[Foreign language]
Hello. This is Shinada from Panasonic Corporation. Thank you very much for your participation out of your very busy schedule. Thank you very much for coming over to this IR day. I would like to show my gratitude for always supporting us. Without a doubt, I would like to explain about the mid-to-long-term strategy for Panasonic Corporation. These are the agenda that I would like to cover today. In the first part, we're going to be sharing you with the goals and the vision, and then the strategy. The last part is going to be about the 30-year strategy. From here on, I would like to explain about the position that I understand. As you know, the Panasonic Corporation was launched. This is the group of appliance company and life solution company in China and Northeast Asia.
Three companies which are related to the lifestyle are succeeded in a comprehensive way. The appliance company was dispersed, which was home application and air conditioner businesses and cold chain businesses. These are all consolidated. We are aiming to have a comprehensive growth. The Life Solutions Sompany, we had a scheme of house planning of JPY 2 trillion. However, from FY 2020, we have been changing our strategy to intensify on the B2B businesses. We always have been trying to make the best judgment at each time. However, there might not have been a consistency sometimes. As a result, we were not able to create a profitable structure. We have been continuously working on low growth and low profitability. Those reflections have led us to change us. We are no longer making some judgment adversarially.
With long-term perspectives, we are going to be trying to change ourselves. That is how we want to change our management. How are you going to be changing specifically? That is what I'm going to be touching upon. On the left-hand side is up until today. Right-hand side is going forward. When we just refer to what we have been doing in the management, we were short-term oriented and department oriented, and execution capability was rather weak. With the operation side, the whole portfolio and the department portfolio was observed in strategical gap. The execution rate for the investment was not enough. Because of that, the growth was not boosted. In the operational side, we have been looking at the optimization of each department. However, company-wide, the control was not enough.
Therefore, we were only able to better and improve ourselves by reducing the cost, which made us lag behind the competitors. With that understanding, from here on, we're going to be continuously looking at the long perspective to change our management shift. We are going to be executing what was decided within the operational front in order to create a business which is going to be number one and number two within the industry. We will be selected and concentrating our works. The investment will be launched speedily under my authority. With the strong cost capability, we are going to be having the function, which is corporate-wide function, right under myself. With that, the top-level operational capability will be realized. The foundation, which is about the organization capability, we will be strengthening that too. The vertical, it is a divisional organization.
This is about the responsible management. For the horizontal axis, this is a company-wide strategic planning and execution function added. The governance and HR system is also going to be restructured thoroughly. This one is based on the long-term perspective in order to have a management that is going to be continuous change. In order to start with our new system, first of all, we clarified our purpose, which is our social meaning of what we are therefore. We have been defining our mission and vision, which is just as you can see. Purpose, in order to realize, first of all, within the lifestyle business area, we have been defining our goal. In order to realize, we have been defining what businesses are necessary. The left-hand side is a goal. Human, society, and the globe.
For each one of them, respectively, we want to be an organization that is needed for them. The right-hand side describes what is needed for the businesses: the B2B clients and B2C clients. We are going to be providing values. Within the lifestyle business, we want to be an overwhelming corporation. To that end, we're going to be working in unity. This time, in order to accelerate to achieve our goal from the perspective of positioning and advantage, we have been setting seven priority business areas. The chart is a bit busy to look at. However, as the business to lead growth, this is first of all air conditioning system and the overseas electric materials and energy solution COT refrigerator. For the businesses creating stable profit, it is about Japanese electrical materials and display case and home appliances in Japan.
For the growth area, within the target area, the market growth is already a high business. For the stable profitable businesses, the positioning is high within the market. We are already having a top share within that market. Each of the growth driver and the profitable driver, I'm not going to be detailing on this currently. As you can see, the unique technological capability and strong sales channel and the supply capability and the know-how that we have been accumulating from the past and the long-term reliability of the products, all these are held. Therefore, these businesses have high competitive strength. From number one to number six, these are the so-called B2B businesses. For these, each of them are going to be having the B2B account management.
It is going to be promoted by combining various products in order to cater to the customer's needs. We see that there's a high potentiality. When we are going to be achieving this, we can provide a better proposal to the customer side. For each of the businesses in FY 2031, we have the KPI launched onto the right-hand side. The growth businesses, the four of them, are indicated by the industry and the region. They are going to be achieving more growth than the region or the industry. As a result, overall, we are going to be aiming for over 8% CAGR for sales and for the stable profitability. The EBITDA rate is going to be aimed for more than 5 percentage points. The chart indicates how the seven businesses are located. The left-hand side top, this is air conditioning system.
In Europe, the growth was 20% in annual growth for the past eight years. Air- to- water, the heat pump used, the heating devices using water, nuke water has been growing for 40%. The GIENO and NANOENO combined, which is unique, this is the active purifying technology. For the first time ever in Japan, we have been launching the air conditioning coordination system. After the launch, we have been given various inquiries. The second is about India, Turkey, Vietnam, focusing them as the focal countries, focal regions. We are expecting that we are going to be having a high growth here. Already, we're the number one within these three countries. The third is about energy solution, which is mostly about household fuel cell and HEMS controller power conditioner.
Within the key products of this area, we are already ensuring the number one position last year, October, for the carbon neutral ages. People expect highly for the pure hydrogen fuel cell. And this is already launched. For the fourth, this is about CO2 refrigeration system. The supermarket and the convenience store has the display. I would like you to understand it's a display refrigerator system. The natural refrigerant is using CO2. Environmental-wise, people focus and have a keen eye on this product. Our company, within the last five years, we have been delivering these systems 12%. It is 2.5 times more than we have been delivering from the past. Therefore, we are near to oligopoly, having 70% of the Japanese share. For the fifth one, this is domestic electrical construction material, LED lighting materials and wiring apparatus, residential distribution board, and conduct tube.
We are boasting number one within Japan, the electrical workshop. Sixty thousand sales, which are accounting for 90% of the Japan sale, are held by us. Sixth of all, this is about the display cases, the refrigerator cases. Hassman Food Distribution is run in North America. We already have 25% of the share within the whole world. We have a strong selling channel. We have a strong machine in the field base, which is abbreviated as MIF. MIF is meaning that the number of the operation apparatus within the market is moving, which is going to be a big foundation for us. Seventh, this is about home appliances. As you know, in many of our products, we both number one share and the long-term reliability product capability is our big strength. Going forward, the circular economy ages are coming.
Therefore, a good product should be used for a long time, which is a request of the ages. Therefore, the product with a long-term reliability is going to be contributing to a big competition or competitive edge. The premium product, which is the category that has higher value added area, we already have a very high share as well. Therefore, this is a source of our strength within the market as well. Talking about the seven priority businesses in all of the markets, we are showing a very strong and unique strength. I would like you to think that we have a strong potentiality. Towards the challenge, these are the portfolio strategy for aiming for the mid to long term. Left-hand side is FY 2022 structure.
According to the lump sum of the business, we have the leader and leader candidates and stable revenue and qualification or qualifying. We have categorized into four. Based on this, we select and concentrate on our works. In the very low area, this is 0.7 for the relative market. This indicates number one share or number two share within the market. On the right-hand side, when a business is included within zone, that means that the business is already selected by the customers. We are to expect a very high profit. In 2030, we would like to be number one or number two businesses within all the seven priority businesses. The sales should be heightened to 75% level. Through these changes to our business portfolio, we will be achieving the green impact that we aim to show.
