Panasonic Holdings Corporation (6752) Earnings Call Transcript & Summary

I will present the consolidated financial results of Panasonic Holdings Corporation for fiscal 2026 ended March 31, 2026, and the forecast for the fiscal year ending March 2027. We are presenting our financial results and forecast based on the new reportable segments starting from this earnings briefing following the new group structure as of January. First, the highlights. Sales and profit decreased year-on-year. Sales decreased overall despite higher sales of Connect, Electric Works, Energy and Industry due to lower sales of HVAC and CC and Smart Life as well as the deconsolidation of Automotive. Adjusted operating profit decreased overall despite increased profit of Connect Electric Works, HVAC and CC and Industry due to lower profit resulting from onetime expenses related to past in-vehicle manufacturing process issues of energy and the automotive deconsolidation. Operating profit and net profit decreased due to recording of restructuring expenses for the group management reform. Operating cash flow decreased year-on-year due to the nonrecurrence of monetization of IRA tax credit through transferable method in FY '25 and restructuring expenses. As for the FY '27 forecast, overall sales are expected to decrease due mainly to the impact of deconsolidation and the effect of exchange rates, while sales in real terms are to increase in all segments. AOP in all segments is to increase due mainly to higher sales of AI infrastructure-related businesses and the effective restructuring. Overall AOP is expected to increase even after factoring in a negative impact of JPY 30 billion, reflecting risks from deteriorating situation in the Middle East and the further memory price hikes. Annual dividends for FY '26 were determined at JPY 40 per share and forecasted to be JPY 54 for FY '27, up JPY 14. Now the details. Sales decreased year-on-year by 5% to JPY 8,048.7 billion, while sales excluding automotive were up increased or were up by 3%. AOP decreased to JPY 447.4 billion, while AOP excluding automotive, increased year-on-year. OP decreased to JPY 236.4 billion and net profit decreased to JPY 189.5 billion. This slide shows results by segment. Next few slides describe the analysis of year-on-year comparison for sales and AOP. First, sales analysis by segment. Overall sales decreased despite higher sales of Connect, Electric Works, Energy & Industry due to lower sales of HVAC and CC and Smart Life and the Automotive deconsolidation. The major factors by segment are shown on this slide. This is AOP analysis by segment. AOP decreased overall despite increased profit in Connect, Electric Works, HVAC and CC & Industry due to lower profit in Energy and Smart Life and the Automotive deconsolidation. In Energy, AOP decreased overall due mainly to significantly lower profit in in-vehicle, reflecting the impact of the U.S. tariffs and the recording of onetime expenses related to past manufacturing process issues. This despite increased profit in industrial and consumer, driven by higher sales of energy storage systems for data centers. In Smart Life, AOP decreased due largely to restructuring expenses related to strengthening of the TV business partnership. Next, OP analysis by sector. From the left, increased sales in yield terms, positive JPY 65 billion; fixed cost, negative JPY 13 billion, but this includes positive JPY 45 billion from restructuring. Raw materials and logistics prices, negative JPY 9 billion, effect of price revisions and rationalization, positive JPY 45 billion; Blue Yonder, negative JPY 10.3 billion due to an increase in strategic investments. Exchange rates, negative JPY 2 billion, mainly seen in Energy & Industry. The automotive deconsolidation, negative JPY 24.5 billion; U.S. tariffs negative JPY 31 billion and recording of onetime expenses related to past manufacturing process issues, negative JPY 40 billion. As a result, AOP was down JPY 19.8 billion. OP decreased by JPY 190.1 billion due mainly to restructuring and portfolio management-related expenses in other income and losses totaling JPY 170.3 billion. An update on progress with the group management reform. The structural reform in FY '26 was implemented as originally planned, and the scale of personnel optimization exceeded the original plan of 10,000 employees, ultimately reaching 12,000. Restructuring expenses in FY '26 amounted to JPY 174.5 billion, while the positive effect was JPY 45 billion. The group-wide effect of the restructuring for the 2 years covering FY '26 and '27 is expected to be JPY 145 billion. Status of cash