing could be easier to be creating this slow. And you have mentioned that from the upper end and the lower end could be easier to connect. Therefore, in a lump, it's going to be easier to connect. But then looking into pinpoint, many data could be connected to the Blue Yonder to increase the value add. So partially, many things could be done through the Blue Yonder. Regarding the core business and the synergy between the core businesses, Harada, who is in charge of Strategy will answer.

The synergy between the businesses is maybe for the businesses, it doesn't have any synergy. Maybe it could be having some synergy with the talent management. In Western companies, the portfolio management, we have been always thinking from that perspective in the last 5 years, that we would like to aim for global #1 or outstandingly, #1 industry in Japan. In those areas, we would like to be profitable. However, if we have not the competitiveness, we will be -- so the businesses will be the subject of the prioritization and selection. We're not saying that we are working on various areas so everything could be connected if that is not the case. However, there could be some case where the customer base is the same or else out of our imagination and maybe there could be some unprecedented, unimagined innovation. So there could be some component and sometimes, a dot and dot could connect. That could happen. Thank you very much.

Now we'd like to move on to the next question. SMBC Nikko Securities, Katsura-san please.

I have one question. Slide Page 6, Avionics. In the [ 3 years ], Connected sales growth and 40% of the sales will be coming from this business. As a previous person asked, FY '17, JPY 300 billion and it has come down to JPY 100 billion and it is going to return to JPY 200 billion level. As the business recovers, there's a possible difference in the content. You said that share has gone up. So how did it change? Please give us some hint. Page 6, left-hand side, you have the recovery of the number of customers, then naturally, service maintenance will be needed. So the flow is not depending upon sales and you are able to generate profit and, therefore, you are okay. Is that how it is or there's a shortage of parts and the fragile situation persists? So what is the likelihood or the probability of achieving this?

At the risk of being repetitive, the largest change, in the past, when Gemba was flowing but fuel efficiency was low and inefficiency, so it's better to fly more of the smaller aircraft. But with a narrow-body, you can fly -- have the longer range. So the ratio of widebody aircraft is decreasing. After COVID-19, the demand for narrow-body aircraft will be increasing significantly as compared to before COVID-19. Narrow-body aircraft. IFE, the widebody as I may say, but narrow-bodies also, there will be a display on the feedback. But price pressure is high. So we are able to generate high profit before. And difference we make with custom demand, SKU is increasing. Screen size alone, embarrassingly large number of screen sizes were offered. But we standardized and cost -- reduced cost. That's what we have done over the past 2 years. That is the biggest difference from before the COVID-19. And the recurring revenue, the maintenance that we thought was recurring revenue was also cut off with COVID-19, so we were hurt considerably by that. That is the largest change. And the recovery is robust. Numbers, Nishikawa will supplement with numbers.

IFE, entertainment system with COVID-19. Pre-COVID as compared to before the COVID-19, it went down by 1/4 or 1/3 of the level. Service, even at a difficult time, it was only 1/2. And end of FY '23, it will come back to the level, which is 20% lower. So it went down to 50% and it goes to 80% and then go back to 100%, which is the same level as before COVID-19. Entertainment system is still at the level of 1/3 pre-COVID. As Higuchi explained, airline performance is recovering and demand is picking up rapidly. End of FY '23, the size is the same as service or higher than that. That level is expected. The demand is going to recover. And then all that matters is whether or not there will be components materials necessary. Thank you very much. The time has come, but one more question.

[indiscernible] from SBI Securities, please.

Regarding Media Entertainment, sales are recovering is what you have said. In the background of this, the reopening from COVID-19 and the economy is coming back normalcy. The outdoor concerts or events could increase. But are there anything other than those, for instance, maybe do you see any trends in expanding the e-sports or any trend that you see growing? If so, please share. And my second question. Regarding the growth businesses, you mentioned that you cannot mention about the stock change listing. But as far as you can share, do you have any notion of spin-off? So the stockholder of Panasonic today could be acquiring 100% of the new company. I think the shareholders will benefit from that. So do you have those in idea? So it's just as far as you can share with us, please.

