Panasonic (OTC:PCRFY) Corporation (6752.T) reported a record net profit for fiscal 2024 and provided an optimistic outlook for its electric vehicle (EV) battery business, despite facing some challenges in the current fiscal year. The company's fiscal 2024 financial results showed increased sales and profit year-on-year, with a particularly strong performance in the Lifestyle, Automotive, and Connect segments.
The earnings call highlighted the company's strategic focus on growth areas such as automotive batteries, supply chain management software, and air quality and air conditioning, with plans to enhance corporate value through business growth and higher profits.
Key Takeaways
- Panasonic's fiscal 2024 results show increased sales and profit, with an annual dividend of JPY 35 per share.
- Net profit reached a historic high of JPY 440 billion, driven by one-time gains.
- Fiscal 2025 projections indicate higher sales and adjusted operating profit, but a lower net profit due to the absence of one-time gains.
- The company plans to focus on the automotive battery business in North America and Japan, with supply agreements with Subaru (OTC:FUJHY) and Mazda.
- Challenges include a loss in the Automotive segment and lower-than-expected ROE and cumulative operating profit targets.
- Panasonic is optimistic about the long-term growth potential of EV batteries and heat pumps.
Company Outlook
- Fiscal 2025 forecasts an increase in sales and adjusted operating profit, with a decrease in net profit.
- The company aims to grow its business and profits, with a focus on the Lifestyle and Industry segments.
- Panasonic anticipates an increase in demand for automotive batteries as EVs become more prevalent in the mass market.
Bearish Highlights
- The company experienced a loss of JPY 18.7 billion in fiscal 2024, mainly due to decreased sales in Japan and manufacturing process issues.
- Panasonic's medium-term management indicators show ROE and cumulative operating profit targets are below expectations.
- A loss is expected from the share transfer of Panasonic Automotive Systems.
Bullish Highlights
- Panasonic expects to recover in fiscal 2025, with increased profitability at existing factories.
- The company is focusing on productivity, cost reduction, and the smooth ramp-up of new factories.
- Panasonic's air-to-water business is expected to see sales growth in Poland and other regions.
Misses
- The company's midterm operating profit and ROE goals were not met.
- Adjusted operating profit for fiscal 2025 is projected to be a loss of JPY 17 billion, despite an expected improvement.
Q&A Highlights
- Panasonic discussed the outlook for EV batteries and heat pumps, emphasizing the long-term growth potential.
- The company addressed its support for small and medium-sized enterprises and plans for the consumer electronics business reconstruction.
- Panasonic clarified that the $7,500 tax credit for EVs will apply to cars priced below $80,000.
Panasonic Corporation's earnings call revealed a mixed but forward-looking picture for the company's future. With a historic net profit and strategic partnerships in the automotive battery sector, the company is positioning itself for growth in the evolving EV market. While challenges persist, such as achieving medium-term management goals and addressing losses in specific segments, Panasonic's focus on key growth areas and market expansion demonstrates its commitment to navigating the dynamic business environment and enhancing shareholder value. The upcoming group strategy briefing set for May 17, 2024, is expected to provide further insights into the company's initiatives and strategic direction.
InvestingPro Insights
Panasonic Corporation's robust fiscal 2024 performance, particularly in the EV battery sector, is reflected in key financial metrics that may interest investors looking for value and growth opportunities. The company's Price/Earnings (P/E) ratio, a measure of its current share price relative to its per-share earnings over the last twelve months as of Q1 2024, stands at a competitive 6.54. This suggests that Panasonic's shares could be undervalued compared to the industry average, potentially offering an attractive entry point for value investors.
In terms of growth, the Price/Earnings to Growth (PEG) ratio is exceptionally low at 0.05, indicating that the company's earnings are expected to grow at a much faster rate than its P/E ratio would imply. This could signal a strong growth trajectory for Panasonic, particularly in its strategic focus areas such as the EV battery business.
The Price/Book (P/B) ratio of 0.76 further underscores that the market may currently undervalue the company's net assets, providing another indicator that Panasonic's stock might be a value play.
InvestingPro Tips suggest that with a Return on Assets (ROA) of 6.17%, Panasonic is efficiently converting its assets into profits. Additionally, with the stock trading at around 72.29% of its 52-week high, there may be potential for price appreciation as the company continues to capitalize on the growing demand for EV batteries.
For investors interested in a deeper analysis, InvestingPro offers additional insights on Panasonic's financial health and market potential. Make sure to use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription. There are 15 more InvestingPro Tips available to help you make an informed investment decision in Panasonic Corporation.
