Appliances Company Business policy - Panasonic · Appliances Company Business Policy 12 Our strengths and Market share in home appliance in Japan Achieved record high market share

Copyright (C) 2016 Panasonic Corporation All Rights Reserved.

Appliances Company Business policy

May 18, 2016

Panasonic Corporation Appliances Company

President Tetsuro Homma

Notes: 1. This is an English translation from the original presentation in Japanese.

2. In this presentation, “FY17” refers to the year ending March 31, 2017.

ＡｐｐｌｉａｎｃｅｓＣｏｍｐａｎｙＢｕｓｉｎｅｓｓＰｏｌｉｃｙ 1

FY16 Results


ＡｐｐｌｉａｎｃｅｓＣｏｍｐａｎｙＢｕｓｉｎｅｓｓＰｏｌｉｃｙ

Exchange rate (1 USD) 110 yen 120 yen

2

FY16 Financial Results

2,552.5 Sales

Operating profit (Ratio)

67.8 (2.7%) 50.8

(2.0%)

(-2%)

2,504.8

FY15 FY16

Sales Despite increase in white goods, decreased due mainly to downsizing business of TVs

OP

Decrease Increase

Increased due to profitability improvement of white goods focusing on premium strategy and return to profitability in TV business (+33%)

＜US GAAP＞[Consolidation of

manufacturing and sales]

(yen: billions)


FY16 Financial Results

3

Despite strong sales in Japan and Asia, overall sales have negative growth due to slump in Europe, US, and China

Operating profit increased due to sales increase in Japan and Asia, and strengthening premium zone

Sales

23,500

24,000

24,500

25,000

25,500

26,000

FY15 FY15 -47.7

Japan +63.2 AC

+5.0

Asia +26.7

Ex-rate +4.4

Operating Profit

0

200

400

600

800

1,000

1,200

AC +2.4

Europe US

China -30.3

(2.7%) (2.0%)

＋16.9 FY15 FY15

Others -1.7 Stream

-lining +61.6

Others +45.9

Ex-rate -38.2

TV -98.6

China -58.8

Europe US

-83.2

FY16 -47.7

(2.0%) Japan Asia

+19.0

Premium +15.9

TV +16.2

＋16.9 FY16

Strategic Investment

-11.1

2,552.5 2,504.8

2,552.5

50.8 67.8

50.8

＜US GAAP＞ [Consolidation of


(yen: billions)



FY16 Achievements and Challenges

4

Consistent achievement of Key Initiatives in FY16

31% 24% 21%

44% 34% 32%

0%

20%

40%

60%

80%

100%

Japan Asia China

Expanded composition ratio of premium goods

Marginal profit ratio improved

by 1.5%

<The composition ratio of premium goods (FY15→FY16)＞

White goods business hugely contributed overall profitability

Returned to black in TV business (for first time in 8 years)

Achieved operating profit of more than 1 billion yen, while original target was to eliminate loss (+0.3)

・All 11 business divisions achieved positive profitability ・All 5 white goods-related business divisions achieved operating profit over 5% ・Improved profitability due to consolidated management based on manufacturing-sales collaboration (Consolidated 3 Asian sales companies and manufacturing companies to AP)

FY１5

FY16

<Operating Profit (yen: billions)>

Ex- rate

-１４.９

＋１.３

Restructure

Others

JP/Asia/Oceania Profitability improvement

<Consolidation of manufacturing

and sales> (yen: billions)

Failed to achieve target due to declining Chinese market

６７.８７３.６

-5.8

AC (others)

AC (China)

Compressor

Others

FY16 Challenges

FY16 result

FY16 target

<Consolidation of manufacturing and sales>

(yen: billions)


Preparation for growth from FY17 onward

5

Portfolio management by strategic investment

Restructure for profit growth

■ Strengthen Commercial Refrigeration & Food Equipment Business

Automatic laundry

folding machine Established joint venture

for commercialization

Launch housing space

value creation project

■ Strategic investment to AP Asia/ AP China (approx. 7.5 billion yen)

（Commercialization scheduled in Nov. 2017）

Create new products/businesses Expand highly growing business

Marketing investment in strategic regions

Withdrew from the vacuum cleaner business (US)

Transferred SANYO TV business

(China)

Acquired 100% shares of Hussmann Corp.