For the second issue, I would like to ask Harada to answer. And for the first issue, before and after the COVID-19, the changes with demand was what you mentioned. And the remote camera demand is rising sharply. So that is one trend that is growing. This one is pushing up the profit. Like KAIROS, you don't really have to be going to the Gemba and edit can be done by software based on the cloud. So people cannot -- don't have to be in one place in order to go through the editing. So the demand based on remote work is one change that we observed. And even post-COVID, this editing could be done inexpensively. Therefore, I think demand will be growing. The question that you mentioned about the stock change listing. Unfortunately, we cannot comment. But on May, the press holding was held. And at that time, we are going to be holding the majority. So far, that's the clearest point that we can share with you.

Thank you. With this Panasonic Connect explanation will be finished. Thank you very much.

Good afternoon. I'm Tadanobu from Panasonic Energy. Panasonic Energy, unlike the 3 companies that you have heard, the various energy business of Panasonic regrouped into our company. In the earnings call and IR, there has been communication. But Panasonic Energy as a whole, the strategy, the first time that we'll explain the strategy of the company. From that perspective, I would like to highlight these key points. Now I would like to explain in Panasonic Energy FY '23 full year financial forecast and the medium- to long-term strategy. This is the agenda for today. First, I'll talk about the contribution to society and FY '22 results and FY '23 full year financial forecast and the medium- to long-term strategy in this order. First, as the battery business has its long history, so I'd like to explain the battery history and our contribution to the society. First, I'd like to look back on the history of Panasonic's battery business. Panasonic started production of dry batteries in 1923. Since then, for almost 100 years, Panasonic has been driving and enhancing the creation of enriched lifestyle and convenience society as a leading battery company through evolution of various batteries and introduction of industry's first technologies. Our strength is, simply put, technology, such as materials development, manufacturing and intellectual property. Market creation to solve customers' problems by strategic relationship with customers. And as we have been focusing upon high confidence, so a brand with highly trusted performance. We believe that it is our mission to develop new technology and products by leveraging and enhancing the strengths and open up new era. Now what are we going to do as new Panasonic Energy? Achieving a society in which the pursuit of happiness and sustainable environment are harmonized free of conflict, which is the mission of us. Environmental performance and safety performance, which is #1 and minimize the environment impact to be energy that changes the future. And as we say, our will, we will be -- we will have the strong will to do what humankind requires. In order to realize this, as you can see on the right-hand side, the pursuit of human happiness, we had to maximize contribution to the society through battery and for that, what we think is important for the products that we offer is environmental performance and quality and safety as we have been focusing upon from before. And harmony with the environment is to minimize the environmental impact related to all the business activities of the company, not only in our own factories, but measures for the supply -- entire supply chain is important. I will be coming back to later with specific examples. Through -- by realizing the mission, we will increase contribution to the environment and will be driving Panasonic Green Impact, which is the environmental vision of the group. Next, business scope, I would like to explain. We will contribute to environmental issues and where our strengths can be utilized. Automotive industry and Consumer area, that is green and digital areas, we'll be focusing upon green digital area. In Automotive area, we will -- we entered into full-fledged EV dissemination period. And the growth of battery market is accelerating at an unprecedented speed. And industry and consumer area that we have not been able to explain in the past, as seen in the increase in data volume due to expansion of digital society and effective utilization of renewable energy, acceleration of electrification and motorization of society, infrastructure is creating new demand. With diverse batteries and technologies that our 3 business domains have, we will reduce CO2 emission by supporting electrification of mobility. We will establish a safe and secure social infrastructure that will not be disrupted even in time of emergency, and we will create a convenient and comfortable lifestyle with environment-friendly batteries and we will maximize contribution to the society by doing these. Next, I'd like to explain the FY '22 results and FY '23 full year financial forecast, breaking down the contents of the earnings announcement we made the other day. First is FY '22 financial results. Both sales and profits increased, led by the expansion of the Automotive business and improved profitability in the Industry and Consumer business. As a result, EBITDA significantly improved. New production line in North America significantly contributed sales against a robust automotive demand. Operating profit and EBITDA increased due to increased sales profit and rationalization. More specifically, significant productivity improvements in Japan and North America for Automotive business. And in Industrial business, expansion of system business for high value-added social infrastructure contributed to improved profitability. I am not writing numbers, but the breakdown by segment is shown by the pie chart on the right-hand side. Well, environmental performance that we are focusing upon, reached at 2 KPIs. Carbon dioxide reduction through production was 13 million tonnes in FY '22. This is calculated by CO2 reduction per driving EV, which amounts our batteries. The CO2 emission reduction through our plant was 450,000 tonnes. We