The left-hand side left bar graph shows the CO2 emission within the value chain. In FY 2021, it was 0.95 million tons emitted. This is a total of the Panasonic Group, 90%. This for the seven businesses, we are going to be making the investments and making the growth. While doing so, we are going to be decreasing the energy usage and shifting to natural refrigerant. Therefore, by FY 2031, we would like to decrease our CO2 emission into half. CO2 emission is large in air conditioner and ventilation light and house apparatus. Therefore, by inverters and saving energies and expanding LED, we would like to decrease the usage of energies. The other one is the green bar graph. This is a graph showing the level of contributions to decrease the CO2 emissions to the society. It is not just our own value chain, but with our activities.
This is a chart that indicates the contribution that's going to be ripple-effecting to the whole society. For 2030, we are to grow the A2W within the Western world and energy solution divisions in the world and also make an efficiency for the lighting control. With this, along with our businesses, we are going to be contributing to the environment. In FY 2031, we would like to be one of the top companies working for sustainability. From here on, I would like to describe about the third year strategy where we aim for. The chart that you are seeing is the top important topic for the next three years. I would like to go into details. First of all, I will show you the overall picture of how we intend to achieve profit growth over the next three years.
We have set a JPY 350 billion EBITDA target for 2024. The breakdown of the JPY 147.5 billion increase to achieve this goal is shown from left to right by business segment and from right to left by measures. For the businesses on the left, we have set profit growth in seven priority businesses as follows: JPY 60 billion in growth businesses and JPY 50 billion in stable revenue businesses. As shown in the step chart from left to right, we will increase profits through company-wide operational reforms in addition to increased sales. We will strive for an EBITDA increase by JPY 145.7 billion by doing this. The breakdown of the profits from sales increase will be explained later. 80% of the increase is expected to come from sales increase, which exceeds the industry level due to aggressive investments into the growth businesses.
The remaining 20% comes from the recovery from the impact of flooding in Malaysia and supply chain issues. Next, I will explain profit growth in seven priority businesses and company-wide operational reforms. First is about the seven priority businesses. I will leave the specific strategies and measures to the heads of each company later. I would like to talk about the aim to achieve JPY 110 billion of profit growth with the seven businesses, which accounts for three quarters of the three-year EBITDA increase. This shows the change in the profit structure of the seven key businesses over the three-year period. The horizontal axis represents net sales. The vertical axis represents EBITDA ratio. The size of the boxes represents EBITDA amount.
The growth businesses on the left half are expected to increase profit mainly through sales growth, while the stable revenue businesses on the right half are expected to increase profit mainly by strengthening operations and increasing value. I'd like to talk about the highlights of how the focus businesses are going to grow EBITDA. First is the HVAC system business. In the year ended March 2022, profits were low due to soaring raw material logistic costs, as well as the impact of flooding in Malaysia. Therefore, profits ended at low levels. However, over the medium term, we will make investments in production bases to enhance production resilience and expand the equipment and engineering businesses, mainly in Europe and Japan.
In the overseas electrical construction materials business, we will achieve double-digit annual growth along with market growth in the three priority countries of India, Turkey, and Vietnam, where market growth rates are high and our market share is high. In the energy solution business, in addition to improving the profitability of photovoltaic power generation systems that are weighing on profitability, we will accelerate the development of high-value-added systems that link power generation storage, mainly in Japan. We will also strive to enhance overall profitability by strengthening three battery systems. Next, regarding the stable revenue businesses, for the electrical construction materials business in Japan, we will improve the profitability with greater sales and earnings as supply issues caused by supplier fires and other problems are being resolved and the result of new revenue growth from solution-based engineering.
As for display cases, in addition to increasing market share in Japan, we will aim to improve productivity and profitability also in the U.S. Regarding home appliances in Japan, we faced headwinds in March 2022, such as sales decline in response to absence of demand from stay-at-home trends and soaring raw material and logistic costs. By promoting operational reform and development production and sales by enhancing the value we provide in the market, we will strive for profit recovery. In addition to further increasing profitability through premium products, the company will also take drastic measures to its sales and marketing efforts. That was basically an explanation of the key points for earnings growth in each business segment. I hope you can hear about the details from each divisional company head later on. In order to accelerate profit growth, we will boldly change our approach to capital allocation.
In the new structure, starting this April, we will align with Panasonic Holdings. We will be able to execute investments with a considerable amount of discretionary authority. In other words, because of the divisional company now in place, this will be a material change. We are now able to make flexible investments, including M&A, within the scope of operating cash flow in the priority business areas that we have defined. Even in the case funds are insufficient for themes that match the growth investments of Panasonic Holdings, such as investments in HVAC systems or in hydrogen energy technology platforms that I am in charge of, we are thinking about adding from the growth investment funds of Panasonic Holdings. Based on this approach, we plan to invest by ourselves as well as with Holdings more than JPY 365 billion over the next three years.
Specifically, we will invest JPY 120 billion in growth businesses in addition to discontinuous investments. This will be for the expansion of the air-to-water bases in Europe, the air quality business sites in North America, and expanding our base in southern India for the overseas electric construction materials business. We will also be investing in resilience. In addition, we will invest in growth investments in energy solutions, such as the expansion of the hydrogen business. We also plan to invest JPY 110 billion for the businesses with stable revenue in order to improve efficiency. We will be investing for automation streamlining and new construction methods that are our major bases in Japan. These investments will include IT infrastructure reinforcement investment and DX investment, which will be JPY 33 billion and JPY 200 billion related to green impact. Next is company-wide operational reforms.
As you can see, we will strive to offset a total of over JPY 130 billion to counter the risk of environmental deterioration, such as soaring raw material prices and exchange rate fluctuations over the midterm three-year period through continuous cost structure reforms and price revisions. Regarding reforming the cost structure, we will aim to achieve JPY 25 billion in the company-wide direct materials cost competitiveness initiative and also work on the China cost model reform, as well as cost reduction of indirect materials, such as the reduction of promotional materials. Furthermore, we will be establishing a better SCM and reducing SKUs. We will be developing a design platform through SCM ECM reform. We will achieve a total of JPY 80 billion over the three years through these reforms.
Also, as an impact from revising shipping prices of electrical construction materials and overseas HVAC, we are expecting improvement of JPY 50 billion. That was basically an overview of the initiatives we have in place. Let me talk about strengthening the cost competitiveness of direct materials costs. The biggest challenge for further strengthening cost competitiveness of direct material costs going forward is bringing company-wide efforts to the next phase to optimize efforts of each field unit, which are still limited to individual optimization by making them more company-wide. Until now, each development and design division had individually selected manufacturers and parts to be procured. Although improvements have been made in individual divisions, the overall cost competitiveness has not yet been achieved that is comparable to competitors.
In the future, the procurement department will be involved in the parts selection process at the development stage, and new systems will be introduced, and IT controls will be put into effect. To this end, we established a procurement department in the strategic headquarters directly under me in April. We will promote the four initiatives shown in the bottom row. I will explain the third part of these initiatives, the centralized contracting of electrical components, which is expected to have the greatest impact. These both are examples from the home appliances business and washing machines, where we apply to other businesses. In the example on the left, the motor used in the washing machine was deployed in Panasonic Cycle Tech's electric bicycles under a centralized contract.
In the example on the right, a solenoid valve used in the same washing machine was used in a bathroom ventilation dryer manufactured by Panasonic Ecosystems. There are a lot of these examples available internally, and this is what we were able to identify in the initial stages. Going forward, we would like to accelerate these efforts going beyond divisional company boundaries. Next, I'd like to talk about our initiatives in the home appliance market in Japan. It's a matter of delivering the values of our products appropriately to our consumers. Therefore, we will take on responsibility for inventory risk and specified prices. Starting from 2020, we will be starting this effort. More than before, we will be needed to control our distribution inventory at a higher level. We will be able to sell high-value-added products at reasonable prices, thereby ensuring and maintaining reliability.