Exhibit in AWE in Shanghai

Renew storefront display in Indonesia



Toward FY19


7

Midterm business policy of Appliances Company

Further strengthen marketing for customers in ‘premium zone‘

Deploy Japanese winning business model to overseas

Accelerate business growth in Asia & China + Europe

High profitability by promoting nonlinear activities and utilizing IoT

Home appliances business

ＢｔｏＢ business

Shift resources to highly growing business Overall



8

Business areas and positioning of Appliances Company

Commercial Refrigeration & Food Equipment, Small/Built-in appliances in favorable competitive positions

Indust

ry a

ver

age

pro

fit

ratio

Market growth rate

Profit ratio and Growth ratio in global market

The size of circle: market size

… 25 billion USD

Relatively favorable area

[%]

Growth rate: CAGR of FY16 to FY19 Profit ratio: FY16(both our estimation)

Need to search for more profitable area

0

5

10

15

3.0 0.0 -1.0 5.0 4.0

AV

AC

Major

Small/Built-in

Comm. Fridge & Food equip.

Devices


•Achieve high global growth through proactive nonlinear investment

•Strengthen products/sales competitiveness by boldly enhancing resources

• Pursue stable profitability expansion by growing in China & Asia + Europe

• Pursue profitability expansion through improving model portfolio

・Minimize risks and pursue steady positive profitability

Sales Profit (ratio)

Invest- ment

Sales Profit

(amount) Invest- ment


Invest- ment


Invest- ment

9

Business portfolio toward FY19 Newly position “Small/Built-in” as highly growing business

Small/ Built-in

Major

Devices/ etc.

Air conditioner

Comm. fridge & Food equip.

ＡＶ

Highly growing business

Steadily growing business

Profitability improvement

business

HA

HA

HA

HA



10

Accelerate investment for highly growing business

Intensively invest human resource and cash

0

25 00

R&D engineers

0

25 0

Company’s strategic Investments

Intensive

Investment

Area

76% 69%

24% 31%

FY16 FY17(f) FY16 FY19(f)

600 Increase

Comm. Fridge

& Food equip.

Small/ Built-in

AC

2,000 ２２ (number of personnel) (yen: billions)


11

Goals for FY19 Aim at achieving 2.8 trillion sales in FY19 due through mainly

highly growing business and steadily growing business

2.8 trillion yen (125 billion yen)

2.5 trillion yen (54.6 billion yen)

<IFRS> [consolidation of


Sales (OP)

AV Devices

Small/ Built-in

Major


FY16 FY19(f)

AC Highly growing business

(67% of total Sales growth)



12

Our strengths and Market share in home appliance in Japan

Achieved record high market share in past 30 years in whole home appliance goods

AC

Sm

all/

Built

-in

TV Recorder

Refrigerator Top Load Washer

Shaver Dryer

MWO Induction Hob

Rice Cooker

Dishwasher

Residential air-conditioner

1st

1st

2nd

2nd

2nd

2nd

1st

1st 1st

1st 1st M

ajo

r AV

Share ranking in amount by product in FY16 (Panasonic estimates)

1st

‘Capability to establish relationship’ with customers Link with diverse customers with diverse contact

‘Capability to convey values’ to customers

J concept Daily Premium 4K world

Consolidated operation by

‘Manufacturing-sales consolidated management’

Our strength

15%

20%

25%

30%

1990 2000 2010

FY16 Record high

<Japan> Market share

in home appliances (Estimate by Panasonic)

Front Load Washer


13

Expand Japanese Winning Business Model to overseas

Expand marketing approach developed in Japan, considering regional characteristics

Establish Marketing division and Sales BU

to strengthen “Integrated marketing”

”development-manufacturing-sales consolidated management”

Propose new values based on localization

Premium brand strategy × Field marketing

Top wind flow

Washing power /Large opening 4K/Lighting

Synchronize media & storefront campaigns

Enhance quantity and quality of promoters Continuous storefront

demonstrations

‘Healthy, affordable and classy’ + smart

Create “aspiration” with premium goods

Transfer overseas sales company to Appliances Company in steps, to ensure manufacturing-sales consolidated management

