Panasonic Holdings Corp
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Thank you very much. Let me now present the fiscal 2023 financial results as well as fiscal '24 financial forecast. This is a summary of consolidated financial results, starting with the impact of the U.S. inflation Reduction Act or IRA. Although the detailed rules are not yet announced an amount equivalent to the assumed tax credit is recorded in Q4 as a tax deduction and factored into the FY '24 forecast as adjusted operating profit. I would explain the details on the next slide.
Overall sales increased year-on-year due to the higher sales, mainly in lifestyle Automotive and Connect and by currency translation. Adjusted OP decreased due to the large profit decline in industry and energy despite higher profit of automotive and Connect. Net profit increased due to the tax deduction equivalent to the IRA tax credit. Operating cash flow increased year-on-year-on due mainly to efforts to reduce inventories and the impact of a one-time tax payment last year. The annual dividend is set at JPY 30 per share, same as the previous forecast. For the FY '24 forecast, both sales and profits are expected to increase overall due to the demand recovery and profit recognition of an amount equivalent to the IRA tax credit. Net profit forecast is a record high level of JPY 350 billion. Both sales and profit are expected to increase in lifestyle, automotive, Connect and Energy sales and profit are expected to decrease in industry.
Let me explain the impact of IRA tax credit on our financial results and forecast. There are 3 ways to monetize the tax credit; deductible, refundable direct payment by the government and transferable with each requiring different accounting treatment. In Q4, in FY '23, we are assuming that the deductible tax credit will be applied. So we recorded JPY 40 billion in net profit as a tax deduction equivalent to the IRA tax credit. For FY '24, we are assuming to elect refundable tax credit, considering an aim of US IRA , which is to reduce excessive inflation and to promote energy policies in the United States, we believe we should use the credit to promote EVs to in North America.
In addition to investing in our U.S. EV battery business, we are also considering a way to effectively use the credit with our customers to strengthen and expand our business in North America. Therefore, for FY '24, JPY 80 billion, about half of the total tax credit amount is factored into the adjusted OP in energy. In addition, we are assuming the amount effectively used with customers will be applicable for deferred tax accounting or DTA. JPY 20 billion is expected to be recorded in DTA. As a result, the impact of the IRI or net profit is expected to be JPY 100 billion in FY '24.
Next is the details. This shows the consolidated financial results. As shown on the right-hand side, overall sales and each profit number in PL statements as well as EPS, ROE and EBITDA exceeded the forecast of February 2. These are the results by segment. An analysis of year-on-year comparison for sales and operating profit are shown in the next slide. Starting with sales. Overall sales increased due to higher sales mainly in Lifestyle, Automotive and Connect and by currency translation. Details are shown on this slide by segment.
Next is operating profit analysis. Adjusted OP decreased overall. This is due to major decline of adjusted OP in industry and energy in the second half, while it increased in Automotive and Connect. Details by segment are shown on this slide. On the right-hand side, other income and loss is shown at decreased year-on-year. Excluding the impact of JPY 58.3 billion revaluation of existing equity [indiscernible], upon acquisition in FY '22, it actually improved due mainly to lower restructuring expenses. This is a result of the lifestyle by divisional company. On April 20, the recall of clothes drying dehumidifiers was announced. As a result, recall-related expenses are recorded in other income and loss of Heating and Ventilation AC Company.
This is our operating profit analysis by factor. On the left, profit from sales expansion increased by JPY 40.2 billion. Fixed costs were a negative factor of JPY 84.8 billion due mainly to investments in lifestyle and energy aimed at growth of the business. Price hikes in raw materials and logistics were a negative factor of JPY 224.2 billion. The price revision and rationalization effort was the positive factor of JPY 224.6 billion. The consolidation impact of the Blue Yonder and temporary factors of lifestyle led to the increase of JPY 0.7 billion. As for Blue Yonder, profit increased by JPY 2 billion and the breakdown is shown at the bottom right. Overall Forex impact was 0, almost no impact. By segment, it had a positive impact on industry and energy, but negative impact mainly on lifestyle. As a result, adjusted OP decreased by JPY 43.6 billion. Other income and loss was down by JPY 25.3 billion due to one-time gains in FY '22. Operating profit decreased by JPY 68.9 billion.