Full transcript - Panasonic Corp PK (PCRFY) Q4 2024:
Unidentified Company Representative: I'd like to now present the fiscal 2024 financial results as well as fiscal 2025 financial forecast. This is a summary. Regarding the accounting treatment of the U.S. Inflation Reduction Act or IRA, the amount was recorded on PL as before. In fiscal 2024, both sales and profit increased year-on-year, the same level as the revised forecast announced on April 24, 2024. Overall sales increased on higher sales of Automotive and Connect as well as currency translation despite the decreased sales in lifestyle industry and energy. Adjusted operating profit or AOP increased overall with higher profit in Lifestyle, Automotive and Connect as well as IRA tax credit despite the lower profit in the industry. However, AOP excluding IRA tax and credit, decreased. Net profit increased due mainly to onetime gains with the liquidation of Panasonic liquid crystal display in Q1 fiscal '24. Operating cash flow significantly increased year-on-year due mainly to reduced inventories. Annual dividend is determined at JPY 35, up JPY 5 per share year-on-year. For the fiscal '25 full year forecast, overall sales and AOP are expected to increase year-on-year. Net profit is expected to decrease due to the impact of onetime gains recorded in fiscal '24. Furthermore, a loss of JPY 50 billion is factored into other income and loss resulting from the share transfer of Panasonic Automotive System or PAS. After this transaction, PAS will become a company under the equity method. By segment, lower sales and higher profit are expected in Automotive and Energy. Both sales and profit are expected to increase in Lifestyle, Connect and Industry. Now let me explain the impact of the U.S. IRA tax credit on our financial results and forecast, the accounting treatment and items remain unchanged from Q1. The amount recorded for fiscal '24 results and fiscal '25 forecast are shown in the middle. Next is the details of consolidated financial results for fiscal '24. For the consolidated financial results, as mentioned, both sales and profit increased. On the right, a comparison with the forecast announced on February 2 is shown. Each multi-step profit, EPS, ROE and EBITDA were below this forecast. This is the results by segment, along with the comparison with the forecast announced on February 2. Adjusted OP was below February 2 forecast due to the recording of the expenses related to the past manufacturing process issues in energy segments in vehicle business. Operating profit was also below the February 2 forecast. This is due to recording such factors as an impairment loss of goodwill related to a part of automotive segment businesses. In other elimination and adjustment, I will explain the analysis of year-on-year comparison for sales and operating profit now. Now starting with the sales analysis by segment. Overall sales increased due to higher sales in Automotive and Connect as well as currency translation despite the lower sales in Lifestyle, Industry and Energy. Detailed factors by segment are shown at the bottom. Adjusted operating profit analysis by segment is shown. Overall AOP increased on higher profit in Lifestyle, Automotive and Connect and IRA tax credit despite lower profit in industry. Detailed factors by segment are shown at the bottom. In Energy, as I said, excluding IRA tax credit, decreased. This is due to the decreased production in Japan factory, higher fixed costs for future growth and recording of expenses related to past manufacturing process issues, as explained earlier. It shows the results of the Lifestyle by divisional company. Next is operating profit analysis by factor. From the left, lower profit from decreased sales in real terms was the negative factor of JPY 13 billion. The increase in fixed cost was the negative factor of JPY 73.4 billion. This is due mainly to investments in energy for business growth and the impact of inflation. The impact of the raw materials and logistics prices were also a negative factor of JPY 29.6 billion, the factor of the price revisions and rationalization was a positive factor of JPY 88.6 billion. Looking at the other divisional factors, the impact of IRA was a positive factor of JPY 86.8 billion. Lower profit of Blue Yonder was a negative factor of JPY 4.5 billion. The breakdown is shown at the bottom. ForEx effect was positive factor of JPY 21 billion, mainly seen in industry and energy. As a result, AOP increased by JPY 75.9 billion. Operating profit increased by JPY 72.4 billion. This shows the cash flows and cash positions. On the left, operating cash flows amounted to JPY 866.9 billion, with a significant increase year-on-year due mainly to reduced inventories. Going forward, we aim to steadily generate operating cash flows through improving profitability and reducing inventories. On the right, net cash was a negative of JPY 445.7 billion significantly improved from the end of fiscal '23. Next is shareholder return. The Board of Directors resolved today that the fiscal '24 annual dividend of JPY 35 per share, up JPY 5 year-on-year. This is the same amount as the forecast announced on February 29, 2024. We will distribute stable and continuous dividends based on our medium-term strategy. Furthermore, we aim to enhance corporate value achieved by business growth. and higher profit through investments, mainly in our growth areas. At the bottom, we again show our approach to using IRA tax credit, as explained before. Dividends are determined based on the amount of net profit excluding the impact of the IRA tax credit. As a result, the payout ratio for fiscal '24 is about 25%. Next, the consolidated financial forecast for fiscal '25. This shows the consolidated financial forecast for fiscal '25 Overall sales is expected to increase 3% year-on-year to JPY 8.6 trillion, excluding the ForEx effect. Adjusted OP is expected to increase to JPY 450 billion, and operating profit is expected to increase to JPY 380 billion. Net profit is expected to decrease to JPY 310 billion due to the impact of onetime gains with the