flows and cash positions. On the left, operating cash flow for FY '26 decreased to JPY 624.3 billion year-on-year due to the nonrecurrence of monetization of IRA tax credit through transferable method in FY '25 and restructuring expenses. On the right, net cash was outflow of JPY 756.7 billion. Next, forecast for FY '27. This is the consolidated forecast for FY '27. Overall sales are expected to decrease to JPY 7.6 trillion and AOP is expected to increase to JPY 600 billion. OP is to increase to JPY 550 billion, and net profit is to increase to JPY 420 billion from an increase in AOP and the nonrecurrence of restructuring expenses recorded in FY '26. EPS, JPY 179.89, ROE 8% and EBITDA JPY 1 trillion. This is the forecast by segment. A negative impact of JPY 30 billion is factored in other/elimination and adjustments, reflecting risks from situation in the Middle East and the further price hikes of memories. Next few slides show major factors. This shows the FY '27 outlook for changes in demand by segment. Please note that certain uncertainties such as the Middle East situation have not been fully reflected, and we'll continue to monitor the developments carefully. Positive changes in demand are written in blue and negative changes in red. The major changes we anticipate by segment are as follows: for Connect, we expect demand growth for supply chain management software, avionics and factory automation. At the same time, we are closely monitoring the potential impact of the memory shortages on the aircraft and PC supply chains. In-vehicle of energy, EV demand in U.S. is expected to remain at broadly similar level to the FY '26, while demand from our customers is expected to exceed the FY '26 level. For Industrial and Consumer of Energy, demand for distributed power supply system is expected to continue to expand significantly. For Industry demand for information communication applications such as Gen AI is expected to expand, shows a year-on-year increase and decrease factors of sales forecast. Sales are expected to increase in all segments. Major factors by segments are shown. In particular, significant sales increase is expected in energy, driven by higher sales of in-vehicle at our North American factory supported by the recovery in customers' production volume as well as continued sales expansion of the energy storage system for data centers. This shows the year-on-year increase and decrease factor forecast. AOP is expected to increase in all segments. In particular, Energy and Smart Life will drive overall increase in profit. For Energy, AOP in-vehicle is expected to rise significantly due to the higher sales in North America and absence of onetime expenses recorded in FY '26 related to the past manufacturing process issue. In addition, much higher profit in Industrial/Consumer is expected with higher rate of energy storage systems for data centers. For Smart Life, AOP is expected to grow due to largely the absence of onetime restructuring expenses. This shows the year-on-year increase, decrease factors of operating profit. From the left, higher sales in real terms is expected to become a positive factor of JPY 120 billion. Fixed costs will be a positive factor of JPY 60 billion due to the effect of restructuring of JPY 100 billion despite the increase in strategic investment and the impact of the inflation. The net impact of raw materials, logistic prices, mainly from the price hikes in copper, resins, memory will be a negative factor of JPY 125 billion. The effect of the price revisions and rationalization will be a positive JPY 124.9 billion. The Blue Yonder AOP is expected to grow by JPY 2.7 billion. The FX impact will be a negative 40 billion, mainly seen in Energy & Industry. The absence of onetime restructuring expenses recorded in '26 is expected to become the positive factor of JPY 40 billion. Furthermore, negative impact of JPY 30 billion is factored in, reflecting risks for deteriorating situation in Middle East and further memory price hikes. Taking all these factors into account, AOP is expected to increase by JPY 152.6 billion. Operating profit is expected to increase by JPY 313.6 billion due to JPY 161 billion improvement in other income and loss, mainly reflecting the absence of the restructuring expenses. Here is some supplementary explanation regarding the impact of the situation in the Middle East and further memory price hikes. As for the potential impact on us from the deteriorating Middle East situation, we mainly assume the price hikes in raw materials such as resins as well as the decline in sales in Middle East. Furthermore, rising memory