Next is cash flows and cash positions. Operating cash flow was JPY 520.7 billion, up from FY '22. This is due to efforts to reduce inventories as well as the impact of onetime tax payment in FY '22. Inventory started to decline after peaking out in Q3, mainly by revising the strategic inventory level. We will continue to reduce the inventories in FY '24 and onwards. Net cash on the right was the negative JPY 591.4 billion better than the end of fiscal year '22. This shows the shareholder returns. Today, the board of directors resolved to pay the year-end dividend of JPY 15 per share. Combined with the interim dividend, the annual dividend for FY '23 is JPY 30 per share. The same amount as the dividend forecast announced on the February 28.
Our approach to use the IRA tax credit is shown in the middle of this slide. As I mentioned earlier, we believe we should use the credit to further promote the EVs in North America using the cash from the IRA tax credit for investments in our EV battery business in the United States. Our dividend policy in principle is to distribute profits to shareholders based on the business performance and strive for stable and continuous dividend payments. Dividend payout ratio target is about 30% vis-à-vis the consolidated net profit. Considering the US IRA, dividends are determined based on the amount of the net profit, excluding the IRA impact. We continue to try to provide returns to our shareholders by achieving enhanced corporate value through business growth and profit expansion by investing mainly in growth areas.
Next is consolidated financial forecast for FY '24. This shows the consolidated financial forecast. Both sales and profits are expected to increase year-on-year. Sales are up 4% to JPY 8.5 trillion, excluding exchange rates, adjusted per OP and operating profit are expected at JPY 430 billion. Net profit is expected at JPY 350 billion, EPS at JPY 149.95. And ROE is expected at 9% and EBITDA JPY 880 billion. All these figures are above the levels in FY '23.
Next, this slide shows our outlook on the business environment. This chart shows the changes in demand by segment as an assumption for the FY '24 forecast. For the 4 segments, except for industry, both sales and profits are increasing on the assumption of market conditions being better in the previous -- than in the previous year. Industry sales and profits are expected to decrease due to year-on-year decrease in demand, in particular for the ICT terminals. However, a recovery trend is expected from the second half. Price hikes for raw materials and shortage in semiconductor carton materials, which had a significant impact for the past 2 years are expected to be mostly resolved for FY '24. As explained at the Q3 announcement, Energy segment faced price hikes for certain raw materials, but there was a time lag before reflection in sales prices. This is likely to be normalized.
And this slide shows analysis of OP. From left, profit from sales expansion is positive JPY 100 billion. Fixed costs are a deteriorating factor of JPY 90 billion. This is due to investment for future growth in lifestyle and energy as well as increased personnel and other costs due to inflation. Price hikes in raw materials and logistics is a decrease impact of JPY 35 billion. As a positive factor, we have JPY 86.3 billion from price revision and rationalization. We have JPY 80 billion in profit recognition related to IRA tax credit. As for Blue Yonder, a decrease of JPY 5.4 billion is expected. As for the exchange rates, we expect -- we expect a year-on-year decrease of JPY 20 billion, assuming a stronger yen to the dollar and the euro compared to FY '23. As a result, adjusted OP is expected to increase by JPY 15.9 billion. Other income and losses is up JPY 25.5 billion. OP is up JPY 141.4 billion. This is the forecast by segment. In industry, both sales and profit are down, but both sales and profit are up in Lifestyle, Automotive, Connect and Energy.
Moving on to sales analysis by segment. In the next slide, First of all, sales forecast analysis. Lifestyle sales are expected to increase due mainly to higher sales of HVAC in Europe and electrical construction materials in Japan and overseas. And this is also with the marketing enhancement and the price revisions for the consumer electronics in Japan and recovery of consumer electronics demand in China. Automotive sales are expected to increase due to higher automotive production and sales of industry segment products, mainly in green vehicle. Connect sales are expected to go up with the sales growth of Avionics and Blue Yonder.
Industry sales are expected to decrease due to decreased sales as the semiconductor sales channel will change after the business transfer in FY '21, despite increased sales of relays and capacitors. Energy sales are expected to increase. In vehicle sales are expected to be favorable with continuously expanding EV demand and improving production and productivity. Industry consumer sales are expected to increase for full year with recovery from Q2, although the ongoing year-on-year decrease in weak market conditions, it will continue until then.