liquidation of Panasonic liquid crystal display in fiscal '24. EPS forecast is JPY 126.31. ROE is expected at 7% and EBITDA forecast, JPY 860 billion. This shows the fiscal '25 outlook of changes in demand by segment. Regarding our growth areas for air to water in Europe, we expect the demand to be at the same level year-on-year. For the full year, considering European economic trends and policy situation, we anticipate it would take a few years to see a full fledged recovery to growth trajectory. For demand related to supply chain management software, we assume it will further expand with companies having experienced disruptions during the pandemic. For automotive batteries, we expect EV market expansion to continue in North America, where we mainly forecast. However, the pace of expansion is expected to slow down. This slide shows our analysis for the FY '25 operating profit forecast by factor. From left, profit generated from sales expense and is expected to become an increased factor of JPY 100 billion. Fixed costs are expected to become a decreased factor of JPY 80 billion. This is due mainly to investment for future growth in energy as well as inflation. The impact of raw materials and logistics prices is expected to become an increased factor of JPY 20 billion, which effect as price revisions, rationalization are expected to become an increased factor of JPY 19.2 billion. Other individual factors, the impact of IRA is effective to become an increased factor of JPY 2.6 billion increased profit of Blue Yonder is expected to become an increased factor of JPY 8.2 billion. Breakdown is shown in the bottom right box. The effect of exchange rates is expected to become a decreased favor of JPY 10 billion mainly in industry and energy. As a result, adjusted operating profit is expected to increase by JPY 60 billion and other income loss, a loss of JPY 50 billion is factored in resulting from the share transfer of Panasonic Automotive Systems operating profit is expected to increase by JPY 19 billion. This slide shows the full year forecast by segment. Major factors are explained on the next slide. This slide shows our analysis of the FY '25 sales forecast by segment. In Lifestyle, sales is expected to increase due mainly to increased sales in electrical construction materials for overseas and room air conditioners in Asia will air to water in Europe and increasing slightly year-on-year. Automotive. Sales is expected to decrease due to the effect of exchange rates. However, sales is expected to increase in real terms, increased sales of automotive electronic systems to offset the decreased sales of automotive [indiscernible] systems related to discontinuation of certain product models. Connect. Sales is expected to increase due to sales growth of avionics and Blue Yonder as well as sales recovery of process automation. Industry. Sales is expected to increase. This is due mainly to demand growth of capacitors for green vehicles and capacitors, multilayer circuit board materials for generative AI service. In Energy, sales in in-vehicle is expected to decrease due to price revisions, reflecting such factors as lower raw material prices despite a slight increase in sales volume. Sales expected to increase in North American factory, but expected to decrease in Japan factory. Shown in the upper right of the graph, decreased sales of JPY 82 billion includes impact of price revisions at approximately JPY 60 billion and effective exchange rate at approximately JPY 20 billion. Sales in industrial consumer is expected to increase. This is due to expanding sales of energy storage systems for data centers driven by generative AI market and also anticipating recovery of batteries for power equipment mainly in second half. Within other eliminations and adjustments, sales of both entertainment and communication and housings are expected to increase. This slide shows our analysis for the FY '25 adjusted operating profit forecast by segment. Lifestyle. Profit is expected to increase due mainly to increased sales of electrical construction materials for overseas at room air conditioners as well as improvement in consumer electronics. Automotive. Profit is expected to increase due to profitability improvement initiatives despite decreased sales of automotive cockpit systems. Connect. Profit is expected to increase due to increased sales of avionics, Blue Yonder and process automation as well as improved profitability of Gamba solutions. Industry. Profit is expected to increase due to increased sales, price revisions and rationalization despite price hikes and raw materials. Energy. Profit of in-vehicle is expected to increase due mainly to improved profitability of existing factories and rebound increase from expenses related to past manufacturing process issues recorded in FY '24, despite increased upfront costs for ramp-up of Kansas factory in North America, details are on the next slide. Profit of industrial consumer is expected to increase due mainly to increased sales. This slide shows details of the year-on-year increased decrease factors of adjusted operating profit for in-vehicle indicated on the graph at the bottom. Adjusted operating profit of FY '24, excluding the IRA tax credit was a loss of JPY 18.7 billion, which is down from the profit of JPY 10.7 billion in FY '23. This is due largely to decreased sales in Japan factory and recording of expenses related to manufacturing process issues in the past. For FY '25, the situation is expected to improve overall due mainly to improved profitability at existing factories. However, given anticipated upfront costs of JPY 30 billion for ramping up the new factories in Wakayama in Kansas, the improvement in adjusted operating profit will be limited to JPY 1.7 billion. Adjusted operating profit is expected to continue to be a loss at JPY 17 billion. We will continue working to improve profitability at an early stage, enhancing productivity and minimizing operational related losses in North America, reducing fixed costs in Japan and ensuring the smooth ramp-up of new factories. This slide shows the