prices have been seen due to the supply shortages. Accordingly, we have factored in JPY 30 billion impact at the group level. While uncertainties will persist for the foreseeable future, we remain committed to closely monitor the situation to achieve the target of JPY 600 billion AOP. This shows the outlook of each individual business, starting with the in-vehicle of energy. On the left is the line graph shows the sales volume trend in in-vehicle batteries in gigawatt hour at our factories in North America and bar graph shows the EV sales trend in U.S. Following the termination of the IRA Section 30D tax credit for EV purchasers at the end of September last year, the situation of the EV market in U.S. has deteriorated. However, North American operation in '26 achieved higher shipment volume year-on-year. In '27 outlook, we expect gradual market recovery compared with the '26 and the increase in demand for our battery production, driven by our strategic customers' market share gains in U.S. Therefore, we forecast full year battery sales volume of 46 gigawatt hour in FY '27. If the uncertainty continues, we will continue to expand our business in line with the market trend and customer demand. Next is our outlook on energy storage system for data centers in industrial and consumer and of energy. The graph on the left shows the sales outlook. We previously targeted the sale of JPY 800 billion in FY '29. In light of demand exceeding our early expectations, we will bring forward the JPY 800 billion sales target by 1 year to FY '28. We are also raising our target to JPY 950 billion in FY '29, approximately 3x the level of ' 26. In response to the rapidly growing demand, we are quickly proceeding with the preparations to expand production capacity. For cell production, we have completed the conversion of the in-vehicle battery production lines in Japan and shipments for data center applications began in April 2026. We have also decided to allocate the in-vehicle production line for data center applications at the Kansas factory and to expand our production capacity going forward. For capacitor backup units, we -- which use our new modularized supercapacitors developed through the collaboration between the Panasonic Energy and Panasonic Industry, we plan to start mass production in FY '27. By simultaneously achieving the high level of both production capacity expansion and the development of new solutions, we will maintain our leading market position and drive further business growth. Next is our outlook for Gen AI-related businesses in industry. We previously industry's AI-related business disclosures focused on the AI semiconductor-related areas such as GPUs and ASICs. However, as the business opportunities that leverage the expertise are rapidly expanding, we will broaden the scope of the disclosure to include the infrastructure area supporting the evolution of AI such as servers, storage as well as edge area, where the advancement in AI technology extend into applications such as ADAS and robotics. As shown on the left, we will target the sales of JPY 430 billion in FY '29 under this new scope, roughly doubling the FY '26 level. In terms of the production capacity expansion to support growth for electronic materials, we will construct a new facility in Ayutthaya plant in Thailand, while simultaneously expanding the production lines at Suzhou and Guangzhou plants in China. In addition for conductive polymer capacitors, we will continue to expand the capacity at multiple sites in Japan overseas. For the AI-related business of Panasonic Energy and Industry, we will provide a detailed strategic update at the Investor Day on June 8. Here is the summary of the progress made in our group portfolio management initiatives. Following the announcement of Housing Solutions and Ficosa, the transactions relating to those businesses have been completed. We have also announced the share transfer of the power tools business of Electric Works and the Security System business of Connect since Q4. Today, we announced the share transfer of the automotive motor and automotive cooling fan motor business of Industry. We will continue to steadily conduct the portfolio management going forward. Finally, our shareholder return. We decided to pay JPY 40 per share dividend for FY '26, no change from August '29. As for FY '27, our forecast is JPY 54 per share, JPY 14 up, the payout ratio of 30% relative to the net profit. We will distribute a stable and continuous dividend. Also, we aim to achieve the enhanced corporate value through business growth and profit increase. Thank you for your attention.