The relationship between consumers, distributors, and manufacturers is shown in the diagram on the right. We are moving forward with the realization of the spirit of three-way satisfaction for all three parties. As a leading company in the home appliances business in Japan, we believe that we have a mission to revitalize the industry by accurately communicating the value and attractiveness of our products, thereby changing the current trend of price competition. With this, we would like to stabilize earnings, and we intend to expand the range of products subject to this policy in the future. In addition, to enhance the statistics, we will be revising the shipping prices as well. In light of the higher logistic prices, we would like to ensure that our prices are revised to appropriate levels. I have explained various amounts of things.
In order to accelerate the speed and ability to implement the midterm strategy I have explained above, we will firmly implement ESG as well. To accelerate our environmental-related strategies, we established the position of CGXO in April directly under me, which stands for Chief Green Transformation Officer. Under the CGXO, we will promote the GX strategy, which is integrated with our business strategy. In addition, for DEI, diversity, equity, and inclusion, we will continue our efforts to maximize the performance of the organization and its people. Also, for governance, under new Panasonic from April, from the outside, three professionals have joined as directors on a board. They have knowledge and experience that we do not have. The decision-making functions of the board will be strengthened with their participation. They will also be part of the advisory board that will be newly established.
From an external point of view, we would like to have discussions about our management strategies. Next is about investor relations and strengthening the implementation into our management. This will be the start. Today is Investor Relations Day. We will be enhancing our disclosure so that we can strengthen communication with you and have a market perspective inside our corporate company. In terms of disclosure, as shown on the right, we will disclose key financial indicators for each company and set KPIs for non-financial indicators in line with the strategies and characteristics of each business to ensure continuous communication. The supplementary materials that have been handed out include the key financial indicators. From this time on, cash flow and invested capital of each of the divisional companies will also be subject to disclosure. The IR schedule for fiscal March 2023 is also shown below.
Finally, we have set the KPIs for March 2025, as shown. In particular, in order to improve our ability to generate cash flow while investing in growth over the next three years, we have set EBITDA as our most important KGI. We have set a target of JPY 350 billion by March 2025. In addition, in order to ensure discipline and investment efficiency as we execute a substantial investment over the next three years, the ROIC target is 10% or more, exceeding cost of capital. The cumulative operating cash flow target is JPY 660 billion. They are all high targets, but we do not think they are unachievable. We will continue to manage our operations so as to realize our goals. These medium-term KGIs are considered only as a milestone and a passing point toward 2030.
We aim to become the number one and number two EBITDA businesses in the industry. That is all regarding the mid to long-term strategy of Panasonic Corporation. Hereafter, business strategies of HVAC systems, Electric Works, and LAS will be explained in detail by each divisional president in the next few minutes. Meanwhile, we plan to explain about cold chain solutions in China and Northeast Asia at an appropriate time, around the end of the first half of the fiscal year. In our recent financial results, we have included one-time items or risks in our plan in order to take drastic measures in the cold chain solutions China business. We will explain the contents and details of the directions of these companies next time around. This concludes my presentation. Thank you very much for your kind attention.
[Foreign language]
Now we're open for questions. Nakane from Mizuho Securities, please.
[Foreign language]
Nakane from Mizuho Securities, thank you very much. I have two questions. First, you have now become an operational corporation, and your authority is now larger. You are going to be having very speedy and fast decision-making. That is okay. Shinada-san, you must be very fast in order to make your decision. Therefore, you need information. You used to be a product-out company, and then that led to you for an unwanted result. The staff of Shinada-san and the condition of the work, how are you going to be collecting all the information needed for you to make very fast decisions? I would like to ask of you your view. That was one. Number two question. Right now, we are going to be having the three people, external directors. How about your side?
The usual general directors, I would like to know what is the reason, what is happening within your realm or boundary in order to accept these three new officers. Thank you very much regarding the information that I should collect.
[Foreign language]
Basically, I am going on with a one-on-one meeting with the division president. By exchanging a very candid opinion, that's going to be the basis of my management. Twice a month, we're going to be holding a strategic meeting by that. Right now, it says about division head and the strategic people who are right under me. The so-called CXO and other people are directly under myself, reporting to me. Therefore, the vertical axis and the horizontal axis, we're trying to cover all the things that are necessary for information.
Basically, for the head of the divisional corporations, the market movement and the marketing department and division is going to be responsible for collecting information. Along with that, I am going to be reported directly for the marketing people. Therefore, by the marketers' information and the head of the division information is coming in. Also, we're going to be having a strategic meeting. Therefore, all these informations are going to be intertwined for me to make decision-making. Second question, it's about the external directors and officers. Our corporate culture is existent, and we are intended to move it in a different way. The members are diverse in talent, and Haruta-san is already working for a long time, including the company called BH. This person knows very well, very well-versed about our company organization.
As written here, management, he has very high knowledge within the management. Mason, the middle person, this person is coming from the Netherlands and is very proficient in various languages. He has been working in a long marketing area for a long time. He has a B2B, B2C, and B2B company. We are working on those areas. If he can provide us advice within those areas and others, we are highly expecting him. Ms. Kaba is owning a company herself, and she has a very high sensitivity, and she has a very strong logic. We are promoting on the DEI diversity issues. Ms. Kaba is currently working for the advisory board too. Every three people have unique backgrounds.
Along with that, while we are going to be discussing with them, first of all, we are trying to break away from the traditional culture, corporate culture that we have. We want to create something new with them. Of course, the marketing area for Mason, he has been coming over for an advisor from a year before. The product that has been advised from him is going to become a product commercialized. I would like you to respect and expect highly.
[Foreign language]
There is a question online. Mr. Yasui from UBS.
[Foreign language]
Thank you for taking my question. This is Yasui from UBS. Can you hear me well?
[Foreign language]
Yes.
[Foreign language]
I'm sorry. I'm participating from online. I have two questions. My first question is improving your operational capabilities that you refer to in the presentation on page 17.
For this, is it a typical type of it looks like a typical step chart when it comes to improving your operational capabilities. Now, we have a holding structure. Can you talk about your focal points to show your determination of accomplishing this? My second question may overlap, but I think cost and operation, on top of that, producing products with added value would be critical. I do not think you explained that much about this. Maybe that was intentional, but how are you going to generate added value going forward? That is it from me.
[Foreign language]
Thank you very much, Mr. Yasui. The focus areas, like mentioned earlier, is going to be about each of the businesses, the localized optimization being rolled out on a company-wide basis. That will be of the utmost focus.
For the past six months, ever since LAS was established, the Living Appliances and Solutions Company, we were focused then after on what kind of opportunity resides after we shift to the divisional company system. We did quite a lot of research, and we were able to feel that there were substantial benefits that we could reap over the medium term, including the amount of impact. We believe that this was one focal point. That is one thing. Another thing is SEM, ECM reform, which actually is the greatest contributor when you look at this chart. We are still doing a bucket relay when it comes to SEM. To be honest, efficiency is not good. Therefore, there is a lot of waste and things that are stagnant. When I was talking about investments, I talked about IT investments as well. The amount is going to be quite substantial.