forecast for the Lifestyle segment by divisional company. It shows updates of the progress in our initiatives for the 3 businesses we identified as growth areas, Changes from the previous announcement are underlied in blue. In the automotive battery business, we have made progress in establishing supply chain in the U.S. free trade agreement countries as well as expanding sales channels. In the supply chain management software business, we announced 2 acquisitions. In the air quality and air conditioning business, Hydronic Systems business showed progress as shown in the slide. We will respond effectively to the change in business environment and always continue to enhance our business competitiveness toward future growth. Finally let me explain the outlook of our medium-term management indicators or KGIs. There are 3 KGIs presented the group strategy briefing in April 2022. The progress is shown on the right side. For cumulative operating cash flows, if we subtract the 2-year results from the goal of JPY 2 trillion, the remainder is slightly above JPY 600 billion. We are within the range of achieving our target. We believe management emphasizing cash flows is taking root. For ROE, we reached our goal of 10% in FY '24. However, the forecast for FY '25 is 7.0%, which is below target. As for cumulative operating profit, the estimated 3-year total with the FY '25 forecast announced today is approximately JPY 1 trillion, also below target. Looking at each business, there were external factors such as unexpected market deteriorations nevertheless, been unable to reach the KGIs so that our effort to enhance competitiveness is still only at the halfway mark. From our review of the situation, we still need to build speed and capability in responding to changes in the business environment. A review of these summaries and future initiatives will be given by Group CEO, Kusumi, at the group strategy briefing to be felt on May 17, 2024. Thank you very much for your kind attention.
Operator: From Nikkei, we have Nagava-san.
Unidentified Analyst: I have two questions, please. First, about in the growth areas that you mentioned, EV batteries and the heat pump -- this has been struggling. The EV itself, the market is struggling. And the heat pump, the subsidy in Europe has been changed. And because of this, you are faced with difficulties. What you expect some tax credit in relation to IRA? And it seems that maybe your view is too optimistic. So could you elaborate on that? And the second question, for the SMEs or small medium-sized companies, how to focus more on the downstream, I think, is very important. So for example, your suppliers and the companies probably are saying that they cannot really increase their prices. So as Panasonic vis-a-vis the partners and suppliers, how do you deal with supporting the management of those small, medium-sized companies?
Unidentified Company Representative: Thank you for your questions. You mentioned that our growth area, EV and air to water each business area, I would like to respond. First of all, from the beginning about the speed of the growth, it's -- you -- as you said, that it's slowing down. But in the medium to long term, it is clear that those are the areas that will grow. 4, 5 years ago, people did not really accept the EV and then we had the kind of a boom. And now it's going back to the realistic speed. That's what we see in EV. Air to water also faces a similar situation. So that's the overall picture. And if I may go deeper on EV. So the overall demand fluctuation of the EV, probably that is not the only element that we look into. In each region, the situation is different. So EV demand, I think that we have to really look at each region. So more specifically, with the IRA tax credit and the critical mineral and the materials, there are some limitations or restrictions. So in our case, we have focused on the U.S. market. So in that market, we have PENA, only the Gigafactory operating. So for fiscal '25, the demand is something that we have and we need to supply for that. So 45X and 30D that is on the part of the customers of $7,500, that is the tax credit. And the conditions for that from January this year and the next year, they will be applied, and we have some additional information supplied through the supplementary information. And for all of them, we have already cleared all of those conditions. So in the United States, in that sense, I think that we are very strong. So in terms of the production capacity, about the United States, I think that we will be able to supply to meet the demand. So that's my answer to your first question. In Kansas, in the medium term, we will be starting up. And at the end of fiscal '25, we will start the mass production. And in fiscal '26 where we increased the capacity. And from '27 30 gigawatt level will be the operation. So I would like to make sure that we agree with our customers and this is not specifically only for Tesla (NASDAQ:TSLA), so we would like to improve our cost competitiveness for EV. As for air to water, demand itself this year, maybe 40% -- went down by 40% in fiscal '24. And from that level, the we do not expect a major growth of sales. So a slight increase is what we expect. Geopolitical risks in relation to gas. And in the Middle East, the price is going up, there are so many different factors. So the major increase of the sales or profit are not expected from the air to water. So slight increase is what we expect. So in like in FY '24, we do not expect a major decline. So that's the answer to your first question. The second is for the small, medium-sized companies. the kind of a return to them or negotiation with them in FY '24, '25. When you look at the factors behind the fluctuation, the rationalization I think we are seeing some differences from the past. And of course, our -- we have a social mission, and we understand the direction that the Japan is moving toward. So we would like to make sure that we keep that in our mind. And we are having the internal discussion to accommodate that. I hope that answers your question.