Other elimination adjustments, sales are of both entertainment and communication and housing are expected to increase. This is the adjusted OP forecast. Lifestyle profit is expected to increase with increased sales of priority businesses and the impact of temporary expenses in China in FY '23. Automotive profit is expected to increase with increased sales, cost reduction and price revision to offset price hikes in patent materials despite increased fixed costs and persistent impact of price hikes in parts and materials due to continuous semiconductor shortages in automotive. Connect profit is expected to increase due to higher avionics sales, lower costs from resolved procurement issues despite the decrease of Blue Yonder due to strategic investments for growth.
Industry profit is expected to decrease due to exchange rates despite increased sales of relays and capacitors as well as rationalization and the price revision to offset impact of raw material price hikes. Energy profit is expected to increase even excluding JPY 80 billion IRA tax credit, the time lag before material prices are reflected in sales prices, this is expected to be mitigated. Production and sales of expansion for both in vehicle and industry consumer are expected, while fixed costs for future growth are expected to increase. In other elimination adjustments for its expected decrease is this due mainly to temporary increase in income in FY '23 from intellectual property despite increased sales of elimination and communication and housing. This is the forecast for Lifestyle segment by a divisional company. Adjusted operating profit and profit OP are up in all divisional companies.
This is the forecast for adjusted OP for Blue Yonder. Details I explained earlier today by the Panasonic Connect. Adjusted OP is expected to decrease even on a stand-alone basis due to investments for future growth, including product enhancement and synergy creation. However, it is expected to increase, excluding investments due to the steady sales growth of [indiscernible] business, which we are focusing on. Next here is the progress of our initiatives for the 3 growth areas. For Automotive Battery, in February 2023, Energy started construction of the factory in Kansas in April 2023, Energy signed a contract with Hexagon Purus to provide EV batteries. In supply chain software business, Connect is continuing its transformation towards future growth, as explained in today's briefing. Air Quality and air conditioning business, the growth in 2W business in Europe is there. And in March 2023, Lifestyle is maintaining a strong plan and production at the Czech factory. In addition to the announcement in October 2022, going forward, the Panasonic group will keep you updated on those progress.
Finally, the slide shows the IR announcement since the new structure was implemented in April 2022. For FY '24, we are planning to host a group strategy briefing on May 18. In addition, each company is holding the planned meeting, strategy briefing on June 1 and 2. As shown in this slide, the group's strategy briefing will be hosted by Group CEO, Mr. Kusumi, and operating companies strategy briefings will be hosted by each CEO. So we look forward to your participation at these meetings. Thank you very much. This is all my explanation. Thank you.
Thank you very much for your attention. Now I'd like to take questions from mass media. If you have any questions, please raise your hand. We are only taking questions in Japanese. First question is from Furukawa of Bloomberg.
Thank you very much. I am Furukawa of Bloomberg. I have 2 questions. First, about the IRA related. This this term, JPY 80 billion adjusted OP is booked, which is about half of the total, we understand. So I'd like to know the total amount and the remaining amount, I think, is the amount to effectively utilize with the customers. So this is to invest in the expansion of the batteries for Tesla. Is that how you use it? The second question is about 4680 about the delay of the mass production. Could you give us the more detailed reasons. On Page 21 of your presentation, 4680 development probably is delayed. Is that the case? Or are there any other reasons behind this delay?
Thank you very much for your questions. First of all, about the IRA 80, which is about which is the half of the total. So the total is JPY 160 billion. So this JPY 80 billion, specifically what purposes do we use it? In any case, as I explained in my presentation, IRA aim of the IRA must be considered, so that is to expand the EV and battery business in North America. And of course, with the customers, we want to have a win-win relationship. We assume such way of usage. So right now, conservatively, we are booking or we're expecting JPY 80 billion on our profit. So that is my answer to your first question. About the 4680 the production or the development we said that within -- or in the second half of FY '24. Actually, previously, when we made the announcement about the new plant in Kansas, we are starting up with 2170.
And after that decision, 4680 start-up timing, what should be the best timing. Before the start-up, we have to improve the capacity. And -- we originally thought that we would start with 4680. So that step was skipped. But since we are starting quickly with 2170 so that we can respond to the demand. So as for the mass production startup of 4680, so in the first half of fiscal '25 is our plan so that will be the next step after improving the capacity startup to 4680. That's our plan. I hope you understand. Thank you.