For the IT investments, while we make these investments, we are going to proceed in reaping the benefits. That amount is expected to be quite significant. That will be one of the big points of the midterm plan. Blue Yonder software will be utilized too. In Kakigawa, we make the front-loading washing machines, and we have already designated it as a leading product for the front-loading washing machines. As a result of our trials, we would like to ensure that we roll it out company-wide as soon as possible so that we can generate a significant impact. Secondly, it was about added value, about the product competitiveness. We do believe that it is critical, and we do believe we excel on that. We intentionally did not show it because it is not the product competitiveness that is going to determine who wins or loses.
It's more about operational capabilities that determine who succeeds. When it comes to a circular economy and when you think about how society is going to be like in the future, of course, the product competitiveness is important, but it's about quality products being used over the long term. You need to gain trust over the long term. It's about providing services to customers over the long term, which will become critical. That is why we didn't accentuate product competitiveness, but rather talked about operational capabilities as well as supplying our products and connecting with our consumers by offering services. We believe that is key in our home appliances business and also for B2B businesses. I did touch upon this slightly at the beginning. We are in the HVAC systems business as well as the cold chain business.
We also are in the electric works business. We have three businesses B2B. Over the same platform, by managing the accounts for the B2B businesses, the platforms are already heading towards unification. By connecting with the customers constantly, we believe we can create additional value. It is not about winning just with products. It is more about connecting with the customers and ensuring that operationally you are successful. I think both in the B2B and B2C businesses, this is the way we are going to generate value. Thank you.
[Foreign language]
Thank you.
[Foreign language]
The time is nearing. Therefore, I will accept two more people. Only one question each, please. Onal San from Morgan Stanley Securities, please.
[Foreign language]
This is Onal from Morgan Stanley Securities. Thank you very much for today. I would like to ask you about fixed expense and the allocation, how you view this.
Specifically onto your material, it's like 15 for the seven priority businesses. You have been indicating the effect of the profit. By businesses, I'd like you to share the fixed cost. Mr. Shinada, you're looking at the overall of the whole company. You're thinking about the allocation. I would like to know to which extent have you been looking into the details. Are you already solidified with your ideas or not? The personnel system and the discretion by having this operational corporation system, if it is going to be expanded, I would like you to share with us how you are thinking about the personnel issue. I would like to start from the personnel issue.
[Foreign language]
The Panasonic Corporation has an HR system by divisional organization.
Because of that, each of the industries that they face are different, and the interests of the companies are different. Therefore, and of course, CCAs will be facing a much more portion in the overseas or else other company businesses are facing more into Japan. Therefore, it's difficult for us to be in line with everything. We just thought that was difficult. Therefore, we have defined that the local area could decide on the local personnel issues. Of course, the total organization or orientation will be within the whole corporate. For about the expenses, Nakashima-san will be explaining. Regarding the fixed cost, please refer to slide 13. This is a step chart. Within the midterm three years, we're going to be having a fixed cost increase. The objective is seen in the right-hand side.
We would like to create a system where we're going to be expanding on the sales and profit. In order to do that, we're going to be working in advance and strategically to put the fixed cost. With that, the sales profit is going to grow. The last part, the production increase is going to be covering the expenses that is going to be increases. The amount, where it is large, it is about HVAC businesses and overseas construction materials. Those are the leader businesses. These two businesses are leading the expenses. The budget for the headquarters, the branding strategy is going to be utilizing the fixed cost and marketing too. Overall, Panasonic is going to be taking those activities. Those are the expenses that should be done in a common Panasonic company, such as increasing the IT expenses.
I think Onal San wanted to ask us about the overall holdings fixed cost as well. That is how I understand his question. To that, in order to answer, we're still underway. Therefore, during this midterm, we would like to revise ourselves. In parallel, we are going to be working. If there should be any development or advances, we're going to be reporting to you.
[Foreign language]
The final question is from Citigroup Securities, Isela San.
[Foreign language]
This is Isela from Citigroup. Thank you. This is my only question. Regarding the three-year step chart on a cumulative basis, as well as the one-year step chart for this fiscal year, I compared the two. The three-year target for the improvement items like price revisions and cost improvement, which is 50 and 80, it's 30 in total, 130 in total.
For more than half of that, JPY 82.4 billion, you're expecting to do this this fiscal year. Raw material prices, the deterioration of the environment is going to be offset by these efforts. When you do the math, in year two and year three, it seems that the improvement items are going to be small in contribution. Therefore, over the long term, it seems that the results are going to be front-loaded. Do you think that the impact is going to be greater down the road compared to your expectations? Have you not accounted for some item that's not shown here?
[Foreign language]
I'll give an explanation first, and you can follow up. Looking at page 17, I think that chart is the easiest to understand. Referring to that slide, on the very right, we show JPY 50 billion.
The majority of it is going to materialize this fiscal year. Everything is not included, but the majority is going to be accounted for by this fiscal year. In year two and year three, the company-wide, 70-80% of the JPY 25 billion, which is the company-wide reinforcement of direct material cost, is going to start to happen and kick in from the latter half of the year ended March 2024 to March 2025. That is what we are anticipating. For 2023 March, the greatest contributor is going to be indirect material cost reduction and the review of shipping prices of home appliances in Japan, electrical construction materials, and overseas HVAC systems. That will have the greatest contribution this fiscal year. That is what we are anticipating.
For the year ending March 2024 and 2025, raw material price increases and FX impact and other items, to be honest, we are not able to get a complete graph. We have not done the total addition. Roughly speaking, that's what we are expecting. Do you have anything to add? As Mr. Shinada mentioned, basically, that's the notion of which we have put together the numbers. The JPY 80 billion is a stretch target for the structural reforms. For year one, March 2023, after we made the medium-term strategy, various challenges have emerged, like Ukraine and Russia with higher crude oil and resin prices. Out of the JPY 80 billion, we would like to be front-loading the JPY 40 billion impact for this fiscal year. For prices since last year, mainly around B2B, we've been working on the revisions, but we will include B2C for this fiscal year.
[Foreign language]
Forty billion out of the fifty billion is expected to be achieved in year one. For the rest of the midterm, which is the two years, is it just going to be the balance between the two?
[Foreign language]
As Mr. Shinada said, we would like to fulfill our responsibility of being a leader in the industry and reap the benefits by doing so. It is a matter of how bold we can implement these price revision efforts. This would be an add-on if we are able to achieve it. Thank you.
[Foreign language]
That concludes that.
[Foreign language]
That is on it. Oh, I am sorry. May I say one more thing? Yesterday was IR day as well, and there were some questions around ROIC. I would like to say one thing. For all of the divisional companies, the most important KPI or KGI is EBITDA.
The majority of the businesses, we are in a challenger position. We would like to make investments so as to raise EBITDA. We would like to also look at ROIC to measure its efficiency and ensure that ROIC is higher than cost of capital. ROIC is set as a target for investment discipline. Our cost of capital right now differs by business, but it is close to 4%-6% for weighted average cost of capital. Basically, we set the target of ROIC, which is 10% or more, because we would like to exceed cost of capital. However, on a pinpoint basis, when you look at it, it is currently at 10% plus. By having a ROIC target, we will be applying it as a measure in gauging return. That is what we apply to our divisional companies as well.
[Foreign language]
That concludes Panasonic Corporation's part. Thank you very much.