achieved carbon dioxide reduction while production volume increased, thanks to carbon-neutral activities in China and Thailand factories. Next, FY '23 full year forecast. Sales was increased by expanding batteries for automotive and social infrastructure and is expected to grow by double digit from FY '22. In relation to the customers, we do have the -- this is a level that is achievable. Now the actual profit. Impact of material price hike were recouped by price revisions, rationalization efforts and increased sales. But as I will explain, profit will decrease due to the investment for the future. Especially, impact of the material price hikes will materialize in the first half due to price hike since FY '22 Q4 as a result of deterioration of the international situation. But impact will be elevated by price revision and rationalization efforts in the second half. Future expenses will be explained later, but future expenses are investment in automotive-related development and investment for production increase for industrial and consumer businesses. The environmental performance will continue CO2 reduction through products. Although we forecast a decrease in profit in FY '23, we will strengthen management effort and make proactive investment in order to maximize our contribution and realize sustainable growth. Now I would like to explain medium- to long-term strategy for the next 3 years. Overall concept is to achieve sustainable growth, implement the management based upon 2 pillars, that is the growth potential in Automotive business and profitability in the Industrial and Consumer business. In addition, we'll lead the way in building a sustainable society environment through environmental contribution activities. Financial goals are sales CAGR of 10% or more and EBITDA, 20%. In order to achieve this, in implementing management based on 2 pillars, we set EBITDA as KGI. With Automotive business as sales growth driver and Industry and Consumer business as profitability driver, we'll increase sales and EBITDA as shown on the right. In terms of contribution to the environment, we said carbon footprint as KGI and promote measures to reduce carbon dioxide emission from business activities and supply chain and address resources issues. Next, I will explain initiatives in the Automotive business, Industrial and Consumer business and contribution to the environment. First from here on, I will explain the in-vehicle strategy. What is indicated here is the result of the in-vehicle battery. Our company is working on the cylindrical lithium-ion battery and already has been supplying the 10 billion cell or more with the cylindrical platform development and high capacity, we have been always leading the industry. Left-hand side is the shipment result of the cylindrical battery. 2008, 1865 size; 2017, 2170 size in-vehicle battery, mass production started. So far in the conversion of EV, we have been providing 1.7 million worth of cells batteries. And we are maintaining #1 share in North America. As a manufacturer, this is all to normal plot. We have a high conscious on safety. And so far, there is no large recall or any recall happening with generated from the battery. The track record has been supported by our history that we have been trending for the technology development. As the form factor development advances and the cylindrical battery, we have been advancing the material technology insistently. Going forward, we will be serving with our outstanding technology in order to evolve 2170 cell. And in new 4680 cell, we would like to develop the EV and further spread and make contribution. For the strategy for in-vehicle battery, our strength is high capacity that should be utilized. And North American market will be our focal point because there's a strong foundation already for us. We will expand the sales for 2170, which is already having a track record and also strengthen the foundation of business for 4680 cell, the new cell. Left-hand side is about the image of enhancement of production capability for the in-vehicle battery. Customers are giving us a robust demand already. Until FY '20, centering around North America, we are aiming for expanding the production capability threefold to fourfold. On the right-hand side, this is a summary of our customer and product strategy. The key point is to create and strengthen the partnership with a customer who can evaluate our capacity and safety for the cylindrical battery. For 2170 cell, which we have the track record, we will improve our productivity. And for our new technology, in order to raise the performance, we will be working intensely on having higher competitiveness. We have already been awarded various inquiry. Therefore, we will be expanding the strategic partner to new customers. Regarding the 4680 cell, the next-generation platform, we are under verifications for mass production and development in fiscal year '24 in Japan's factory. It is to be commercialized and to be starting supply to the strategic partners. The 4680 cell that I think you already have a very high interest, I would like to share with you the development. As already shared, 4680 cell, we have a plan to produce in mass in Wakayama and starting supply in North America starting FY '24. Left-hand side is the schedule and the development. In a nutshell, currently, we are very much on track upon our plan. The prototype development is already complete and we are now moving into the production development phase. In the pilot line in Japan, starting May, we have started opening for prototype. Along with that, accordingly, we are delivering samples to the customers. Customers are now under evaluation. The mass production which is about Wakayama plant, regarding the plan, as shared in the news, Wakayama plant is under renovation according to the plan. Along the way, we have been starting the production for the equipment itself. On the right-hand side, we share the initiatives -- main initiatives for commercialization for technology development for the 4680 cell. This is to be having a tandem high reliability and high performance. We already have a good idea of what we are working on for operation and manufacturing. The premise is to produce in