About the customer, just one point. When you say customer, is that equal to Tesla? Or are there any other customers in addition to Tesla -- or specific customers?
It's difficult for me to say IRA in order to benefit from it, the Giga factory, which is exclusively for Tesla. So that's where we can get the credit and that would limit the customer naturally. I hope you understand. Thank you.
Thank you very much. We would like to entertain the next question, from Nikkei Shimbun.
From Nikkei newspaper, my name is -- can you hear me?
Yes, we can hear you.
Thank you. I have 2 points. First, regarding CapEx. Today, you gave us the supplementary information material. On Page 10, I'm looking at Page 10 of the material for 2025 FY fiscal year, overall CapEx compared with FY '24, there is a large increase. By segment, Lifestyle business as well as Energy business seems to have a particularly large increase. What are the factors behind those increases in CapEx for those 2 businesses? That's the first question. The second question, this is for FY '23 and actual and FY '24 forecast. By segment, you have OP margin information. For Automotive, it seems that margin is a little bit less. So what is your assessment? And do you have any factor analysis on this topic? Now please share if you do -- that's the second question.
Regarding the CapEx, you are right. For energy, there is an increase. This is because for the Wakayama,-4680, we are starting up the production capacity. That's why there is an increase for the CapEx. For the Lifestyle business, for the air quality and air conditioning, especially for air to water, there is an investment for Czech facility, we are going to expand the capability. That's why the CapEx is increasing. That's my explanation -- for your question about CapEx. So mainly for Energy and Lifestyle, we have an increase. For the Automotive margin, there was another question. Well, even in the past, we have been telling you about this, for European manufacturers, high voltage charger equipment.
Well, in those areas, the products are quite challenging. That's what we have got. So for a while, we are anticipating that we have difficulty the loss of more than JPY 10 billion will continue for a while. We already communicated that the loss peak was in FY '22. And then we are already seeing improvement. But for FY '24, JPY 10 billion or more loss is going to continue, however. So because of that situation, Infotainment business is improving. However, for the Targa business, this is becoming some burden. That's why margin is depressed to a certain extent. On the other hand, for the operating companies, IR announcements from [ Mr. Nagayasu ], there was a mentioning about this.
In Europe, for high-voltage charge, there is a great need at the moment for these products. When we get the orders, we had some difficulty. However, today, we are doing the mass production Specifically, 9.6 kilowatt, 11 kilowatt and 22 kilowatt. Those are high-voltage products, high output products. For all of these, we have all of these items in the lineup, and we are able to produce and manufacturing. And we are getting demand for those products. In the beginning, we thought that we would have some difficulty in the beginning. However, today, we are doing a fine job in manufacturing, and we are thinking about the future investments so that we can focus on this business. Thank you. Did that answer your questions?
Yes, it did.
Thank you very much. Next question -- from GG Press -- of GG Press, are you there? We are unable to hear you so we are moving on to the next question.
I hope you can hear me. I also have 2 questions. First, the accumulated cash flow more than the ROE of more than 10%. And what is the likelihood of achieving those numbers of JPY 2 trillion and 10%. So within those -- now the 2 years are over and Mr. Kusumi, I think is referring to the review of the portfolio. So if you can comment on that.
Yes, thank you very much. Well, as our first year, originally, we were working on the improvement of the competitiveness, and we shifted to the operating company system, and we expected acceleration of those. So in the first year, it appears that it was weaker than expectation. But adjusted OP, it's a little bit behind. But the operating cash flow, actually, we are mostly on track that is feeding -- so JPY 1.5 trillion -- we did not expect the IRA at that time. So including that, without giving it up, we are aiming for those numbers. As for ROE, the shareholder equity is expanding. And the equity ratio is 45% right now.
So we need to consider that. So generating the steady profit, so ROE 10% and considering the capital efficiency right now, we have no plans to give them up, and it's not necessary to do so. So those 3 KGIs are the ones that we are aiming for. As for the competitiveness enhancement, on 18th of this month, -- be giving you the overview. So specifics will be mentioned there. And roughly speaking, this is the financial results briefing. So if you look at the first half and second half, on Page 28, fiscal '23, first half and second half are shown in the table. So FY '23 -- the higher sales and lower profit was recorded. In the first half, at the bottom, you see the consolidated number.