Operator: Next from Toyo K. Zai, Mika Key-san, please. .
Unidentified Analyst: This is Mika Key from Toyo K. I have 2 questions. Well, first, about the IRA tax credit. For the whole group companies, excluding IRA, you say that profit was decreased. And I would like to also ask the CEO as well about this question. But what is your view on this? And for FY '25, the IRA is 38 gigawatt hour for the assumption. And for yearly basis, increasing 1 gigawatt hours, is it assumed or are you rather conservative within your view? I would like your answer on that. And another question is a detailed one. I would like to ask you about the consumer electronics in Page 18. It says about the reconstruction of the business. I would like to know the details about it, please.
Unidentified Company Representative: Thank you for the question. So the profit decreased excluding the IRA. And when we are focusing on IRA, then our profit is decreased and which businesses decreased profit is difficult to understand because it is difficult to grasp in totality. But thinking from the Energy, JPY 21 billion was about the expenses that we have been using for the past manufacturing process. It was that the capability of our product has been deteriorating when the users will be using for a longer time. And we have already made counteractions on this. However, the impact of to our profit was rather large. And regarding air to water, air to water also had suffered the decrease of profit, which was impactful for FY '24, industry also had some difficulties. The Connect and Automotive, which was having difficulties in the past was now churned upwards. However, the overall total business has been decreasing profit. And that was unfortunate that was what I view regarding the IRA tax credit. And regarding the second question, the increase of 1 gigawatt hour. So the mass production of cancers is also included. And the Gigafactory, which we call PENA, the productivity should be increased, and we are continuously working on this. Therefore, the 1 gigawatt hour increase is about those things that we are talking about. That was about the first question. And the second question was about the cooking appliances. Actually, in FY '24, we did have some challenges for this business. I will not say which location but then for the cooking appliances factory has been closed or else we had to restructure the factories. And this in other income and loss is included. But we have -- so FY '25, I think this is going to be a year that these actions that we have taken are going to be bearing fruit. Thank you very much for your questions. Are you okay?
Operator: Next from Nikkei Agave, we have Sato-san.
Unidentified Analyst: My name is Sato of Nikkei Asia. My first question about the KGI, cumulative operating profit in relation to that. So our original target in order to achieve the original target, what would be the drivers in terms of segments. So how do you try to achieve the cumulative OP target? Second question is about automotive batteries. So prices are increasing and the yen has been weak and cost is rising, especially in the United States, I think. So you said that you are trying to realize the growth in -- so focusing on the North America. Are there any changes to that? Because you have been focused very much on North America. If there are any changes from it. I'd like to know.
Unidentified Company Representative: Of course, the KGI, I did talk about the summary of the KGI on one of the pages. So JPY 500 billion -- currently it's going to be lower than the original plan by JPY 500 billion. So fiscal '25 in which area are we going to offset this? I cannot really talk about that, but I think we have an appropriate view but there are some conservatism included. So for example, in terms of the currency, JPY 140 to the entire JPY 150 to the euro are our assumptions. The Chinese yuan about JPY 20 or JPY 21. So in Lifestyle, there is a reverse or opposite risk. So based on those factors or risks excluding JPY 60 billion higher profit is expected. So first, we'd like to make sure that we achieve those numbers. And of course, that we want to exceed from those numbers and accumulate. And enhancement of the competitiveness and the improvement of the return on investment and others will try to improve. As for the automotive battery focusing on North America. From the beginning, so there has been a question that why doesn't Panasonic go into the battery business in China or I think this is a strategic decision because our battery -- when you look at the performance, we want to go to the United States where our trade performance is evaluated. So that's why we built the Gigafactory. So we will continue -- for example, in North America, we have different players from the global players. And within the North America, we will be working hard. And in addition, as we announced already, Japan would be another region for the automotive batteries and that would be our strategic area. So with Subaru and Mazda, we have a specific partnership and the supply agreement. And we have already made various announcements. So Japan, we have a shipment 1865 or 18650 has been struggling, and we want to work on the old lines so that we can improve the new ones. And the new -- the battery business starting up in Japan, and this automotive battery strategy will be U.S. first and then Japan in addition to the U.S. So that's what we are thinking. And that's the answer to your questions. I hope those answers answer your questions.
Operator: This is [indiscernible] from Yumuti TV.
Unidentified Analyst: In the financial business result, the operating profit and the net profit and other, I would like to know which is the historical high. And if possible, when was the last historical high. And again, I would like to ask you about the view of all these profits.