Wakayama and to develop globally. For the supply chain, for stable supply, the materials multi-sourcing is what we are going to be working. And in the future, we would like to raise the local procurement rate to 50%. As such, the commercialization of 4680, when we are going to be opening up the operation in North America, we will draw from various experiences that we have been gaining and we are steadily working. That was about in-vehicle. Next is about the strategy for Industry and Consumer business. So the key point is the social changes, which is heading for digitalization and electrification. We would like to promote this in a high-safety and high-reliance technology. We will be utilizing the cell technology as core, and we'll apply it to various systems in order to contribute. We have not been able to have an opportunity to explain this business. Therefore, I would like to introduce some of our representative business, the data center, which is the information community infrastructure. The needs for data maintenance, 24/7/365 days are asked for. For this, we are already supporting and providing the backup power source, which is having a long life, which is highly reliable and safe. This is one point that we have been raising and sharing. This also is sharing a very high share. We also are working on the battery-assisted bicycles in the future for the power equipment, including the construction and agricultural machinery. According to the cooperation and the needs of the customers, we will be developing and providing the optimal pack in systems for each of the products. For the Consumer side, the smart meter and the medical equipment and IoT-related equipment, we will be working widely for utilizing our application. For those area, according to the users' environment, we need to garner high reliance. For this, our primary lithium battery is making contribution. So regarding these 3 businesses, we are having a very high demand from the customers. Therefore, for the growth of the sales, we believe we are obtaining the track that we have been sharing with you. Next is about Industry and Consumer businesses and how we are going to be intensifying measures. There's strong demand and new demand for the lines that we are owning. They're all full in operation. Therefore, it's very important for us to expand our capacity. And the -- in order to expand the contact point of the customers, we will also focus on the human resources in order to allocate the right people for sales and other activities. For supplying system on the left-hand chart indicates the supply system. Regarding infrastructure and power issues, the Tokushima factory, we are producing the optimal cell, line is increased and assembly plant. And in North America, the existing Mexico factory, this is going to be increasing capacity for packing and module. IoT equipment, it is not in lithium battery, but this is the primary battery. We are going to be developing a new building at China, Wuxi. In the future, in order to fulfill our responsibility for supply. For dry battery, Osaka, Nishiki-no-hama, we will be establishing a new plant, and we will be transferring to the area relocating. In the future, around FY '24, these initiatives will be almost finished. Going even beyond, in order to maximize our supply and provision value, from starting with a single products businesses of cell, we have been shifting over to the packing and module businesses. We will be having further layer up and expanding our applications to expand our value provisions. In order to do that, not only the cell technology, but we will focus on developing system for systems and also intensify the managed sales and FAE in order to have larger contact points with the customers. As such, we will be creating another next business pillar in order to be strong other than the in-vehicle. Lastly, this is about the contribution to the environment. The upstream and the downstream process within our businesses, these indicate the CO2 emissions and the ratio. Currently, at our battery plant, we have 14% of emission and 86% is emitted from the upper stream area, especially for drilling the resources and processing. The materials will be emitted largely. We need to be utilizing the recycling materials, and we should be decreasing the users of rare metals. We have to work on carbon neutral and intrinsically work on the upper stream. In 2030, we will be having this carbon footprint in order to make our contribution. This one is what -- one of the cases that we are going to be working on regarding carbon neutral for our own plants at FY 2022. In 20 plants, 5 plants have already achieved the target. In FY '25, all dry battery plants, and in FY '26, all plants in the Japan. In FY '29, in all global plants in the world is going to be achieving the target. Along with the initiative, we will be transitioning ourselves to decreasing and saving the energies. We are also going to be working on reducing the usage of rare metals. Rare metal is scarce and included within the mineral itself. But rather it is emitted more -- emitting CO2 more when it is refined, therefore, reducing the usage of rare metal is directly connected with the decrease of CO2. We already finished the development of a cobalt-free process. We are now working on to reduce the ratio of nickel. We need to work on the positive electrode. Right now, for the low carbon footprint supply chain establishment, we are going to be working proactively with the external organization. Lastly, the summary about the midterm management plan. For the management target for FY '25, the sales, including the in-vehicle and Industry and Consumer, we will be expanding JPY 200 billion by our initiative. And for the KGI EBITDA compared to FY '22, plus JPY 30 billion to aim for JPY 150 billion. Regarding the environmental targets, we have a plan for FY 2031, and we have a target point. KGI, the carbon footprint will be reduced into half. Through our product, CO2 reduction will be targeted for 60 million tonnes, and this is going to be done at FY '22 with fivefold of decreasing quantity. So we would like to be the energy that changes the future. We would like your support. Thank you very much for your kind listening.