It's down by JPY 53.9 billion in the second half, it's up by JPY 10.3 billion. But in the first half, there was a Shanghai lockdown and Q1 was suffered. So for the full year, the lower profit. And in Q4, the profit turned positive. So based on those,-- with the high price hike of the raw materials and the supply chain disruption, we had a major impact. But through the -- our efforts on the enhancement of the competitiveness, KPI and our operating companies and others, we try to break it down to the lower levels. And I think we are starting to see the likelihood of achieving KGIs -- and as for the details, please wait until May 18, when Mr. Kusumi will explain the specifics of the strategies. I hope those answers your questions. Thank you very much.
Thank you very much. We'd like to entertain the next question. Toyo Keizai, please.
From Toyo Keizai. My name is -- can you hear me?
Yes.
I have 2 questions. Well, those are general questions, Except for IRA for FY '24, you expected OP. So the increase in profits, how do you assess this? Is this large enough for the company? Or you wish it was larger, but you are taking a conservative view on this. So could you give us some more color on this. Another question is about PBR. Well, there were some comments made on your PBR. But in terms of the capital policy, are you going to make any changes? Or are you discussing any changes to the capital policy. That's all.
Thank you very much. First of all, excluding IRA,JPY 35.9 billion. For OP, we have JPY 61.4 billion. Those are increases in profits, especially for OP, recently, well, in the past, there were some volatility because of the structural reform costs and expenses. But now those expenses are subsiding. So regarding the increase in OP, we think that we have a clear uptrend. And for the adjusted OP of JPY 35.9 billion in increase in adjusted OP for China industry business, Well, operating companies in this segment.
And in Connect, we have process automation companies like SMT companies. And also in the energy company, well, the auto batteries are doing well. But for ICT and other areas, the market conditions are quite difficult. That was the anticipation we had. But the actual -- well, we had a slide on the impact of those economic conditions. So we are anticipating those difficult situations -- but I think that this is the least that we can do. That's the kind of feeling I have towards this number. Regarding one time or less for PBR, we take it seriously first and foremost.
However, the phase where we are -- well, if we do share buyback to reduce equity to increase ROE, that's one way to go, and we can do a special dividend to reduce the surplus and increased ROE. That's another way. We had an ROE of 15% in the past. At that time, equity was about JPY 1.8 billion to JPY 2 trillion. So in terms of the IRA, we talked about it a little bit, but we want to focus on the business, especially for the medium term to long term. I don't want to boast on what we are doing at this stage. But in terms of shareholder return, we want to keep focusing on that. That's all the comments I can give. I understood very well. Thank you.
Our time is running short, so those people from the mass media, we can take 2 more questions -- from GG Press.
Can you hear me -- thank you -- about the IRA-related tax credit, I'm sorry, maybe this was already asked. But up to FY '24, this was included for Nevada. So this is the end of it for Nevada plant. And as for the new plant in Kansas, this is also applicable. So in the future, this tax credit is -- can be expected for Kansas. And if that is the case, what will be the time frame and how much would it be? So if you can comment on that.
Yes. IRA, it's really up to the budget -- overall budget of the IRA already 38 gigawatt is already we have in PENA together with Tesla, we already make those products. So FY '25, this would continue and also 26 FY '26. And also in the United States, as for the expansion of our capacity, the Kansas is starting with 2170. So this is for FY '25 or second half or from the end of it starting up and then FY '26, we can start the mass production and in '27, maybe 30 gigawatt level can be achieved. So that's the rough time frame.
And that will be -- for IRA. So -- this -- the IRA expected equivalent to the IRA tax credit will continue in FY '25 and '26. So from the government, 45X is what we can apply to us. And the budget of this specific amount is not yet mentioned. So the green energy, USD 270 billion. So it's about JPY 35 trillion. So 45X and various views will be included. So that budget unless we have the detailed rules, we won't know the details, but in a year or 2 years, if we continue for those years, those companies were interested in this will not benefit. So I'm sure that this will stay for several years, and we can benefit. We can assume that this will continue for several years. That is what we understand. Thank you very much. Yes. Thank you very much.
