The results for FY2016. - Panasonic USA · The global automotive market is expected to grow steadily. Meanwhile, regulations such as those shown on the slide have been adopted or

Copyright (C) 2016 Panasonic Corporation All Rights Reserved.

This presentation contains the business policy of Automotive

& Industrial Systems Company.


The results for FY2016.


This slide shows the FY2016 results on a U.S.GAAP basis.

Sales decreased due to the large impact of demand slumps in

lithium-ion batteries and devices for ICT application, despite

growth in the automotive business which has been led by the

strong performance of vehicle sales in North America, and

growth in the industrial business such as power storage.

The operating profit decreased due to a decline in sales and

an increase in upfront development expenses for the future

growth of the automotive and power storage businesses.

On the other hand, the marginal profit ratio improved by 0.8

points from the previous year as a result of the withdrawal

and downsizing of unprofitable businesses. We are steadily

improving the management structure.


Although both sales and profit decreased in FY2016, we have

made steady strategic moves to ensure growth.

In particular, in the automotive field, we invested 49% in

Ficosa International, an automotive component company in

Europe, in June last year and started a collaboration.

In February this year, we also established a joint automotive

battery manufacturing company with a local firm in Dalian,

China. We will supply products globally in response to the

increasing demand.

On the other hand, we continued to work on structural

reforms. In order to accelerate growth with a new framework,

we decided to transfer the lead-acid storage battery business

to GS Yuasa.

We also decided to discontinue the business of PC optical

disk drives, whose demand declined significantly due to the

progress in the adoption of cloud technologies.


The business policy for FY2017.


This slide shows sales targets for FY2017.

The sales target is 2,640 billion yen. We aim to increase net

sales on a currency-neutral basis by 2% from the previous

year by moving into the automotive and industrial businesses.

With regard to the existing business, we expect a sales

decrease due to the declining demand for ICT and withdrawal

from the optical disk drive business.

On the other hand, in the automotive business, automotive

batteries will grow significantly as the demand for eco-cars

such as EVs, HVs, and PHVs is expected to increase.

In the industrial business, the power storage business and

devices business including power-supply modules and multi-

layer circuit board materials will spur growth, together with the

factory solutions business, which is the core.


Next, we'll look at the operating profit.

This slide shows the change factors of the adjusted operating

profit excluding temporary expenses.

In FY2017, we will make proactive investments for future

growth despite an expected decrease in operating profit due

to an increase in fixed costs to step up investments for

production increase and development in the automotive and

industrial businesses.

Please note that while the operating profit on an IFRS basis

was 50.2 billion yen in the previous fiscal year due to

temporary expenses such as those related to lawsuits and

market quality issues, we expect to reach a figure of 100

billion yen with an operating profit ratio of 3.8% for this fiscal

year.


This slide shows capital investments for FY2017.

We classified our business portfolio into three areas, i.e.,

"High growth businesses," "Stable growth businesses," and

"Low profitability businesses," to clarify strategic scenarios

that we should implement.

We have positioned the automotive and industrial businesses,

which are the key businesses of AIS company, as the

company's "High growth businesses" and "Stable growth

businesses."

The automotive and industrial businesses account for 70% of

AIS Company's overall sales in FY2017. We will allocate 85%

of capital investments for these businesses to accelerate our

growth strategies.

This slide shows major investment categories.


Now, I'd like to explain infotainment systems and

rechargeable batteries, which are positioned among the

Panasonic Group's large-scale six businesses.

First, the Automotive Infotainment Systems Business Division.

Although sales and profits are decreasing this fiscal year, we

will continue with our proactive efforts and investments to win

orders and enhance development for future growth.

We are thoroughly preparing to win orders from FY2018

onward, despite a sales in FY2017 decrease due to

prioritizing the establishment of BCP, such as the

restructuring of supply chains over marketing activities from

2011 to 2012.

The operating profit is expected to decrease as we will

continue with upfront development investments, in addition to

the impact of a decline in sales. We've been working with car

manufacturers on developing software that will be at the core

of next-generation cockpits, and we will establish a

development platform to enable future business growth and a

reduction in development investment.


Next, let's examine the Rechargeable Battery Business Division.

With regard to the rechargeable battery business, we aim to

increase sales and operating profit by clearly classifying existing

businesses, such as those for ICT, from a profitability perspective

and accelerating a shift to the automotive and industrial businesses.

With regard to products for the automotive field, we expect double-

digit growth for the total sales of cylindrical and prismatic batteries.