SMBC Nikko Securities, Katsura-san, please.

Thank you very much for a very detailed explanation. I have 2 questions. The first question, Slide -- Page 12. The increasing capacity. In North America, you will be increasing capacity and you're thinking behind that increase of 2170 or 4680. Is that the case? That's my first question. My second question, related question. Slide Page 13, you show the schedule and progress. Including this, FY '26 through '29, you are thinking about investment -- size of investment and fund for investment. To the extent that you can communicate with us, please share with us.

Thank you for your question. The second question, indeed, as I was earlier explaining, until the investment plan is decided, we are not able to communicate. But our activities in America, there was a mention about sites. In the presentation at the onset, I have explained. From a number of customers, we received specific requests and we are working. We have been explaining collaboration in CIAP and that's 46-diameter platform. We work with our strategic partner, as we have been doing in the past. So this is one axis. But others, it's a design of the customers, by the customers and 46 and 21, they are different ones. But in rest of bodies, it's going to be used and the cylindrical or the smaller one is smaller diameter, it's easier to operate. So depending upon specific projects and depending on the timing of the project, we'll be making decisions in that sense. With strategic alliance partner, we do have 46-diameter. But others at this point, 21, we are not going to exclude that. And there is such a possibility as well in terms of quick response. Your second question, investment. Internally, we are having discussions -- various discussions. And naturally, business with the customers, after we have come to finalize the project, then we'll be making judgment. So assumptions. Of course, we do have assumptions, but we are not at the stage where we are able to make any announcements at all. So I'd like to refrain from responding to that question.

Next question, please. From the floor, Hirakawa-san from BofA Securities, please.

Hirakawa from BofA Securities. I have 2 questions, too. One is maybe overlapping the Katsura-san's question. The increasing the capacity of threefold to fourfold, I would like to ask you about increasing the capacity by threefold. So you mean that strategic customers are already seeing that? Or else are you including the North American customers? And in total, you are assuming that the increase of capacity will be needed by threefold or else maybe you might be needing the capacity increase of fourfold or even more? So I would like to know that. And regarding the 4680, I would like 4680. You've been talking about the strategic partner. And for the internal produced 4680 versus that, what is your strength of the 4680 made in your company?