Okay. The last question is [indiscernible].
Can you hear me?
Yes, we can hear you.
I have a IRA-related question. for FY '23, there was downward revision. But looking at the final profit number, it looks better than expected. So for the current fiscal year, carbon neutral expectation is very high. So given the IRA, what is the impact of the IRA in the financial results and your assessment?
Well, in terms of the size of the amount, that is stipulated by the act. So that's how the size is decided. We already have 38 gigawatt for the energy business. So simple calculation tells us that we have JPY 160 billion per year. So this is the number that we can simply calculate from the act -- so the location was important, I think. And also for FY '23. So there was a question in the past. Why not? Well, there was no detailed rules, but we included this time because of the decision by the accounting auditor, we can't do this on our discretion on our own only. This is a huge amount. So in the act, why it was changed is that in the Draft Act, it says that for the new accounting year of U.S. companies are refundable is applicable. However, that's the only information available.
For U.S. companies, their financial years from January to December, but in our case, even in the U.S. subsidiary, it is from April to March. Therefore, so from April, we can apply the new accounting year. And this is applicable for the refundable tax credit. And so this is the subsidy that we can include in the COGS. And whatever is outside of this is not clear because there is no rule announced. Therefore, we thought that we should just apply the deductible tax credit. That was the judgment of the accounting auditor. That's how we applied this. Did that answer your question? Thank you very much.
So that's all the Q&A session for journalists. Now I'd like to take questions from the institutional investors and analysts. Once again, please note that the questions are not accepted on the English line.
From Morgan Stanley, we have Ono.
Yes. This is Ono speaking. Thank you very much for this opportunity. About the IRA and how you consider it? I have 2 questions on that. So 45X based on that, 38 gigawatt hour, if you multiply, so output forecast needs to be multiplied. And I think that you get the JPY 80 billion from it. So as said, Mr. [indiscernible] said, at the full operation, JPY 160 billion could be or could have been booked, I thought. So what is the process to come up with the JPY 80 billion adjusted OP? So 1 kilowatt hour, $35 -- for example, OEM manufacturers can use it to reduce the price and so you are having it? And you multiply 38 to that, and you came up with JPY 80 billion.
So if you can explain how you have obtained JPY 80 billion -- that's my first question. The second question is also related to this. The -- what is the possibility of variability? So talking with the OEM, and this is the -- within the framework of the price and so forth, did you come up with that through that kind of discussion? Or are you just conservatively estimating this number? And even if it goes below that, it won't be -- you will not have to make the downward revision. Also about the suppliers' cooperation from the suppliers. Do you consider that as well? So thank you -- those are the questions that I want to ask.
Thank you. So 45X -- bill 38 gigawatt, and that would -- can be calculated to JPY 160 billion. And of that, about half of that, the aim of IRA, we cannot realize it alone. So inflation control and energy policy that is the introduction of the green energy, which needs to be accelerated. We have to work with other stakeholders. So from those perspectives, specifically, how this will be used is not yet clear. It's not yet decided. But JPY 80 billion is something that we can invest in the automotive business in North America. So remaining JPY 80 billion. For example, if the OEMs based on the aim of the IRA -- of course, that would coincide with what we want to achieve. So we are hoping that we can use it for that kind of purpose. So it's not yet finalized, but we consider that about half is the reasonable level, and that's how we book this number. That's my answer to your first question.
As for the paid variability or whether it would change or not, we want to more manufacture batteries as much as possible, especially Well, right now, Tesla is telling us to do so. So if it is no longer necessary, then the production will not be continued, but I think we are on the same boat. So otherwise, the improving the productivity and increasing the output, we are very much focused on that. So the potential variability is all based on the current condition to improve the efficiency and increasing the output. So it's more likely to have upside. So -- the remaining JPY 80 billion, what do you do with it? And with whom do we work with? Specifically, I'm sorry that we cannot explain that. So JPY 160 billion -- booking that as a profit once and the accounting treatment, without the detailed rules, we cannot decide. So as JPY 80 billion, in that sense, the net number will be JPY 80 billion. That is how we would like you to understand -- thank you -- thank you very much.
Next is Citigroup Securities, Ezawa, please.