Asia 【Sales target in FY19: 350 bil. yen】

China 【Sales target in FY19: 13.3 bil. yuan】

【April 2015】【April 2016～】

sales

Manufacturing

Development

Marketing

Refrigerator

Washing machine

AC

Washing

machine

com

pany

AC c

om

pany

Beauty & health, cooking

Manufa

ctu

ring

com

pany

Manufa

ctu

ring

com

pany

HA Sales Company Refrigerator/Washing

machine BU

AC BU

Marketing Division Small

Kitchen Appliances

BU

Refrigerator

Washing machine

AC Beauty & health, cooking

Manufa

ctu

ring

com

pany

Manufa

ctu

ring

com

pany

Manufa

ctu

ring

com

pany

Manufa

ctu

ring

com

pany

sales

Manufacturing

Development

Marketing

Multi door/Partial freezing

http://panasonic.jp/reizo/products/NR-F611XPV.html#photo-2



14

Business growth with profitability in home appliances

Growth with “Japan + Asia/China/Europe” and “RAC/Small”

FY16

FY19(f)

FY16

FY19(f)

RAC Small Major

RAC Small

Japan others

Japan others

By region By business domain

Major others

others

Opera

ting

pro

fit ra

tio

Sales

５％ Asia China Europe

５％

５％

５％ Asia China Europe

*Consolidation of manufacturing and sales *Areas indicate operating profit amounts

*IFRS


FY17 Business Policy



Exchange rate (1 USD) 120 115

16

FY17 Management Target

2,505.7 Sales

Operating profit (Ratio)

100.0 (3.8%) 54.6

(2.2%)

(+4%)

2,600.0

FY16 FY17 (f)

Sales •Newly consolidated Hussmann Corp.

• Increase in Air-conditioner and Major Appliances

Operating Profit

Increase Increase •Sales increase and improvement of profitability of AC

•Develop and promote premium products

•Newly consolidated Hussmann Corp.

<IFRS> [Consolidation of


(yen: billions)


0

200

400

600

800

1000

1200

Small/ Built-in +13.8

17

FY17 Management Target Increase both sales and profit mainly by highly growth businesses

Sale

s

23,500

24,000

24,500

25,000

25,500

26,000

26,500

27,000

27,500

28,000

FY16 FY17(f) +94.3

AC +51.5

Comm. Fridge & Food equip. （incl. Hussmann）

+143.3

Major +21.7

Device etc. -4.4

SANYO TV

-8.9

Opera

ting p

rofit

<IFRS> [consolidation of


(yen: billions)

Major +6.1

Device etc. -0.8

Small/ Built-in +2.0

Exchange -75.2

Risk Offset etc.

-35.7

2,505.7

2,600.0 AV -11.8

FY16 FY17(f) +45.4

AC +11.5

Comm. Fridge & Food equip. （incl. Hussmann）

+15.8

ＡＶ +11.3

SANYO TV

-0.5

IFRS

IFRS

67.8 54.6

100.0 109.4

Highly growing Business

Highly growing Business

Based on Adjusted

OP Based on Adjusted

OP

Include improvement from non-operating expenses (Based on US GAAP)



Achievement in FY16

Air-Conditioning Comm. AC concentrate on target business area,

RAC aim to further profitability improvement

18

460.6 465.6 504.6

300

400

500

600

700

FY15 FY16 FY17 FY18 FY19

AC sales <consolidation of manufacturing and sales/yen: billions >

Achieve more than 5% OP in ＲＡＣ

Reestablish RAC in China

HA ＢｔｏＢ

Commercial AC

•Collaborate with gas firms and deal with energy liberalization (Launch hybrid AC “Smart Multi”)

•Expand cloud technology with unified platform and utilize for spec-in.

•Accelerate shift to mid-high range product featuring ”Health”

•Transform to actual demand sales unified with distributors (Renew storefront, strengthen helpers, etc.)