So first comment and first reaction to your question. It's about how we take it, how we think the in-vehicle battery is what we specialize in. Then we look at the capability and the reliability regarding the cost. So comprehensively, we must make some selections. Within this condition, one way that we can think is supplying of the material like seeing it's important. And the procurement capability for stability is also going to be included within the supply chain. Therefore, positioning within one area region is very important. As understandable cases, first, regarding share, we need to ensure a level of share. For the targeted region, we must be the first top ranking company. They were looking for FY '31, looking at the market size. And in order to be ensuring our competitiveness, there's one idea that we must do the minimum activity within the area to ensure the share. And in 2031, FY '31, for ourselves, that time line is not that far. During that time, there's various queries coming from the customer side. And we are thinking of various strategy, too. Right now, we have not come to an agreement with the customers yet. However, on the table, there's various ideas. And there's an area where we could be stable within the certain area and also think about the future businesses and having 2 axes trying to come up with terms thinking about the strengths and growth regarding the specific area. So it's not adding every factors. So I would like you to understand about that. The second issue, when the partner is creating the 4680, we are not in a position to make any comments. But of course, the other organization creating 4680, we've been working together in order to fulfill the benefit along with them. Watanabe has been working with them, too. So the differentiation with the internal production with other companies and ourselves, we cannot mention about this. However, the goal, we have a common goal for this development. And the technologies will be developed from both sides, therefore. Right now, this is related to Customer side. Therefore, I will refrain from making any further comments. Watanabe-san?

I'm in charge of Technology. My name is Watanabe. The strategic partner is producing batteries. And basically speaking, the battery supply is always a bottleneck. So this is one of the solution in order to solve the bottleneck. As Tadanobu-san mentioned, cumulatively, we have been providing cells over beyond 10 billion. So that's reliability and safety track record that supported us -- those have been supporting our company very well. And the product itself has been having an update for several generations. So when we come to think of this, we've been working with the area for more than 25 years. Therefore, it's not just one-off business. We're working on business that we are always be able to updating. So we are the technology leader. Another point to make is within this regarding the materials, the electrode material, how are you going to be changing this? This is related to our development. And we've always been taking the lead, therefore, for the resources and the cost. These must be the source of our cells activity, and we would like to take the lead within the development.

I'd like to move on to the next question. Ezawa from Citi Global Markets, please.

Ezawa from Citi Global Markets. I have 2 questions. Sales and profit. As I look at the relationship, sales increased by JPY 200 billion in 3 years, and operating profit increase, it will increase by JPY 20 billion. Three years is a short period of time. But looking at the marginal profitability, profit can increase even more. What is the background for saying increase in profit by only JPY 20 billion? Depreciation will increase by how much? And the price drop and the increase in price of materials, are you assuming that, especially the fixed cost, how do you look at this? That's my first question. The second question, ROIC, 12% target. And what is included in the target of 12% ROIC with production capacity increase by 4x and profit from invested capital will increase that much in 3 years? I have some doubt. On consolidated basis of Panasonic Group, you would like to have a double-digit ROIC. Therefore, you come up with a target of 12%. And do you think that lower level will suffice? Or do you think that 12% can be achieved, especially by the denominator for calculating ROIC? Can you explain?

Thank you for your questions. First, medium term, battery is not something that can be looked at in 1 or 2 years with a longer term. How to design and what is the meaning of that? We have to think about that. Then in the midterm target for growth, as I mentioned before, development and production capacity will have to be increased. If rapid change occurs, then it's easy to reap the fruit, especially the area where we have the leadership in technology will grow further. And as we become larger and the costs included and operation capabilities, we are going to enhance capabilities. As customer says, so investment and the development will be investing, especially speed is the key. And fixed cost, especially resources, significant increase is forecasted in the midterm plan period, about 1,000 -- around 1,000 people, increasing resources by 1,000 people. And a bit more than half will be the value -- the human resources for adding value, including technology. So increasing capabilities for technological development and human resources to support the development. And we are working with customers, and we'll be focusing upon that so that we can realize the target. So there is future investment increase. And the numbers, [ Mizoguchi ] will be making supplementary comment.