Yes, Ezawa from Citigroup. For IRA -- there is one question. And the other is regarding the disclosure -- for IRA question... One point is in the fiscal year just ended. You had JPY 40 billion, you recognize it. But on the cash flow statement, in -- report, how did you treat this JPY 40 billion? And for the new year, you said 50% to 50%. So in that case, what kind of conviction do you have about the 50% range in deciding this? As a concept, you are allocating 50% to CapEx in the U.S. and 50% for the price reduction for cars. Is that kind of rationale you have?
Well, for the investment funds for Panasonic, I think this is very important. If you use this as a fund for discount and then you will be left with nothing. So what is the rationale for 50% ratio? That's the first question. The second question is about disclosure. The operating company subsidiary, they have a company corporate entity status.
But how about the disclosure in the current disclosure material, there is not so much improvement in the disclosure of our subsidiaries or operating companies. So when it comes to operating cash flow and inventory and working capital, is there anything that you can share in addition to what you have already shared for the new fiscal year? Could you share with us some more details about the operating companies? What number is improving? And how is it helping the overall earnings?
Well, at the timing of the accounting treatment and cash recognition, there will be some difference. For this time, DTA of JPY 40 billion has been recognized. Actually, with the U.S. authority, we have made an application and the tax deduction is applied. And in the U.S., over the 20 years, we can use this against the profits in the future. I don't think that it will take so much time, but that's the rule. So the cash itself -- We don't have JPY 40 billion for this fiscal year. Without announcement of the detailed rules, we don't know. But in terms of the cash recognition, normally, there is a time lag of about 2 years. That is something we can anticipate. But we will do the lobbying activity and other activities so that we can proactively work on this, but that's the assumption.
In the cash flow, it is included in net profit. But in the other working capital, it is offset. So there is no increase in cash by JPY 40 billion. So please understand that way. And regarding the 50% ratio, this is just a rough guideline, whether we use the fund for discount or others, nothing has been decided yet. So as I said earlier, for IRA Act, we want to understand the objective of this act correctly. So that the way we use the fund is in line with the objective of the act and mutually beneficial. And this, there is a car sales, we cannot make batteries -- therefore -- so that's why 50%, giving 50% equivalent in one way or another. If we are to do that, we would like to work out the details in those discussions.
Regarding the major KPIs, KGI disclosure, in terms of the inventory, we can share some of those specific data. But -- the sources of earnings. Well, there is an issue of PBR less than 1. But when it comes to how much we are earning, one of the measurements for FY '24 is major business divisions businesses. For those adjusted OP amounts, we would like to expand our disclosure to these items. -- towards the Q1 announcement, we are discussing specifically how we can do that, but that's the direction. So your point is well taken. Based on that, we would like to consider how to improve disclosure. The content of adjusted OP is to be disclosed for a major part of the businesses, we would like to consider how to improve this closure -- thank you.
Regarding adjusted OP for the new pieces of information, is it for entertainment, housing and those businesses which have weaker earnings, are you going to intentionally do that?
For more larger -- for larger businesses, we are thinking about improving disclosure -- but specifically, please wait until the announcement for the first quarter results. Thank you very much.
Next from SMBC, we have Katsura.
I'm Katsura of SMBC Nikko. Thank you very much. I have 2 questions. First, Slide 9 and 15. The price hike of the raw materials and logistics and the price revision to counter that and also the assumptions for this fiscal year. In the past, from '21 to '22 and '23, if you look at those years, the raw materials and logistics costs increased about more than JPY 400 billion. In terms of the price revision or countermeasure, JPY 250 billion and rationalization 3-year cumulative, that would not be sufficient to offset the price hikes in raw materials and logistics.
So your way of thinking in the single year, it has been reversed. But this year, when you created this forecast or are there any ideas, especially the raw materials and logistics costs, there are companies who are having the advantages. And is it due to the uniqueness of Panasonic to have this current situation? The second question is the clarification but the Blue Yonder in the market, the impairment loss is being discussed. So it's not just you or Panasonic, but many companies due to the change of the interest rate, the booking of the impairment loss is being discussed. So this time, the detailed business briefing was conducted, and it was mentioned that you are in the investment phase and you are targeting the very aggressive growth. So based on that, it is the case that you do not need to book the impairment loss. Thank you.