Unidentified Company Representative: Thank you for the question. In the past, the historical high value is for the net profit. It was JPY 440 billion net profit this time recorded. And in the past, it was in 2018, it was JPY 284.1 billion. Other than that, the historical high profit is to be achieved for the net profit. We have slammed the highest profit in net profit ever since 2018 and about my view for this. We did have tax credit from IRA. And for FY '24, the LCD JPY 110 billion of a -- to support the net profit. So regarding JPY 440 billion profit -- although we did renew our high the LCD panel and the Japan's tax asset. Within the profit and loss statement, within a certain time frame, this profit has been shown. However, this is going to be coming back as an operating cash flow in the future. And then at that time, profit loss is not going to be generated and then the cash flow will be increased. But this time, it has been all recorded at one time. This is treated based on accounting treatment. And because of that, JPY 440 billion historical high for the net profit has been generated this is a positive thing for us. And this is coming back to the cash flow in the future, and we would like to be waiting for that. That is all from my side.
Operator: So last question from journalist [indiscernible] san from Nikkei.
Unidentified Analyst: [indiscernible] from Nikkei. About the consolidated business results. It's not related to that. But today, the nonconsolidated financial results and you announced some recognition of the extraordinary income and losses. So I have a question on that. So about the -- in relation to JPY 71.2 billion of allowance for the debt for receivable from the subsidiaries and affiliates were recognized. So could you explain on this? So you lend the money to the subsidiary, and it is not possible to recover that. They start why? And why did this happen? And how did you make a decision on this doubtful receivables from the subsidiaries and affiliates?
Unidentified Company Representative: Okay. Concerning this, as you can see in the press release, it will not have an impact on the consolidated financial results. As you know, 2 years ago, in Japan, we have started up several entities and the management needs to look -- needs to be looked at from the global perspective. So there's no impact on the consolidated financial results. But between or among the entities, legal entities, for example, in Japan, dividend payment to Panasonic Holdings. I cannot mention the name, but the operating company say that this dividend will be recovered outside of Japan. So if that is the case, in Japan, if it cannot be recovered outside of Japan, we need to pay the dividend. And on the nonconsolidated basis, the borrowing will increase. So when you look at the transaction between the legal entities. If there are no major changes happening, it is possible that those receivables would become nonrecoverable. So it is really specific to the nonconsolidated results. So I think this -- if it was one company, it was handled internally. But when we have the real separate companies, these things happen. But again, there will be no impact on the consolidated financial results of the company. I hope that answers your question.
Operator: So that concludes our Q&A session for journalists. [Operator Instructions] Yasui-san from UBS Securities.
Kenji Yasui: This is Yasui from UBS Securities. So I would like to have 2 questions. First is about batteries. So regarding campus factory, you're going to be making the investment, but then in which quarter and which size and regarding Mark lines, some news media was reporting that Kansas, half of them is going to be lifted -- switch to 4680. So 88 gigawatt in simple calculation is what I think. So for the world line, if it's going to be following the disclosed news, then as far as you can explain, I would like to -- I would like you to detail upon the teams of your plan to switch half of your products in its 4680. And another one is about the question about air-to-water. Air to water is not increase for the profit. However, you have an assumption that the number of product is going to sell higher. Therefore, if you have any prospect B2C and others, I would like to know about the reasons why the sales number are going to grow for air to water, please. Regarding the in-vehicle or automotive batteries and cancers IRA giga increasing 1 gigawatt hours, this is a consistent part of this business and work.
Unidentified Company Representative: And we are going to be setting up a production launch. So the contribution is not assumed largely in FY '25. So if we are able to collect the mass production, then we will have a larger profit coming back. And then for 4680 and it's switching 4680 right now, Wakayama Factory is settling up and ramping up for FY '25 first half for the mass production. Therefore, in Kansas Factory, along with discussion with Tesla, we have been focusing on 2170, and that was determined. Therefore, whether or not ounces is already going to be creating manufacturing 4680 or not. First of all, we must do whatever that has been already determined. Therefore, for about the news that you mentioned, we are not aware of that. That is about the first question. And the second question was about air to water. For the market forecast, market forecast is showing some uplift. So overall market is going to be slightly increasing. Poland, and other areas are our main market for air to water and demand in those markets has declined France, Italy, Germany. Those areas are the geography that we would like to -- we have been expanding our sales for air-to-water. And right now, currently, we are now seeing some result concerning from the past efforts. And clearly, the residents, the detax housing are focused currently that is the only area that we have been focusing for air to water going forward, not in a large way, but then maybe we can focus more on offices or as a small shops. So I don't know if this is called B2B. However, we would like to start working selling to B2B to -- so therefore, that is why we are accounting for increasing of the sales. That is all from my side. Are you okay with the question?
Operator: Next, Okazaki-san from Nomura Securities.
Yu Okazaki: About the Lifestyle. I have a question. By divisional companies, the profits are expected to grow. But as a segment as a whole, it's flat. So could you explain the background. On Page 18, other factors are included, for example, in and so forth. So could you explain that? Second question is about the automotive batteries. On Page 14, when the cars for the mass increases, it is expected that the demand is going to grow. But could you explain the details on this?