Thank you. I'm [ Mizoguchi ]. Thank you for your question. First, the balance between sales and profit, JPY 200 billion and the increase in North America. And FX difference is also. So in actual sales, about JPY 170 billion. And Automotive has a slightly higher ratio of increase. So as we look at the increase in sales and profit, about JPY 40 billion to JPY 50 billion increase in profit from sales increase. And then future cost or the depreciation will increase, and human resources increase for development and sample costs for new products, these costs are factored in. So those which need to be factored in have been factored in and came up with these numbers. ROIC, 12% and the meaning of this 12% in terms of return on capital. The recent level of ROIC has been -- was not included in the presentation. So let me elaborate. FY '22, 14% ROIC, the after-tax operating profit and return on capital. In FY '15, the rights of the investment resulted in increase in profit and the Industrial and Consumer. Over the past several years, we have not made much -- so much investment and it turned into a system, which resulted in profit, higher profit. So ROIC has gone up significantly. We are at that phase. Going forward, FY '25, 12% ROIC target. Operating profit target is 9%. So after-tax operating profit can be estimated to a certain extent. So ROIC is going down, which means a slight deterioration of the turnover of capital. But Wakayama and investment for future is included to calculate ROIC target. Thank you.

Like the image battery, then Automotive is battery. That was the perception, and I was not able to explain the overall picture. At the onset, Automotive and the Industrial and Consumers, I have broken down and explained. As we grow the business, we should have the balance between the growth and the profitability. Naturally, profitability and growth, which is the focus and hit the balance and grow each of the segments. Automotive will be driving the growth and systems. Mostly, it is not selling just the cells. It made into packs and modules and then made into larger systems. So the business model is changing significantly versus the balance will change -- will not change so much. So as we communicate with the energy company with these 2 pillars, those which require investment in the short term. And in the long term, we will be able to see a stable growth, and we will be communicating from these 2 axes. Thank you.

Next question, Nakane-san from Mizuho Securities, please.

This is Nakane from Mizuho Securities. I have 2 questions. So it's about your -- how to take the pricing of the batteries for in-vehicle is my question. Now currently, the cost is inflating rapidly and you would like to respond to it that you have gained consensus. But when we are observing 3 years ahead, 5 years ahead, 10 years ahead, there could be a risk where the materials could be having a higher price. And are you able to add the pricing over to the customer side? Who's going to be covering the cost? And as the position of battery manufacturer, I would like to know your position and it all relates to your strategy as well. Another question. So competitors, when you're going to be making a competition with other companies, the recipe and the productivity or operation, for instance, with the North American part customers, if you can maintain the #1 share, then is it okay for us to think about, I think so will be all right, but would you be needing the economic of scale and to pay for the recipe and costs from your side without making investment and to expand on the cost of scale? So how are you thinking in order to keep up with the competition?

For the first point, including the costs and how to add on the pricing especially for the in-vehicle battery, the Consumer business is also of that. Regarding the material, the LME such as very fair indexes, there's already a tendency where people are open to be fair, therefore, with rapid fluctuation. Thinking about the timing of the price hike and when we're going to be recovering and collecting the pricing, there could be some time lag. However, as a fair partner, we would like to be able to ensure our position. However, as a pricing -- absolute pricing, if we are not able to contribute to the customers' needs, we will not be able to resolve our problem. And we have yet to work on. However, how much can we develop? We cannot assume at this point. So for FY '28 or '29, we should be holding a target within the company and to advance our recipe for production. So that we will be creating the level of product that the customers will be wanting, and we can split the cost with the customer side and ourselves. So in another word, currently, with single year, when we speak about quarters and the first half and second half, maybe the numbers will change. However, in a long time, it will not be that different. However, we must buckle up. Regarding the licensing and how we work on the business model, I think that was what you were referring to. Regarding the scale, if we're going to be pursuing the scale, yes, I understand you very much because you have been drawing some case. And the needs of the battery for automobile, there is some area that it is unseenable. Even for FY '31, we do have some hypothesis for some level. However, there is a thinking of various countries. And according to the condition of the current status quo in the world, there could be some additional changes. But it is not a level that one company can make the contribution. So at the level of all the battery manufacturers making announcement, it's also difficult to make a matching currently. Therefore, it's not about scale. However, we would be making judgment whether we could be competitive. When the pie becomes firm, then we must change the strategy, but it is not the timing currently. Therefore, we need to develop a technology to differentiate ourselves, and we need a capability for manufacturing. We need some strength. And there, we need and we have some room to improve. That is our basic idea.