Thank you for your attention. We now have our CEO, Kusumi, to explain the group growth strategy.

Hello, everyone. This is Kusumi speaking. Thank you for taking time out of your busy schedule to join us on this online briefing. CFO, Waniko, just reported on last fiscal year's results and the forecast for this fiscal year, especially with regards to the devices area. I will now give the details of the Panasonic Group's growth strategy. First, I'd like to go over the group management reforms implemented last fiscal year. First, the fixed cost structure reform last May. Recognizing the need to review the fixed cost structure for the entire group, we announced our goal to achieve JPY 122 billion reduction in FY '27 compared to FY '25. Currently, we expect to exceed that target and achieve JPY 145 billion reduction. As part of the group structure, we dissolved the former Panasonic Corporation and we established 3 new business companies, Panasonic Electric Works, Panasonic HVAC and CC and the new Panasonic Corporation for Consumer Electronics. We consolidated and streamlined our headquarters, sales divisions and indirect functions and consolidated our sites. The personnel optimization has resulted in a reduction of 12,000 people globally. We have completed the direction setting for businesses with issues, namely this with no foreseeable growth and ROIC below the cost of capital as well as this requiring careful consideration of business sites. Regarding PIDC Industrial Devices and the electromechanical control businesses, we have completed the construction process through delivering the structural reform results and material cost reduction. There's a plan to transfer our automotive motor and automotive cooling fan motor businesses as well. In the kitchen appliances businesses, we will thoroughly pursue global standard cost structure by shifting mass production development to China, optimizing development resources in Japan, reviewing standards and criteria that do not contribute to customer experience value and actively utilizing Chinese components. In the TV business, we have established a prospect for risk reduction through collaborations with other companies overseas. Through these, we are to eliminate businesses with issues by the end of FY '27. The HVAC business to be reconstructed will strengthen the cost base for air conditioners and compressors in Asia through structural reforms and site optimization. In particular, we will improve profitability in the commercial air conditioning by reducing development costs through partnerships and focusing on specific areas. The Consumer Electronics business will strengthen the competitiveness by pursuing global standard cost and becoming asset-light through collaborations while enhancing the brand and sales channels based on our core technologies that allow many customers to perceive the difference, creating a cycle in differentiated areas where we will strengthen products and advertising for higher profitability. Panasonic Housing Solutions completed the share transfer to YKK at the end of March. Through a full lineup of building materials and synergies, we aim to achieve growth that was not possible so far. We will continue to implement measures to improve the group. Having strengthened our earnings base through last year's group management reforms, we now enter a growth phase. In 1932, our founder, Konosuke Matsushita stated, only when spiritual stability and an inehaustable supply of material goods are combined, can happiness in life be stable. This is what I have come to understand as the true mission of Matsushita and declared the realization of an ideal society for both material and spiritual abundance prevails as a true mission for the next 250 years. Let me describe how our group can contribute to prosperous society in 2032, the 100th anniversary of that Meichi revolution. The Panasonic Group continues to evolve, supporting the development of society and industry by solving social challenges that change with times. In particular, towards 2032, we aim to solve 2 challenges: efficient use of energy and alleviating the frontline labor shortage by supporting AI infrastructure and social operations. This slide shows the steps of revenue growth or profit growth until 2030 through our efforts to address these 2 challenges. First, in Phase 1 for the 3 years leading up to FY '29, the business supporting AI infrastructure and the devices area will expand significantly in both sales and profits, driving the group's growth. In addition to growth of other businesses, as shown last year, we will increase AOP by more than JPY 150 billion from FY '27 and will certainly achieve our target of exceeding JPY 750 billion. During this period, the Solutions area will transform its business model to further contribute to the evolution of our customers' operations. And this area will be the core of revenue growth in Phase 2 from FY 2030 onwards. The Devices area and the Smart Life area centered on the consumer electronics business will continue to grow sustainably through technological innovation and strengthen competitiveness in Phase 2 and beyond. At the briefing in February 2025, we explained power supplies for data centers as part of our Solutions area. Given the continuous technological advancements in devices in line with the evolution of AI server technology, are the key, we have repositioned them within the Devices area now. Now let me explain the overview and initiatives of our business supporting AI infrastructure in the devices area. Our business supporting AI infrastructure and the Devices area is focused on the rapidly growing AI data center market. Our group contributes by addressing the need for high-speed GPU ASIC peripheral circuits and boards, which constitute the brain of AI processing and by providing backup on peak power reduction around the power supply, which constitutes the heart of the system. In the future, we will expand our contributions to edge computing areas such as AI-driven autonomous driving and robotics. Here, you can see the growth road map for the Devices area. Key industry players such as hyperscalers and AI semiconductor manufacturers are rapidly increasing the capabilities of data centers and the GPUs and ASICs that support them to meet the rapidly growing demand for generative AI. In response to this evolution, the area surrounding the GPU ASIC, the brain of the server requires further speed and stable operation, along with reduced power loss