Unidentified Company Representative: Thank you. About Lifestyle. So about the JPY 30 billion difference. About that, in Lifestyle, other segments, products existed in fiscal '24. And when you look at the lifestyle, they do not belong to the divisional companies and it's possible that the sales will decline. So that is something that we expect. And as for the divisional companies, Panasonic Corporation, new businesses and digital transformation in order to realize them, the IT investments are going to be accelerated. New businesses, what are they specifically I think in maybe you have seen a photo, the hydrogen business in Japan, the recycled energy 100 and we are investing for the development. And as I said, in China, the yuan assumption is CNY 20 and currently, CNY 21. So with CNY 1 difference, JPY 4.7 billion, not very precise, but the JPY 4.7 billion level impact because we import that is a negative impact for the Chinese yuan. Renminbi. So that's something that is included. So about JPY 30 billion is in others -- or other segment. So those are the reasons. About Energy, the Automotive on the type of the cars for the mass market. Yes. What we mean by that is that 3030D that is the customers are benefiting $7,500 that tax credit and that is above for the cars above $80,000. It's not going to be applied. So when we say on the mass market, it's below $80,000 and batteries will be utilized. And our batteries, as I said, every OC compliance and others, there are several regulations, and we have already qualified for all of them. So our own batteries will be for compliance. So I'd like to make sure that when the numbers of the EVs are increased, that will be the tailwind for us. So that's what we mean by this. So Tesla, new type, the cheaper ones, you're positive about that. Is that right? Concerning that, we have not yet had specific discussions and we have not yet confirmed this clearly. So nothing I can comment on that point.
Operator: From JPMorgan (NYSE:JPM) Securities, Ayada-san please.
Junya Ayada: This is it from JPMorgan Securities. So I have one big question for energy. And in it I have 2 questions. And for the first question, this is about the update of Suminoe factory, May I ask you the update. Ever since summer, the utilization of this Suminoe factory has been lowered -- so for this fiscal year and for the full year, I would like to listen to your forecast. And when I think the capability utilization is going to take several years in order to reach the full. And you've mentioned about Masuda cooperation and Subaru cooperation as well. But if you do have anything that you can share with us, please. That was the first one. And the second point is about Kansas Factory. Umeda-san, you mentioned on the previous question about recognize estimate, 30 gigahertz for production. Where is it going to be coming at peak? And it was said about JPY 50 billion to JPY 60 million investment in the initial point. However, at this fiscal year '25, how much investment are you expecting? And about the new factory launch, this is probably increasing the Kansas and Wakayama Factory, which is JPY 30 billion in total. And when I follow you, maybe this expense for investment for the new factories could be increasing. Therefore, I would like you to factor and elaborate on this, please.
Hirokazu Umeda: Regarding the Japan Energy. In effect, the 1865 production line, which is an old line is also in production. Regarding the decrease of demand, those will be eliminated -- and thinking about energy cost and other expenses will be lowered with lowering FX regarding personnel working we will be distributing allocating them for the growth area where we can garner much more profit. For instance, maybe the Giga PENA Factory RLs, 2170 Kansas, those are -- could be the destine where we can channel all people for FY '24 to '25, the margin of the losses will be smaller until the first quarter, Japan's production was there to some extent. In the second quarter, there was a very strong break, therefore, slowing down. So in FY '25, it seems that Japan seems to be weak in the first quarter. However, the demand increase we will not expect much on that, and we are now continuously taking the next step forward to be ready. And the utilization in Japan -- but this is really depending on the judgment of our clients, the car manufacturers. In FY '25, it is not included. It is not included in FY '26 either. And further on, this is all related to our customers. Therefore, the full production, whether it be in FY '31 -- or 2030, we are not sure. However, we are thinking of the production for the energy in that span of time. That was about energy. And regarding cancer's factory, the investment for the cancers factory is what you are questioning and JPY 430 billion for Energy. We have been making investment, and that was announced by the forecast. And most of this investment is channel 2 Kansas Factory. Therefore, in scale, I would like you to think that this is mostly for Kansas and this is about the investment of. And at the same time, JPY 30 billion is in expense, which is related to profit and loss statement. Therefore, this is regarded to R&D and the ramp-up expenses. 4680. In the final end, where are we going to be producing this 4680, this is yet to be determined. But the ramp-up, start-up of cancers and the cost in Japan for 2170 in relation to the ramp-up of Kansas it was something that we must think too. But then anyhow, we are focused on the investment for Kansas Factory. That is all from my side. Are you okay?
Junya Ayada: And about the 30 gigawatt, and when are you going to be reaching that for FY '25?