[Foreign language]
I'd like to—this is Materia from the Heating and Ventilation AC Company, and I would like to talk about the midterm strategy of the company. I'll briefly introduce our business. The Heating and Ventilation AC Company is developing equipment and engineering solutions utilizing air and water-related technologies. B2B equipment such as HVAC, electric, construction materials, building, and housing materials sold through housing and construction channels account for about 70% of total sales. In particular, we have number one share in the global market for ventilation fans and gas air conditioning systems. Sales of B2C equipment account for about 20% of net sales. In addition to equipment sales, we also provide engineering solutions such as remote monitoring of commercial air conditioning equipment, tunnel air ventilation and purification systems, and regeneration and supply of chemical solutions, mainly to semiconductor plants.
We are now facing various social issues as shown in the chart, and there is no time to spare to work on solutions. The Heating Ventilation and AC Company has many solutions that can contribute to solving these social issues. They are engineering solutions such as low GWP refrigerants and ABS absorption chiller systems, standalone power air conditioning, GHP/EHP hybrid systems, active air purification and humidity control, and construction and maintenance digital transformation. We will continue to expand the areas where Heating Ventilation and AC Company can contribute. These are our goals. Our mission is life, tech, and ideas, which is to make people, society, and the earth healthier. Our goal is to be a company that is able to provide the best services to our customers. Our vision is to be a global top-class professional company that creates a healthy and comfortable life and society through air and water technologies.
Here's our commitment. It is vitalize the future with air. The vision is expressed as our intention to confront various social issues with the power of air. Here are our values. As shown in the chart, we will realize three values. In accordance with end users, property owners, and builders, we will provide values such as sustaining the plant with air, promoting well-being with air, and energizing lifestyles with air. These three values are our commitment to society, and it is our purpose. On this page, we explain the specific measures for the HVAC Company in light of Panasonic Corporation's target of halving CO2 emissions by 2030. Under Scope 1 and 2, we will reduce CO2 emissions to virtually zero by 2027 for our overseas sites and by 2030 for all sites, including those in Japan.
In Scope 3, we will accelerate the spread of products equipped with inverters and DC motors and further improve the energy-saving performances of products to reduce CO2 emissions by complying with laws and regulations, changing models, and so on. In terms of refrigerants, we will accelerate the shift to lower GWP refrigerants while sustaining environmental regulations in each country. In addition, to contribute to CO2 emissions reduction, we will promote coordination, integration, and innovation of air conditioning and ventilation equipment and strengthen our efforts in air- to- water in Europe, etc., to help our customers reduce their CO2 emissions. In addition, as part of our distributed energy business, we will promote initiatives to effectively utilize thermal energy using ABS and propose examples like the Mushroom Center in Ueno Village, Gunma Prefecture, to a wide range of customers.
We will invest more than JPY 90 billion in green impact investment in the cumulative period of the next three years to reduce CO2 emissions. Here are the markets we will be placing emphasis on in the future going forward. In particular, we will focus on the residential and light commercial sectors. As shown in the chart on the left, most of the places where we spend our lives are inside buildings. It can be said that it's important to increase the value of air in these buildings. As you can see on the right-hand side, the light commercial fields from residential to spaces that are up to 2,500 sq m is an area where the value of air quality is highly valued. For example, this will be clinics, hotels, nursing care facilities, and so forth.
In addition, we have effective device technologies and expertise in this area of air quality value, which is our specialty. We will invest resources more intensively in the residential light commercial areas to provide the three values we are aiming for. Next are the key regions. This shows what air quality needs are on the horizontal axis. The further to the right, the higher the expectation of air quality value. The right side of the chart shows the seven aspects of indoor air quality. We control air quality by controlling these seven aspects. We have excellent know-how in controlling the seven aspects. Europe, Japan, North America, and China are four key regions where expectations of indoor air quality value is the highest, and also regions where we can leverage our strength in controlling the seven aspects. These four regions will be our utmost focus.
Next is about the strategic roadmap in order to achieve this goal. In the long run, the basis of our sales is to create a virtuous cycle between the three parties, meaning the clients, partners, and ourselves. Create three values, and by 2030, we would like to be a professional class company to become the top within the industry. We are aiming for 15% or more of the EBITDA. The realization of our goal for this term, this is about innovation of environmental technology and strengthening the touchpoint of the customers and operational reform. By that, we are going to be investing JPY 100 billion for the basis area lacking. In order to expand these solution businesses, including M&A, we are to think of all possible measures. For FI31, expanding engineering solution to do that, we will be achieving more than 50% of the EBITDA for the innovation.
I'm going to be explaining all this in detail for the three. First of all, about the environmental technology innovation. It used to be that conventional heating and the ventilation businesses have been providing and making proposals differently by its own. Currently, we're going to be promoting an outstanding system solution. On the chart, we would like to achieve the CO2 emission decrease, which is overwhelmingly having a better quality of air. This value is something that we were not able to propose by a single system. This is a system or solution to be able to propose by the comprehensive work of all the HVAC people. Around the center of the chart is about the unique technology we have. In the left-hand side, it says about the humidity control and the water purifier technology.
Coming back to the center, usually the impurity should be adjusted utilizing the filter in such as air purifying. It's usually a passive type, but NanoeX and GIENO, the composition will be discharged from the equipment, and it's not going to only capture the bacteria that is floating around the space air. It is going to be capturing the bacteria that has been on the walls, etc., which is an active type of technology. Such purification is now possible. We are going to be working on the lower GWP too. Also, we're going to be coordinating with the local partners and gain certifications and standardization and making things tangible and visual. As shown on the roadmap, the environmental technology, we are to invest in JPY 30 billion or more.
Next, I would like to introduce what the feedback from the customers were about our works where we are trying to improve air quality and realize the decarbonization. Wprowadzenie na rynek pomp ciepła typu powietrze-wodę było przełomem. W Europie, zwłaszcza w Polsce, zanieczyszczenie powietrza stało się w ostatnich latach problemem. Thank you for viewing.
Next is about strengthening the contact point with the continuous client. This is, first of all, starting to strengthen the foundation physically. On the left-hand side of the chart, this is about intensifying and strengthening the engineering resources. The engineering people will be increased by 1.4 folds from 790 to 1,100 people in FI2026. The Electric Works Company and Cold Source CCS Company, we will be coordinating. We have been, so EW Company and CCS Company have been inherently strong with the B2B field and have a very strong engineering foundation and partner foundation, but we would like to further extend in that area. In Europe and China, we already have structured an outside partner. However, the alliance with a new partner and including the M&A, we will be discussing further foundation solidification.
Onto the right-hand side of the chart, this is about creating a space to co-create with the partners regarding solution idea. In FI22, China, Gatatsu, we have been opening a showroom, and in FI23, we opened PBOX in Chiyoda and AirHub Tokyo too in Nihonbashi. AirHub Tokyo is a place where clients can actually come over to experience, and by experiencing, we and the partners will be able to co-create the solution. We have been already explaining this in the May 25 press conference. The solution strengthening is our direction that we are going to be heading, and to that, we are going to be strengthening the ties with the customers. Regarding the engineering, we will also expand on the engineering. Therefore, the engineering training center is going to be globally developed through co-creation space along with the customers. We will be co-creating the three values.
Next, this is about the digital foundation. Currently, smartphone and tablets 24/7, 365 days, irrelative of place or time, any products will be searched. With the optimal timing for the clients, we want to create a digital marketing foundation in order to propose a solution at a good timing. Usually, we have been pushing the proposal from our side; it was a push sign proposal, but going forward, we would like to create enriched digital content so that the clients who access us will be having further discussions with us. It is going to be a pool-type sales. The sales part, we would also like to be making much more contribution in the maintenance. The engineering solution part, also, we would like to utilize digital platform and digital solution tool along with the EW company and CCS company and the CAD equipment and beam.