and absorption of power load fluctuations. Our group is paving the way to meet these demands through advancements in substrate materials and capacitors. In the power supply area, which can be considered the heart of the server, there is a need to achieve both higher levels of power efficiency and stable operation in response to increasing power load and fluctuations per server rack. Through advancements in battery cells as well as advancements in devices unique to our group that fuse battery and capacitor technologies, we will continue to support the power supply systems of ever-evolving AI servers. Our group has the development capabilities to propose and realize products that don't yet exist in the market by advancing materials and process technologies in line with the 5-year visions of our customers, including hyperscalers and AI processor semiconductor manufacturers. Furthermore, by building production and supply system that can flexibly respond to customer requests, we will ensure a stable supply and continue to support the evolution of AI servers and data centers. In Devices and Systems supporting AI infrastructure, we aim to achieve JPY 1.4 trillion in sales and JPY 290 billion AOP in FY '29 and try to grow further in FY '30 and onwards. Already, our customers have shown us the future demand forecast. So we are very much likely to win the orders, especially the power supply for DS at data centers, we are getting the strong demand from the customers. And our award win rate, that is the agreements to proceed with the development orders and secured have reached 80% of the sales. From FY '27 to '29, we plan to invest about JPY 500 billion in total for businesses supporting AI infrastructure in advancing devices and systems and expanding production. Next is the businesses supporting social operations in Solutions area. First of all, the business model transformation in Solutions area. Phase 1 is during the 3 years up to fiscal '29, and we mentioned that we would transform our business models. And this means that we will shift from the hardware-centric to service-centric value proposition. In response to the challenges such as labor shortages, resulting rising labor costs, environmental issues and regulations and soaring energy costs, we will support the operations of various clients and the public institutions through the service and engineering so that we can realize always-on, energy- and labor-saving solutions. Conventionally, we have had the good evaluation from many customers in wide-ranging industries, especially in the area of hardware. The machines in the field are the machines installed and in operation. We call this MIF. By expanding the size of the MIF, we have been accumulating the customer base of the maintenance. For Panasonic Group by providing -- by having the high MIF and also services and engineering, we have a high potential to widen the services that we provide to our customers, especially by using the AI and digital technology, we can broaden our service offering from consulting, maintenance, hardware and services. About the hardware plus service value proposition, I'd like to show you one example. In the area of the showcase and freezers, those are not provided only to the supermarkets, but together with the remote monitoring, control and analysis solution, we are providing the products and services so that customers' operations can keep running. For the in-flight entertainment for the aircraft, it's not just replaying the movie and the music, we can play the role to deepen the touch point between the airlines and passengers so that we can provide a personalized experience to improve the customer satisfaction. In 50 locations globally, we have integrated maintenance services covering the third-party equipment so that the airlines can provide a comfortable air travel. In building management system, we have a wide-ranging services of the lighting, central monitoring, security, disaster management and maintenance services. In water treatment, water supply and drainage, we provide the facility management, upkeep maintenance after construction, not just the design and the construction. We will accelerate the introduction of the connected equipment so that we can realize the always on energy saving, labor saving value proposition. In the area of the solution, what we can offer is to upgrade customers' operations. The energy costs are rising and the environmental regulation is becoming more stringent. In addition to the labor shortage on site, the customers are looking for the total value, not just the equipment value. We have to improve the efficiency of the operation and the labor saving and energy saving and environmental countermeasures. So we have to make sure that the interruption of the operation lead to the economic loss or loss of credibility and the tolerance for the downtime is becoming more smaller so that preventive maintenance becomes important. So in the wide-ranging areas, we would like to utilize the high level of the MIF and provide the operational support and modification, system linkage and integration so that we can widen the area of contributions to the customers, especially since we have a high market share, we will have a very wide-ranging access to the customers' Gemba or frontline. We have accumulated very rich know-hows in the facilities operation. We would like to further deepen our understanding about the customers' operation and to broaden our services and to enhance services and engineering so that this will lead to the higher revenue growth. So based on what I explained, I'd like to talk about the financial discipline for the 3 years up to fiscal '29. As for the growth investments and shareholder returns up to FY '29, those would come from the funds generated from our businesses. 3-year cumulative operating cash flow is expected to be JPY 2.2 trillion or more and JPY 500 billion strategic investment for the businesses supporting AI infrastructure and also growth investment for Solutions area. And the consolidated dividend payout ratio is around 30%. The financial discipline is the net debt-to-EBITDA ratio of around 1x. That is a similar level of liabilities to the cash generation capability. Panasonic Group will continue to solve the issues of the society and to support the development of the industry as the social challenges changes in 2032, we would like to continue to support the AI infrastructure and social operations and accelerate our contribution.