We intend to respond to increased demand, prepare for a

production increase, and supply products on a timely basis.

For the industrial field, we will expand the power storage business.

Through collaboration with local partners and system integrators,

we intend to accelerate the development of large-scale power

storage businesses, such as power infrastructures, in addition to

base stations and data centers.

With respect to operating profits, we expect an increase partly

because we recorded temporary expenses for handling lawsuits

and market quality issues, etc., during the previous fiscal year. We

aim to reestablish management foundations, including the

establishment of safety quality, and at the same time achieve the

next phase of growth.


Growth strategy towards FY2019 and beyond.


First, let's deal with sales and profit targets.

We will target 3.2 trillion yen in sales and a 5% operating

profit ratio for FY2019.

The sales target has been reset as a more realistic target

from the previous 3.6 trillion yen, with consideration given to

the effects of exchange rates. We will focus on profits and

make a turnaround after bottoming out in FY2017.

In the automotive field, we will work on increasing orders to

improve our position with respect to car makers in Japan, the

U.S., Europe, and China.

In the industrial field, we aim to expand the business scope

from single products to systems and services.

In the existing field, we will secure profits by concentrating

resources on competitive devices.


Now, I will explain automotive business strategies.

First, let's look at the market environment of the automotive

business.

The global automotive market is expected to grow steadily.

Meanwhile, regulations such as those shown on the slide

have been adopted or tightened in the relevant countries and

regions.

Under these environmental changes, the demand for

automotive electronic equipment, which our company targets,

is forecast to increase significantly in line with the

development of electrification and electronization at an

average annual growth rate of 8%. This is higher than that of

the vehicle market growth.


In this automotive market which has a high growth potential, we

aim to achieve two trillion yen in sales for FY2019, with a high

annual growth rate of 16%, exceeding the industry average, by

expanding businesses into systems.

We are making steady progress with orders and the

achievement of the two trillion-yen target for FY2019. We have

already received orders for approximately 90% of the organic

portion, which excludes nonlinear sales.

In the Comfort area, we will expand the cockpit system

business by applying digital AV technologies, which are our

competitive advantage.

In the Safety area, we will accelerate ADAS development by

utilizing sensing and image processing technologies in

collaboration with other companies.

In the Environment area, we will leverage our advanced battery

and power supply technologies to obtain orders for a larger

number of vehicle models.

From the next slide, I will explain specific efforts in the Comfort,

Safety, and Environment areas, as well as their progress.


First, the Comfort area.

In the Comfort area, we aim to obtain a larger number of

orders by leveraging our group's technical assets in

developing new-generation cockpit systems with car

manufacturers.

Our strengths lie in possessing advanced image processing,

downsizing, and optical lens technologies within the group,

which we cultivated in digital consumer electronics.

In FY2018, we will start delivering new cockpit products that

use these technologies, such as head-up displays and center

information displays.

We've also been working on developing a platform for next-

generation cockpits with car manufacturers . We believe that

the horizontal deployment of this platform will enable our

cockpit business to enter a new growth phase.


Next, let's move on to the Safety area.

In the Safety area, we've been working on expanding our

ADAS business by applying the group's technologies, such as

advanced image processing technologies to the AIS

Company's devices, such as automotive camera modules

which have the No. 1 market share, and furthermore, by

promoting collaboration with other companies.

We mainly target perimeter monitoring and in-vehicle ADAS in

low- and medium-speed ranges. We aim to expand the

business by exerting our strengths in self-parking, lane

change assistance, low-speed emergency brakes, driver

monitoring systems, etc.

With regard to emergency brake systems, some product

deliveries are scheduled for FY2017, and we will further work

on obtaining orders.


Finally, let's examine the Environment area.

In the Environment area, the demand for eco-cars, such as

EVs, HVs, and PHVs, is expected to increase rapidly due to

enhanced environmental regulations in the relevant countries

and regions. As a result, inquiries on our batteries by car

manufacturers have been increasing significantly.

We have installed our batteries in 45 car models in total, with

an increase of five models over the same period last year. We

are currently working on 41 car models, 19 of which have

already placed orders.

In order to meet this increasing demand, we collaborate

closely with car makers and prepare for production increases

in these three world zones, Japan, the U.S., and China.


Thank you for your cooperation.


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The results for FY2016. - Panasonic USA · The global automotive market is expected to grow steadily. Meanwhile, regulations such as those shown on the slide have been adopted or