FY16 FY17(f)

Sales

・Integrate global/local strategy and expand sales in overseas, mainly in Asia

・Sales of Quick cool/warm AC do well in Asia, maintaining No.1 market share

•Double digit growth in Asia

•Expand sales of gas AC in Japan

+12％

Mid-High range ratio

２０％３２％

Key Initiatives

EHP GHP


Major Appliance Propose “Life with aspiration” with premium goods suitable for

each region

19

Sales

Europe

Asia Japan

China

Partial/ Glass door

Joint development with Gorenje

Easy wide opening

ＨＡ

Key initiatives

Large-size French

Square Front load washer

EcoNavi Inverter

Premium Flat

Washing Machine

Sales increase exceeding industry average rate with products suitable for each region

・Optimization of product planning within regions

・Expand product lineup by complementary supply within regions

Support development

Regional autonomous management

(Asia)

Daily Premium JAPAN Quality

『Healthy/affordable/classy』 + smart

452.6 491.8

506.4

300

400

500

600

700

<Consolidation of manufacturing and sales/yen: billions>

Cuble


127%

146% 149% 143%

100%

120%

140%

160%

1Q 2Q 3Q

Panasonic

Entire industry

FY15 Sales vs. LY

Jan-Feb （Panasonic estimates）

【ASEAN6 Top Load Washer】 Sales of washer (8kg and over): more than +40% vs. LY

Vietnam

Japan

Thailand Philippines

Indonesia

No1 market share



20

Small/Built-in Appliance Expand high profitability business proven in Japan to oversea

ＨＡ

Strengths Sales

Panasonic (No.1)

Ａ

Ｂ

Panasonic (No.1) Ａ

Ｂ

Market share in Japan in FY16 (Panasonic estimates)

Key Initiatives Hair drier Induction hob

(200V)

High entry barrier needed suitability

for company

Product planning ability

Create Value

Store front competitiveness Feeling/Experience

Core devices Nanoe/Shaver blade

Small Built-in

Quality competitiveness

CS network

<Consolidation of manufacturing and sales/yen: billions>

FY15 FY16 FY17 FY18 FY19 200

300

400

500

371.0 404.9

414.9

China •Expand Japanese high-end beauty products

•Sales increase with lineup improvement of IH rice cooker

•Launch premium products to shaver/trimmer “ European design x professional technology”

Europe


AV Business (TV)

21

ＨＡ

Enhanced brand presence by launching "Premium 4K TVs"

Own color reproduction technology reality oriented

OLED TV

Multi-division back light area control Certificated world’s first

ULTRA HD PREMIUM

High-resolution model with powerful sound

Deploy know-how of Technics

Available on May 20

Limited version in Japan

ＣＺ９５０

ＤＸ９００ＤＸ８５０

Sales <Consolidation of manufacturing and sales/yen: billions>


541.3 476.4

453.6

300

400

500

600

700

Key Initiatives •Promote multi-cell which enables attachment of several makers open-cell (total 8 site) （IPS/VA, 4K/FHD, several makers）

•Establish global platform and achieve lineups by country with least investment

•Expand by country product/distribution strategy by collaboration with manufacturing and sales in 5 regions (Japan/Europe/Latin America/Asia/India)

http://www.vente-coiffure.com/pro_5025232782581-tondeuse_panasonic_er_gp80?sa=X&ved=0CBwQ9QEwA2oVChMIl_T72YXzxgIVBBimCh1WTgsd



・Focus on customers who recognize our value e.g. supermarket, convenience store & drug store etc. ・Strengthen original/customized products with high profitability

1,112 1,128 1,213

0

500

1,000

1,500

22

Comm. fridge & Food equip. Business Aim at achieving 400 billion yen in FY19 on Panasonic corp.

through creating synergy with Hussmann

Key initiatives of Hussmann Sales(AP company)

ＢｔｏＢ

Oligopoly with two companies

• Sales forecast in 2016 Q1 is expected to exceed plan at due

diligence

• Achieved No.1 market share in showcase in North America in FY16

Customized display cases

Beverage Business ・Vending machine market shrinks due to rise of convenience store ・Site consolidation in FY15 (Kusatsu→Gunma)

・OP is expected to increase by strengthening dispenser business

<Sales (million USD)>

A

Hussmann

Share of display cases in US (FY16)

Hussmann Corp.

Opened display cases

synergy

<Consolidation of mtg. and sales/yen: billions>

FY15 FY16 FY17 FY18 FY19 0

400

300

200

100

136.1 144.0

285.6


Learn from Hussmann •Dispatch assigned employees to learn each other management method appropriate for BtoB solution business



24

(Appendix) Products in each business area

Small/ Built-in

Major

Devices/ Etc.