From [ Kyoto Agency, Higashi-san ] please.

Higashi from Kyoto Agency. I only have one question. Investment in BBU of approximately JPY 500 billion, BBU. Does this include the start-up of new plants?

First of all, JPY 500 billion, the majority of this would be for battery investment. New factory construction is not part of the plan. Does that answer your question?

Yes.

We take the next question from Nikkei, Masami-san, please.

I am Masami from Nikkei, I have 2 questions. First, this time, the structural reform, the direction setting is now complete mostly. And our initial forecast is to transfer some of the businesses to other partners expected more projects like that. But now it seems that you have overcome some of the businesses with issues. So I think that the frontline people worked very hard. If that is the case, how do you continue to do so?

Masami, thank you -- your question, probably, I think that the sale of some of the businesses to other companies were expected on your part, especially consumer electronics, maybe you had expected that something like that. Now the consumer electronics is a driver for our brand. It's very important. And at the same time, since the past, this consumer electronics in China and Japan, we have had a separate operation and our capability to compete in China was something that we gained. And in the new structure, we decided to fully leverage and utilize what we learned in China. So under the new leadership, we are accelerating that. So this is a little bit different from other companies. We would like to fully utilize resources in China and the capability that we gained in China. So once again, we want to do so. And by doing that, including the kitchen appliance, I think we have set a good direction. I hope that answers your question.

Yes. My second question. So this time, our growth strategy is announced. So this -- the medium term -- it's not the medium-term management plan, I understand. And this time, many people expected the medium-term management plan. But this is the growth strategy rather than the medium-term plan. So could you explain why that is the case?

In the past, every 3 years, I think we had the rolling plan. So after 3 years, I think that the situations in the society and technology changes so significantly. Therefore, internally, to have a rolling plan rather than having such a 3-year plan, we decided to change that to do so every year. So considering only the 3 years in the future, should we try to set up the strategies. But rather than that, that would be like a hockey-stick type. So after 3 years, we can achieve this much. So that would be how you can make a plan. But rather than that approach, we'd like to look at further in the future and think about what we want to change. We think that we need to change the way of thinking. And on top of that, of course, if the modification is necessary every year, we would do so. Toward the target after 1 year, for example, if something is not doing well, we will make the changes and adjustments. So 3 years in the future and 6 years in the future, that is not something that we are showing this time. But in the solution area, for example, there are various, not just KPIs, but the KPIs that we will be considering. So that type of planning or to make the strategies more sharpened, that is something that we need to focus upon. And based on that, rather than calling it the medium-term business plan, we decided to announce the group growth strategy.

Next from Toyo Keizai, [ Yamashita ], please.