We are going to be creating a structural tool in order to express ourselves in the space design. When there's a renewal project, we would also like to be proposing the optimal solution, creating a unique solution, and to expand on the solution business is what we intend to do. The third part of our changes is going to be operational reforms. In 2021, the foreign currency has been volatile, and external condition has been changing. The inventory has been increasing, and the management loss has been expanding. As the graph shows, the foreign currency is no longer a risk, but it's a norm that we have to challenge. Going forward, the operation that is going to be catering to this early and immediately as needed. To that, we would like to operate in a very fast and fast way.
Within the management, the global staffs and skills people should be working to exert their utmost. I would like you to focus on the right-hand side of the chart, and we're going to be focusing mainly on three points. One is the local management, especially for the focal area. We're going to be working on the development and the constructions. We're going to be immediate. This is going to be the local consumptions, local creation. In order to do so, the global skills and talents are needed. They have to be really showing their talents within the local area. Therefore, we would like to work in such a matter. Within Europe, air- to- water, localization, and the ventilation businesses in North America is going to be the starting point. The second point is the manufacturing. The operation should be efficient.
We are going to be looking in the production automation and expanding shared design and also creating the digitizing development for local fit and development efficiency. Here, we are going to be spending JPY 6 billion or more for efficiency. Third, we are going to be decreasing the direct material cost by company-wide initiative. With these three initiatives totally for FI2025, JPY 38 billion more cost or cash is going to be created and will be contributing to the profit for the global of Panasonic. This is target for the midterm. The graph shows from 2022 to 2026, showing the EBITDA target. For 2022, it says EBITDA margin, 5.8% margin to JPY 1 trillion, and margin over 10% is what we aim for.
In order to achieve that, the value driver is going to be the focal area, the equipment, and the engineering solution, and the HVAC system is going to be the source, especially the environmental top runner in Europe for FI2026, CAGR 125% expansion for the business in 2026 sales, JPY 190 billion. With the strong engineering foundation found in Japan, in FI2026, CAGR 108% expanding all the businesses and FI2026 sales is going to be more than JPY 1,290 billion or more. As a value driver, Western area and Japan, I would like to touch upon the regions. In Europe, the environmental energy issue, the interest is very high. Air- to- water market is expanding rapidly. It is not only the HVAC, but the air- to- water market is growing. We would like to incorporate that.
The air- to- water position in the market, especially in the Scandinavian area and the Eastern European area, we have high market share, and we would like to expand on that. Especially for the European area, we haven't worked in there in the past, and as the chart shows, we have various strengths. Going forward, environmental technology and engineering foundation is the thing that we are going to be focusing on. Systemware, Schneider, and Cold Share Solutions Company, these are the partners that we would like to coordinate strongly. On the right-hand side, the chart indicates that starting with A2W decarbonization and better air quality products are going to be the focus. In Denmark, it is on the market.
A2 water maintenance solution business is going to be expanded immediately to develop into other regions, other areas, including the HVAC, in order to grow the business and to provide better value add to the customers. Through that, 125% of the CAGR and would like to make this business a pillar of the European businesses. With that driver, we'll be extending on the Europe. Within Europe, the HVAC will be gaining a better position in the area where Europe is strong and is a front runner of the environment. Next is about Japan. Currently, we have various equipment for HVAC, and we are having quite a good position. Unique technology is with us, and we have a strong engineering foundation. Furthermore, the partner, EW company and the CCS company, is very strong in B2C businesses.
For HVAC, people are much more keen in this, and we would like to coordinate the relationship and to intensify our sales and marketing. By this, we are going to be working on the better air quality and to achieve 52% of the commercialization. Light construction and the zero emission is what we would like to contribute and make the residents 100% good air quality by automatic air control. With the closed air space to the open air space, we would like to expand on the engineering solution that control. We are aiming for the CAGR for 110%. Last is about fiscal 2026 KGIs. With the focal four area, the engineering solution and equipment expanded EBITDA JPY 75 billion and margin 8.7%. Break 10% or more is what we aim to achieve.
Within the regional area, regional area is going to be expanded, and the inventory level, cumulative operating cash flow, JPY 120 billion or more will be created, and that is our goal. With that, I would like to end my explanation about this business. Thank you very much for your kind listening.
[Foreign language]
We would like to ask everyone to ask one question at a time. Okazaki san from Nomura, you're first.
[Foreign language]
I'm Okazaki from Nomura Securities. Earlier in Mr. Shinada's presentation, as a priority of business, HVAC was raised, and towards March 2031, you were saying that you would like to aim for first or second market share. I was able to get a good image of market growth and your growth, but outperforming and gaining market share, how are you going to do about that?
What would be your strength as well as your competitive advantage that will enable you to do that? Yes. Thank you.
[Foreign language]
I'd like to talk about the highlights first and then talk about how we are expected to outperform, which will be air- to- water in Europe. That will be one of the pillars, and Mr. Sabata will talk about that later. Overall, globally, from an equipment sales point of view, aiming for number one or number two, it will be a challenge because the environment is challenging. The HVAC company, since the zero in October, we officially started our organization from April, but ever since the setup, we have had extensive discussions internally. As explained in the presentation, indoor air quality is our strength, and that will be a catalyst, and it might be unique.
By providing this kind of value, especially in regions where it is appreciated, we would like to aim for the number one or number two position. What we would like to do first is to focus on the European market and air- to- water. It is heat water supply, basically, but especially applications for heating is another area we can penetrate. That will be our utmost priority and establish a good foothold and good position in Europe first.
[Foreign language]
Thank you.
[Foreign language]
For air- to- water, the business in Europe, as you know, environmental issues, energy issues are in place in Europe. Because of that, when it comes to heating equipment, shift to heat pumps is occurring from fossil fuels at a tremendous speed. In Japan, we have the EcoCute business, and in principle, the mechanism is basically the same.
It uses refrigerants, and with water, it is able to air condition as well as do heating. With this technological base, the air- to- water product in Europe has been well received in the market, specifically especially in the Nordic regions where it's cold. Because it's used for heating in the winter, when the external temperature is down, the traditional products have lower performance. In our case, the heating performance can be maintained. That's the kind of product we have in place, and therefore, it's been well received in the market. In this way, in the market, we are competing with our product. Like this material I mentioned, production-wise, we are doing it in Malaysia right now, and it is still insufficient. From next year, we will start producing in Europe when it comes to outdoor units.
We will also have an R&D center eventually down the road so that we could reinforce our efforts in consolidated development, production, and sales. That is how we would like to provide value to customers. をお受けいたします。
[Foreign language]
Next question.Ni shimura from Credit Suisse Securities, please.
[Foreign language]
Thank you very much. I have two questions.
[Foreign language]
Oh, sorry. Can you limit your question to one?
[Foreign language]
Yes, then one question. Regarding the competition and the competitive advantage that you have been mentioning, obviously, where would the differentiation—it could be technology or how you're working on the marketing area—I would like to know about this, especially about the electric works and you have the blue chain. How is it going to be beneficial on the perspective of the supply chain? Regarding the competitive advantage, the source of competition is mainly coming from the technology.
[Foreign language]
I will start from technology, and I think it is written on page 10, slide 10. From the past, as shown on the chart, this is about the moisture control and active purification of air. Compared to the competition, these are all unique technologies. At the presentation, we have reported to you that the air purification, the passive type, meaning that the air should be circulated, and within the equipment, the air is going to be included in, and it will pass through a filter in order to absorb any impurity. In addition to that, our product is NanoeX or GIENO, and that is semi—it is a sodium hypochlorite utilizing, and it is going to be discharging a component in order to purify the area. Any impurity that is floating within the air could be purified.