Time is running short, but we'd like to entertain question from 2 more persons. One person is participating online. Goldman Sachs Securities, Harada-san, please.

Harada from Goldman Sachs Securities. I have 2 questions. First question is a simple one. 4680 strategic -- supply to strategic partner is the basis at this point in time. New customers and customers in Europe inquiries from them and request for supply is there. So are you able to expand the customer base? That's my first question. My second question is overlapping somewhat to the previous questions. Competitors are investing heavily. Apart from material price, is the risk that the margin will be under pressure? As you pointed out, the Industrial and the Consumers, you moved to making modules and systems. But Automotive business, by taking the same strategy to increase the value-added, for example, emerging carmakers do not have know-how in that area, so they welcome receiving supply in the form of modules or systems. Strategic partners with strategic partner, that is not going to be the business. But with new customers, you can establish such a new business model?

Thank you very much for your questions. Your first question, 4680 and the needs for 4680 was your question. Naturally, it's not that there is none. First, we have to create this and those which are made in Wakayama, we will be supplying to a strategic partner. So at the development stage, we -- it is not going to concrete specifics, but there are certain amount of needs. With regards to your second question, that is aren't we going to have the layout of business model for Automotive business as well? As we try to electrify vehicles, then with cells using 21 and 3,000 or 4,000 can be used. BMS, I don't know whether it's BMS. More sophisticated system is needed. And the various conditions and designing algorithm for different conditions and how to secure reliability and safety. How much can we involve ourselves? As we see competition with the evolution of cells, it is not the right timing. But rather, we ourselves and our customers discuss the borders. And together with the customers, we make it. That will be more rational, reasonable and have higher probability of success. So in the current midterm plan and next midterm plan period, basically, we will be evolving the existing business model and increase cost competitiveness. We'll be focusing upon that. So at this point, increasing the layer. We are -- to a higher level, we are not thinking of that at this point.

One point, a follow-up question. With strategic partner, you are discussing in this business. Going forward, in the future, other companies can make at this price. And when they say that they would like to see the price going down? Or you have an agreement with this partner, strategic partner?

The target for the future, we are always having discussion together. And individual business, I would like -- it should be difficult to respond in concrete terms. But the partner has a strong route spread and disseminate EV and design the automobiles and design more of the commercial vehicles as well. So the company with leadership, and it will be able to evolve ourselves so that we can secure our profitability. With the competition and price, it is individual case. So we build cells so that we can compete even when that situation might occur, and we'll continue to do so.

Now the last question. So I would like you to have one question from Morgan Stanley Securities.

This is Ono from Morgan Stanley Securities. One question. On Slide 18 and 20 and Page 12, I would like to ask you about the relationship with these 3 slides. The capacity itself in FY '26, from the graph, I read that it is going to be double from FY '23. So 100 kilowatt-hour is going to be the number I suppose. However, the sales written on Page 18, this is the around JPY 200 billion in total. And for in-vehicle, it is around JPY 100 billion, just excluding the foreign exchange. And from FY '25 to '26, by having a new line output, do you have any plan? So is my image okay in creating such number? And the other one is, most of the number will be coming from the 4680 for the increasing part. Am I right, correct, please?

Regarding the timing, various discussions are ongoing. So therefore, we cannot specify the year. However, as a target about FY '29, which is the end year that we target, maybe during the way heading for FY '29, we need to make a big management decision. And whether it'd be 4680 or not, with -- along with which partner and customers, it all depends on which partner that we are going to be working. Therefore, at this point, it is difficult to share any idea with you currently. So on FY '26, things are not that visible, as I assume, that during our discussion, this is one of the milestones that we hold. And the detailed issues, once we have some concrete idea, we will come to share with you. Thank you very much. And with that, the Panasonic Energy Company explanatory briefing is finished. [Statements in English on this transcript were spoken by an interpreter present on the live call.]