So for 2 years, until now, the hikes of the raw material logistics were difficult for us. For FY '23, the coverage of the price revision is about 70%, 7-0 to counter the hikes of the raw materials and logistics. From Q1 to Q4, that coverage has been increasing. And for FY '24, as you can see on the slide, 1.5x is expected, especially energy -- how the prices are determined. Actually, the reflection of the raw material price hike will be delayed to FY '24, but we are catching up. So this is the major positive effect, so a 3-year cumulative number, roughly speaking, about 60% to 70% of the price hikes in the raw materials and logistics are offset with the price revisions. That would be the case for FY '22, it was only 30% or so.
So it's not all price revisions, of course, is the corporate activity. So we have to do the rationalization as well. So the remaining portion through the rationalization and the production and increase of the sales, those are the factors that we consider to offset the remaining part. So that's what we have been doing. And as for the raw materials, -- it is on the rise slightly. And in Energy, the lithium is staying at the high level. Still, that is the case. And also, we do not disclose this, but the housing raw materials are actually increasing. But in comparison to the year before, we are not seeing the major increase of the raw materials.
So the number itself has been shrinking. So that is in relation to the raw materials. As for the Blue Yonder impairment loss possibility WACC, weighted average capital cost in terms of WACC. So WACC is on the rise and goodwill and the present value is being used. So in Blue Yonder, the decision or the judgment of the impairment loss, risk free rate, 20-year U.S. government bond. If it's a par with that, we will consider that as a level. So it used to be 1.9% to 2%. And our judgment on the impairment loss as of 1st of January, we used this interest rate. So that is the rule that we have. So at that time, it was 4%.
So double of the previous number that I mentioned. So WACC has been going up and Blue Yonder, whether it's okay or not, was discussed. Of course, the -- during the impairment loss testing and when you look at the present value how should you evaluate this? We have shrunk the gap. In terms of numbers, about JPY 50 billion is the level that we exceeded in the past was JPY 100 billion, JPY 200 billion or so. So whether there was an impact, yes, there was an impact. But it did not affect the book value. So that's what I can say about the Blue Yonder. Thank you very much.
Now we have already passed the scheduled ending time, but we'd like to entertain one last question from Nakane from Mizuho Securities. Sorry, we can't hear you, Nakane. We would like to move on to the next question now. Goldman Sachs, please.
From Goldman Sachs, my name is Harada.
Yes, we can hear you.
I have one question. Excluding IRA impact for each business, what is the underlying performance?
In the previous year, there were different reasons for the downward revision for the final full year results. But this year, it seems that there is quite a lot of improvement in each of these businesses. In the past, for industry well, it is still challenged. But for energy and in data center, there was some difficulty or also consumer products as well.
But if you look at the macro economy as a whole, it seems that this year, the sentiment is still weak. Some companies are assuming that weak sentiment again for this year. But what is your assumption for the plan? Excluding IRA? How do you assess the business sentiment for the full year? For example, for the first half, it's difficult, but it's improving in the second half. So if you could answer even qualitatively, I would appreciate it.
Well, in terms of the business sentiment on the presentation material Page 14, we are showing some statements. Well, there are some differences depending on the business. For industry and others, well, there is some toughness going to continue. And for energy, the blue color represents positive and the red color is negative. So you can see differences. In Connect, for example, for the aircraft business, for the Q4 '23, there was a quick recovery probably for FY '24 compared with the pre-COVID 2020, maybe we can recover 90% of the demand and also, auto production, we also expect some semiconductor problem to be unwinded and production to recover going forward. I think that's the view overall for the industry and our company as well.
So given that, there are some difficulties in some areas. But in other areas, we have some bullish expectations. So please see the details on this page. Having said that, if there is any major recession of the economy, are we expecting that? We are not expecting such a significant event. But the ongoing tone of the business is something that we are watching carefully. And as we announced those numbers for this fiscal year, we have carefully assessed those sentiment. And so please understand that the numbers we have announced is based on what I have just talked about.
Yes, I understood clearly.
With this, we would like to conclude FY '23 full year financial results announcement. Thank you very much for your participation today.
[Statements in English on this transcript were spoken by an interpreter present on the live call.]