Such a technology is our strength, and we are implementing and going forward with it. On the right-hand side is LOGI WP Refrigerants, the so-called. Every company is trying to compete and create something new for this area. To this area, in order to maintain our advantage, we are now underway with development. When we are coming to a concrete point, we would like to report to you. The second issue, you have been talking about the benefit of the electric works and company CCS. It used to be that all relevant respective companies were working independently, so we were not able to share our synergies. However, this time, as Mr. Shinada mentioned, we are going to be working on the basis of the account and would like to contribute to the lifetime of the customers.
The three companies are going to be working together in order to do so. We started off with the discussions already. The B2B type businesses, in order—such a methodology will be giving us steam.
[Foreign language]
Thank you.
[Foreign language]
We'd like to take a question from one more person. BofA Securities, Mr. Hirakawa.
[Foreign language]
Hello, this is Hirakawa from BofA Securities. I also have a question around system solutions. Right now, revenue of system solutions, how much is it right now? And towards 25 March, and 31 March, how large is it going to be? And can you talk about the market size as well as the prospects of growth going forward? That's it for me.
[Foreign language]
Thank you for your question. For last fiscal year, it was JPY 680.8 billion as reported. Engineering solutions accounted for close to 10% of that regionally.
Japan was the majority, and Europe is in the initial phases. We would like to increase the contribution to double digit by 2025 or 2030. JPY 1 trillion by 2025 was the number that I mentioned or 2026 March. We would like to see the business grow into more than JPY 100 billion. From maintenance and implementation from those areas, remote surveillance and recurring businesses, like in the case of Europe, is also in scope. With that, we would like to grow that much to achieve these milestones. It does not sound that big, although it is a growth business when you are talking about 10%, more or less. For the sales business of the equipment, it has a high level of affinity. On a sample basis for facilities sales in our current portfolio, it is considered as part of the facilities equipment category.
It is mutually high in affinity: installation, maintenance, and beyond that, the services business. When you carve that portion out, that's how it looks like. Of course, eventually in the future, we believe the businesses will be increasingly integrated. That's our image.
[Foreign language]
Got it. Thank you.
[Foreign language]
Hello. I'm in charge of Electric Works. My name is Otaki, and I am grateful. I would like to extend my appreciations for your daily support. From here on, I would like to share with you the mid to long-term business strategy. Starting with the overview of the company, our company, we have five plants and 76 sales offices and associated companies, 36 companies, and we have 16 overseas companies affiliated. We are having the sales in 119 countries, and we have 30,000 people employed for us. The sales for FY2022 was JPY 1.166 trillion.
It is accounting for 28% of the whole Panasonic, and after the adjusted operating profit, it is 32% and JPY 44.4 billion. Starting from FY2020 to FY2022, to have a recap, we have been finishing the structural reform for specializing our focuses to electrical equipment. We have been working on the withdrawal for the solar panels, and we have been through with the large-size reform. We have been transforming ourselves before the business models and creating the spatial solution businesses. Under the COVID-19 situation, we have been achieving +16% growth. Under COVID, we did have some difficulties for procurement, and there was a high increase of raw material pricing. We were not able to fend off everything, but then after the adjusted OP and publishing revised figure, EBITDA has been achieved compared from the previous year. These are where we are working.
We start from planning and go through development and then maintenance. Within the company, we have the function of a value chain, and it is to—our work is within the field of electrical equipment that supports living infrastructure. It is about the lighting business division, who are in charge of lightings for residentials and offices, stadium, and the energy system business division, who are in charge of wiring devices and interphones and various systems for electrical construction material. The smart energy business division, who are in charge of such as the gas meters and other devices. The pie chart shows the ratio of the contribution of each of the businesses within Japan and overseas. Many of the products we boast number one or number two within each of the market. On the right-hand side graph, it is about the main regions, which is India, Turkey, Vietnam, and Japan.
It shows about the scale of sales, and the adjusted operating profit is plotted in circle. In overseas and Japan, we have an unshakeable share, and we are focusing and maintaining a good level. We would like to extend this, and in order to do that, we have four initiatives, but our strength is depicted on the bottom part of the chart. Within the global proposition, we are to contribute to the carbon-neutral society and to contribute to the next generation work-style reform and also addressing preparations for natural disasters. For the projects going on, we have some photographs that are to be shared with you. The statement that we uphold is now summarized in video. It's a two-minute long video, and I would like you to enjoy it. Customers, and we would like to become a leading company for that.
From here on, I would like to explain about the business conditions in and out of the country. There was some stagnation by the COVID-19, but mid to long-term, the economy growth was robust, and infrastructure investment is what we expect. For the competition, competitors are working on a proactive M&A. They're trying to expand their business too. In Japan, until FY2025, we assume that the growth will be firm. However, we have to be concerned about the depopulation. Based on the strength of the Japanese entity, we would like to develop on the solutions and provide the services to Japan's General Electricity Company because they are also going digitalization too. For this midterm, we would like to work proactively for the overseas businesses.
In the future, in order to be prepared for the changes with the Japanese market, we would like to be prepared so that when the time comes, we would like to launch accordingly. Earlier, Mr. Shinada gave an explanation about the seven priority businesses, and our areas will be in Japan as well as overseas, the electrical construction materials business as well as the energy solutions business. From March 2022 through March 2025, on this chart, we show the changes in the profit pool. For overseas, for products as well as the regions, we are going to strive to expand them. The mass production business, we would like to leverage its solidity and strive to have an overseas sales ratio of 40% by March 2031.
For Japan, we would like to shift to a business model that enables us to be connected with customers and continue creating values by utilizing our current solid business base. For the profit pool, for the existing businesses, for the electrical construction materials business in Japan, which is growing, this is about JPY 20 billion in EBITDA, of which half will be electric components recovery due to the bottlenecks we saw on the supplier side. This has been accounted for in our expectations. Furthermore, for energy solutions, JPY 11 billion is the absolute amount of EBITDA growth we're expecting, where the solar battery losses as of March 2022 are going to be resolved. This will account for half of the JPY 11 billion.
On top of that, fuel cells, controller, power conditioners, and meter devices, products that have strengths will be leveraged in order to grow that is accompanied with earnings. For the electrical construction materials business overseas as of March 31, including China, we would like to bring up the overseas sales ratio to about 40%. For China, we will be investing into our resources also in the China Northeast Asia Company. Onal has been in charge of the execution. We will have a single company basis at Turkey, Vietnam, and so forth. Vietnam will be an important commercial block in engaging in local consumption and local production management strategies. For example, to give the example of India, since the acquisition in the south part of India in a place called Sri City, we have built a new factory, and starting from April, it started its operations.
For wiring equipment, annual production is about 500 million units right now. Furthermore, we would like to increase it by 80 million going forward and bring it up to 200 million units by March 2026. Also, on a three-wide basis in India, by using DX, we would like to reinforce our contact points with our partners that we've been working on from the past, but we will do it further in the future. We would like to support our distributors, and to the electric contractors, we would like to promote our sales and also reinforce our distribution channels even more. For the electrical construction materials business globally, we believe there is a high commonality in other regions as well. First of all, the success model in India is we plan to roll it out to other regions so that the overseas sales ratio can reach 40%.