Air conditioner


ＡＶ

Room Air-conditioners (RAC), Commercial Air-conditioners (CAC), Water heaters

Showcases, Kitchen facilities, Vending machines, Dispensers

Microwave ovens, Rice cookers, IH cooking hobs, Dishwashers, Beauty products, Health products, Cooking appliances, Irons, Nano-e devices, Pump

Refrigerators, Washing machines, Vacuum cleaners, Toilet seat with shower

Compressors, Condensing units, Vacuum insulation panels, Fuel cells, Meter devices, Electric power assist bicycles

TV, Recorders, Audio

Business Area Main products

Disclaimer Regarding Forward-Looking Statements This presentation includes forward-looking statements (that include those within the meaning of Section 27A of the U.S. Securities Act of

1933, as amended, and Section 21E of the U.S. Securities Exchange Act of 1934), as amended about Panasonic and its Group companies (the Panasonic Group). Panasonic discloses its consolidated financial forecasts for fiscal 2017 based on International Financial Reporting Standards (IFRS). To the extent that statements in this presentation do not relate to historical or current facts, they constitute forward-looking statements. These forward-looking statements are based on the current assumptions and beliefs of the Panasonic Group in light of the information currently available to it, and involve known and unknown risks, uncertainties and other factors. Such risks, uncertainties and other factors may cause the Panasonic Group's actual results, performance, achievements or financial position to be materially different from any future results, performance, achievements or financial position expressed or implied by these forward-looking statements. Panasonic undertakes no obligation to publicly update any forward-looking statements after the date of this presentation. Investors are advised to consult any further disclosures by Panasonic in its subsequent filings under the Financial Instrument and Exchange Act of Japan (the FIEA) and other publicly disclosed documents.

The risks, uncertainties and other factors referred to above include, but are not limited to, economic conditions, particularly consumer spending and corporate capital expenditures in the Americas, Europe, Japan, China and other Asian countries; volatility in demand for electronic equipment and components from business and industrial customers, as well as consumers in many product and geographical markets; the possibility that excessive currency rate fluctuations of the U.S. dollar, the euro, the Chinese yuan and other currencies against the yen may adversely affect costs and prices of Panasonic’s products and services and certain other transactions tha t are denominated in these foreign currencies; the possibility of the Panasonic Group incurring additional costs of raising funds, because of changes in the fund raising environment; the possibility of the Panasonic Group not being able to respond to rapid technological changes and changing consumer preferences with timely and cost-effective introductions of new products in markets that are highly competitive in terms of both price and technology; the possibility of not achieving expected results or incurring unexpected losses in connection with the alliances or mergers and acquisitions; the possibility of not being able to achieve its business objectives through joint ventures and other collaborative agreements with other companies, including due to the pressure of price reduction exceeding that which can be achieved by its effort and decrease in demand for products from business partners which Panasonic highly depends on in BtoB business areas; the possibility of the Panasonic Group not being able to maintain competitive strength in many product and geographical areas; the possibility of incurring expenses resulting from any defects in products or services of the Panasonic Group; the possibility that the Panasonic Group may face intellectual property infringement claims by third parties; current and potential, direct and indirect restrictions imposed by other countries over trade, manufacturing, labor and operations; fluctuations in market prices of securities and other assets in which the Panasonic Group has holdings or changes in valuation of long-lived assets, including property, plant and equipment and goodwill, deferred tax assets and uncertain tax positions; future changes or revisions to accounting policies or accounting rules; the possibili ty of incurring expenses resulting from a leakage of customers’ or confidential information from Panasonic’s systems due to unauthorized access or a detection of vulnerability of network-connected products of the Panasonic Group; as well as natural disasters including earthquakes, prevalence of infectious diseases throughout the world, disruption of supply chain and other events that may negatively impact business activities of the Panasonic Group. The factors listed above are not all-inclusive and further information is contained in the most recent English translated version of Panasonic’s securities reports under the FIEA and any other documents which are disclosed on its website.

In order to be consistent with generally accepted financial reporting practices in Japan, operating profit (loss) is presented in accordance

with generally accepted accounting principles in Japan. The company believes that this is useful to investors in comparing the company's financial results with those of other Japanese companies. Under United States generally accepted accounting principles, expenses associated with the implementation of early retirement programs at certain domestic and overseas companies, and impairment losses on long-lived assets are usually included as part of operating profit (loss) in the statement of income.

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Appliances Company Business policy - Panasonic · Appliances Company Business Policy 12 Our strengths and Market share in home appliance in Japan Achieved record high market share