Hirokazu Umeda: And we would like to start the mass production. And then we would like to ramp up and start the lines steadily. And going forward, FY '27 or for FY '28, I think we will be reaching full and that is our assumption as of today. That is all.
Operator: We are running out of time. So we would take questions from 3 more people, one question each. BofA, we have Hirakawa-san.
Mikio Hirakawa: Hirakawa from BofA Securities Japan. Your plan -- adjusted OPE and operating profit difference is JPY 70 billion. And out of the JPY 50 billion is the share transfer loss. So it's not the cash out and JPY 20 billion, what is the other item?
Hirokazu Umeda: As we communicated before, in other income and loss, about JPY 20 billion is quality and other lawsuits expenses and those are something that we expect, of course, it probably were not, but about JPY 20 billion is that what we assume for that. And about JPY 50 billion, it is not a cash out. Mainly this is the goodwill impairment loss or in the future, something that can be collected. So this deal, if you only look at this deal, about the JPY 50 billion loss is expected. So that's what we mean. So it's not a cash out.
Operator: Next, from Citi Securities -- Citibank Securities. Ezawa-san, please.
Kota Ezawa: Citi Group Securities, Ezawa. I have a question. So the priority growth area, you have mentioned all the 3 are weak. So now it seems to be weaker for the overall growth. And the medium-term plan has been already 2 years past. So as a company, you have been announcing the structural reform and internal effort does not seem to be bearing fruit. So within the 3 years, the cumulative operating profit and ROIC could be unachieved, which probably is not good. So for structural reform, revising over the business portfolio, about the progress of your effort, I would like you to share what you're doing internally, please? As you say, within the past year or 2, the EV and air to water as a business environment has been changing drastically, and we are challenged by the changing business environment regarding Blue Yonder. The importance of supply chain is ever yet focused. And therefore, currently, this Blue Yonder business is trending steadily.
Hirokazu Umeda: So just looking at a single year, the EV is a low profile first, and then there's a high-profile time for EV. And then now EV is converged to come to a specific level. This business is looking at a span of 5 to 10 years. Therefore, the adjustment speed of the immediate work. These are something that we would like to adjust and respond accordingly. However, for the 2 businesses, when we started mentioning about the growth area, it is becoming weak. So even when we are explaining, we feel that we have to do more. But then within this midterm plan, we would like to work more rigorously. And for air to water, we only have been focusing to sell into the detached housing. And we were unable to access France market. Therefore, now it is time that we are going to be having the next work and next action within the area in order to grow for the 3 growth area. For the midterm KGI, the operating profit and ROE part. It is unachieved. We will be at accumulating our efforts and thinking this as our trough. And when you are revising over the business portfolio, are there any progress? Regarding the business portfolio management, there's various types of management. For instance, Pro AV, the AV for the professionals. And for digital socamera, this is related to entertainment part of our businesses. And that could be coordinated together, and that could be a portfolio management, which is done currently by ourselves. Other than that, various portfolios, management are underway on progress However, because of the -- due to the nature of the issues, we have customers, we have clients and partners and we have people working for us. Therefore, when appropriate timing comes, then we will share the news with you as we have always been doing. And by that portfolio management, is underway. Please understand as such.
Operator: So the last question. From Mizuho Securities, we have Nakane-san.
Yasuo Nakane: I am Nakane. Just one question. In comparison to the previous fiscal year and this fiscal year in relation to AI servers on Page 36, this time, the generative AI survey is going to grow, but the base station server probably is not going to grow that much. But in the narrow sense, AI server capacitor, condensed [indiscernible] and the server as a whole and also the ESS, the so server, data center related, your sales size in the previous year, how big was it? And how big is it in this fiscal year? So I think there are some customers who are really looking into this. So could you talk about that? So I think you mentioned that hundreds of -- tens of billions, could you give us more digital numbers.
Hirokazu Umeda: Well, yes. To give you the specific numbers, it's not something I can do, but the related ones you mentioned already that the industry businesses and energy, the industrial businesses, ICT and for our industry. So AI servers for AI servers, the components, a huge amount of data need to be processed. And in comparison to the general server, higher performance is required. So the value, it is easier for us to get approval for the value. So our products at the [indiscernible], you mentioned, SP cap, it is the condense old capacitor, and we have good functions and performance. So the growth of those there's a big range when we say double digit, but more than 10% growth or double-digit growth is expected for fiscal '24. And hundreds of -- sorry, the tens of billions, I think we believe that it will grow in teens. And in our forecast or expectation the recovery of the industry is expected, and the orders or the demand is growing steadily. So as for others, the recovery is difficult to forecast. So those are the areas that we can expect some recovery. Sorry to only give you the analog answers. But I think you get my meeting that way. I hope that answers your questions.
Operator: Thank you very much. So with this, we would like to close FY 24 Annual Financial Results press conference. Thank you very much for your attendance.
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