This will be my very first time to ask your questions. My name is [ Yamashita ] from Toyo Keizai. I have 2 questions. First, on AI-related businesses, which are to be the pillar of growth going forward. Yes, there is a big expectation that demand will grow. But once the demand plateaus or flattens, what happens then? On Page 18, you're showing the cash allocation. So where would you be investing business-wise going forward? And including the AI-related business for overall portfolio balance, what is your thought?

Regarding our thinking on investments, I hope that Waniko-san can add more comments later. But first of all, for the next 3 years, no major investments was our original expectation. But we are now receiving inquiries for big demand in terms of production capacity, including the capacitors and batteries and panels. We need to make investments in all those areas. So we want to leverage this opportunity. And that is the reason why we have said JPY 500 billion new strategy investment. For other types of growth strategies, we will be making investments within the framework for the other businesses, we will be making investments within the earnings made. But for the strategic investments for holdings, we are making this capital allocation as the holdings company for this JPY 500 billion. Anything to add?

Yes, JPY 500 billion, as Kusumi-san said, majority is related to battery, especially BBU-related expansion. Conventionally, in-vehicle batteries had been the main scope of investment for energy, but there is a major shift taking place on where the focus is. And we need to build the expansion capacity to support that rather than new plants, rather we are going to be making the best of the existing lines now that the demand is shifting. And you asked what happens if that part of the business slows down? Of course, we will be making investments, keeping a close eye on how the market and the business grows. Today, we are seeing rapid expansion increase in demand. So we are changing the targets upward every time we make announcements, but if we see a change in this trend, of course, we will be revisiting our allocation.

My next question is on Blue Yonder, which you covered in your presentation. Strategic investments are still proceeding. When would this phase change to the profit reaping stage? What is your current prospect or any update on this?

Thank you. For Blue Yonder, yes, we're talking about large investment. Sales profits -- when we can recover through sales and profit cannot be explained. We have always talked about the possibility of listing the share. But now we are seeing SaaS disruption as people call it. So payout period -- and the distribution, the cognitive connection is highly appreciated and that is growing. So we are looking at all these different factors to see what will be the best way to recover our investment. Anything to add, Waniko-san?

Thank you. Just a little bit of additional comments. Conventionally, regarding the strategic investment, including cognitive solutions, SaaS-based product transition has been the driver. FY '26 or FY '27 was the time frame that we had in mind for the strategic investment. Now we announced the full year forecast and you might feel that the strategic investment size has not been reduced much from the earlier prospects. And this is because various incentives and packages are being provided so as to accelerate the user corporation's adoption. We felt that for the deployment of cognitive solutions, we should be making more investments to facilitate that. And that is the reason why the strategic investment doesn't appear to be reduced much for this fiscal year compared to the previous year. Does that answer your question?

Yes. That is all the questions I had.

[Operator Instructions] Nikkan Kogyo Shimbun, [ Ono-san ] please.

[ Ono-san ] speaking from Nikkan Kogyo Shimbun. So today, you announced this group's growth strategy. In the solution area in coming 3 years, you're going to consolidate and you want to be profitable from fiscal '30. And as one of the indicators, you talked about MIF, MIF and you talked about your strategies. So about these machines in the field, I think in the comprehensive equipment, I think that the MIF-based management is talked about. And if you focus too much on that, it would lead to the price competition and profitability goes down. So how do you -- what do you think of that in the solution area? What kind of MIF do you have in your mind?

Well, this time, we mentioned MIF machine in the field. In the comprehensive copy machine, for each machine, there are consumables and there is maintenance services. So that's how the companies are managing the business. But in showcase and also the professional air conditioner, they need to work in the nonstop way. They shouldn't stop. And in addition, energy saving and various rationalization. For example, in the supermarket, they want to save labor and there is a very strong need for that. So it's not just consumables, but this -- when it is used for the professional services -- professional operations, the importance of services become more than the past.

So per equipment, how much profit can you raise?

For example, in the case of freezer and also HVAC, there could be some differences, of course. But conceptually, services and engineering and also in the case of copying machine after certain years, you would be replacing them. But in our business, we can expand the scope of businesses, starting with those machines in the field. So I think that the concept or basis is the MIF that we can use for this type of business.

I see. So you already have a MIF or high level of MIF and you want to add services on top of that?

Yes. When they become connected equipment, the range of the services and how the customers use them, we -- our understanding will improve. And through that, we would like to help customers in the wide-ranging ways.

I see. So for example, say that you understand the needs of the customers in the connected equipment, then when the competitor offers the cheaper hardware, your customer probably will continue to choose yours comprehensively together with the services. That's what you try to achieve?

Yes, if that's the case, we would be very happy.

Next, from NHK, [indiscernible], please.

[indiscernible] from NHK Osaka. For the growth strategy, you did talk about where you intend to make profit. But could you elaborate, especially regarding the Smart Life area, you did not talk much. You said that you are going to strengthen products and advertising. What do you mean by that?

The key to the growth is, as I said, AI infrastructure and for FY 2030 beyond, things that would support the social operation, meaning services and engineering. In February of last year, we talked about different areas, devices, solutions and Smart Life. And today, from the perspective of growth, I focused on devices and solutions, how to grow these 2 areas. There are many things, but mainly challenges to be solved would be efficient use of energy and alleviating the frontline labor shortage, both in devices and solutions areas. In the meantime, in the Smart Life area, as I mentioned earlier, this is an area that is very difficult to differentiate ourselves or you might think that it is difficult, but there are products that can be easily differentiated while others are hard to be differentiated. When customers say this is good enough for those types of products, of course, cost competitiveness would be the key. For those types of products, as we've been saying, we'll be pursuing the global cost, the global standard cost, leveraging the supply chain in China so as to be cost competitive. In addition, you might be one of the users, the Nanocare dryer, hair dryer, which uses the Nanocare technology to make your hair more beautiful with evidence. I think many people are already experiencing that difference by using our hair dryer or hair blower. And I think -- and we do have the core technology for that. The same goes for the front-loaded type drum-type washing machines. Here again, we do have the core technology. With these technologies, we can have customers feel and experience for themselves the difference for Nanocare hair dryer, the Net Promoter Score is high. With advertisement, we want to communicate the benefits directly. And through SNS, that would expand more rapidly. And NPS is elevated. And if we can have more Panasonic products with higher NPS, then that will enhance our brand capability and that will relate to the service quality as well. Through these efforts, we want people to really feel for themselves, the high quality and high reliability that Panasonic brand products can offer. So that is how we are positioning our consumer electronics products. So this is nothing new, and that is the reason why we didn't talk about that today. Does that answer your question?

Yes.

We have many hands raised, but we are getting close to the end time for the questions from media. So we will take just one more question from mass media. From Nikkei Business, we have Iwato-san.

Iwato of Nikkei Business. Yes. So this time, structural reform, you have exceeded expectations in terms of results. So is this irreversible? How should we interpret this? Because I think that the culture to continue making the improvements, do you think that you have already built such culture? Is there a kind of a system that you would not deteriorate from here? You can just continue to improve?

Yes. So personnel optimization, several times in the past for the individual business, I have experienced, and I wanted to do this never again. So this time, after operating companies trying to do many things and that led to the higher headcount, I think. So from now on, headcount control is something that we have to do. And then at the same time, of course, if we become too busy, we feel that we have to increase the headcount. So unlike the past, Panasonic Go, for example, the AI utilization is something that we can do on a daily basis so that we can improve the operational efficiency. So we'd like to accelerate that, so we would not go back to the past and operational efficiency can be improved. So process itself at the headquarters and at PECs and operating companies, we will continue to work on them. And that's something that we will do at the group-wide level so that we will not go back to the past. And such culture, that kind of culture, that is to say that to make this easier for us to achieve and to be more creative and to improve the efficiency. That type of culture is something that we need to create at the same time.