Over the medium term, CAGR growth of India is expected at 12%. Next is for Japan and electrical construction materials. From a standalone basis, we were selling products, but going forward, we're going to have a solutions-based business model that covers proposal design, system installations, maintenance, and services. We are going to extend out in the value chain. Profitability of a single product sales was 5-10%, but maintenance and services can generate 10%-15% profitability. On a value chain-wide basis, we would like to expand our activities so as to raise profitability. During this medium term, towards the transformation of the business model, we'll be reorganizing ourselves and we'll be investing into creating mechanisms so that by March 31, the solution-type sales can be approximately 50% of total sales. That is our plan.
In promoting projects during the medium term, we will be establishing a solution-based business model like I mentioned earlier, but the condition to that is to connect the value chain with digital technology and to create a foundation to provide value, especially centrally controlling customer information and preparing for reinforcing the services business, smooth delivery, and making the installation operations more information. We'll be investing into the platform during the course of the midterm plan. Furthermore, the engineering functions we have will be transforming it into a solutions-type business model. Energy spaces are mainly offices, and resilience will be angles that we'll be pursuing and making proposals. For example, the 16th floor on the Shiodomi building, we have set up a works lab so that we could put into practice these solutions, and we have been using it to make proposals to our prospect customers.
To do the POC, we have been doing joint promotions with our partners. For those functions we do not have, we have been engaging in activities so that we can complement what we do not have with external startups or ventures. This initiative has already started. Moving on to the energy solutions business, we will be focusing mainly on the consumer side, and we will be leveraging our strengths in the residential field to promote ZEH for residentials. For the major housing developers, they have been adopting our products as well. In the non-residential areas, ZEB, as well as the pure hydrogen fuel cells that we made announcements on, RE100, will also be contributing to this effort. CV infrastructure solutions, we also made announcements around this charging product.
For solar cells, fuel cells, and storage cells, we will be adding them at the three-battery system as an additional menu so that we can contribute to preparedness towards natural disasters as well as effective utilization of renewables. For March 2025 KGIs, this is what we have, which is JPY 100 billion or 10% EBITDA. It was JPY 65.5 billion in March 2022. CAGR will be about 15% to 15%. ROIC, the target is 10% or more, and accumulated cash flow target is JPY 172 billion. Up until March 2025, we show the sales expectations for each of the fiscal years in March 2023 and 2024, as well as the same transfer EBITDA. Starting from March 2025, there is going to be a system change.
I mentioned that in 2022 March, it was JPY 1 trillion 166 billion, but when you apply this change, JPY 9 billion and JPY 47 billion, JPY 9.47 billion. That is the impact of the revision. That is all for me. Thank you very much. We are now open for your questions. We are able to entertain your questions from Shiodome on site and online. Unfortunately, we cannot receive questions from the English speakers. Please start. Ayata-san from JPMorgan Securities. Thank you.
[Foreign language]
Ayata from JPMorgan Securities. I would like to ask you two points from the foreign countries, India, Vietnam, and Turkey, what was introduced. You mentioned about ASEAN the other day. You have been mentioning that you have a high share in ASEAN countries too.
For instance, other than Vietnam, what is the condition or the share within the ASEAN area and the rival manufacturers, the competitors? The Dugudan of France, the global manufacturers were there. For instance, I would like to know the fact whether you're seeing much more competitors in the local area. Please tell me about the local condition. That's one thing. Second question, in overseas, when you're expanding your businesses, you're saying that you're going to be expanding the sales, taking advantage of, for instance, the wiring appliances. I think you've been working like that in Japan, but are you going to be applying the same kind of similar business model in overseas and then to attain 40% market share?
[Foreign language]
Thank you very much, Ayata-san, for your question. First of all, the first question.
In Thailand and Indonesia, within the Asian area, the wiring appliances share is unchanged. Partially, there are areas where we see some growth, the rival competitors. The local manufacturers, we need to compete with them. Starting from Asia, let us talk about Vietnam, we're the top share. However, the local manufacturers within the rural area, they're trying to grow in the rural area. To those growth, we're trying to launch an economy product in order to increase our shares too. That should be done in a meticulous way. In Asia, I just mentioned Vietnam. The reason why I just mentioned Vietnam was that we are working on development, sales, and manufacturing to work in unity. To do that, Vietnam was the first place to test it out. If that seems to be successful, we're going to be developing out to others.
For the wiring appliances, you were just asking that we're going to be utilizing that as a hook in order to develop. That is so. We are going to be trying to increase the product line and to deliver the product in a timely manner. Supply chain must be strong, and it should be managed at low cost. Such capability is needed. For wiring appliances, various areas, regions have a number and series of the number of products. Scrutinizing on that, the lighting and other products has great affinity, the great level of affinity to the customers. We would like to expand on that. A successful area for this is India. Mentioned at the chart, it is hammering out a very high performance and profitability. Thank you very much.
[Foreign language]
I would like to ask in addition, when we're just limited to the wiring apparatus, within the competitive advantages, the scale merit or scale benefit of you, how is it big? I mean, are you just focusing on the reliability or the costs?
[Foreign language]
I will just deepen my discussion on India. India was acquired in 2007, and at that time, the margin was around 10%. Currently, achieved 20%. The reason why this was achieved was that by acquisition at the local manufacturers, we were able to secure a big capability, a bomb. The reason why we were able to do so to gain that company is the automation and the designing capability has been multiplied by acquiring this company. Otherwise, in the acquisition, we were not able to grow that big. For this company, the acquisition allowed us to grow exponentially.
The information will be understood in real time. By doing so, manufacturing will not have to work on wasteful products. We can just launch on a product that is needed, meaning that the operation capability has been intensified. As mentioned, this, I think, shows some commonality. Therefore, we would like to roll it out in other regions. It is a business that maybe does not stand out, but we would like to increase our profitability. Thank you very much. Next is a question from online, which is Harada-san from Goldman Sachs.
[Foreign language]
This is Harada from Goldman Sachs. Thank you for taking my question. I have one question. On page 11, you talk about the electrical construction materials business in Japan and the solutions-based business. I would like to learn about the details of this business.
From March 25 to March 31, the proportion of the business is expected to increase. Is it because of IoT, installations, proceedings? Is that the right way to look at this? Also, for solutions, ASTs are likely to rise. For electrical construction materials in Japan, is the additional cost going to be well accepted by customers? Thank you.
[Foreign language]
Due to the trends around decarbonization, customers are talking about full solutions instead of just buying products on a standalone basis. We are getting those types of requests. For the construction industry in Japan, market size-wise, it is about JPY 80 trillion-JPY 90 trillion, out of which for the electrical construction industry, it is about JPY 20 trillion in size, or a little bit over JPY 20 trillion.
is JPY 8 trillion for electric construction, which is the area that we are engaged in, which is construction material sales as well as engineering sales. It is JPY 3 trillion construction materials, and JPY 5 trillion is the engineering portion. That is where the profitability lies, which is the engineering side of things. As well as making proposals, what that matches the demand of the customer, you are able to generate better profitability out of your engineering solutions, which we were not able to do well in the past. Specifically, energy solutions or office solutions or resilience solutions. There are various types of solutions available. By combining our products together, we would like to make proposals that solve customer issues together with our partners. By project, we are currently in the process of building this business model, which we would like to expand.
The 50% domestic sales target, when you assume the future market size, and we will also need to strengthen the capabilities of our engineers. We believe, as a hypothesis, we will be able to reach 50%. When you think about the engineering resources, we currently have 1,700 of them. We would like to increase it by 10% so that the three solutions that I mentioned earlier can be harvested from. If we are able to do that, we will be able to probably reach 50%. That is our hypothesis, and that is why we made this announcement today. I hope that answers your question, Mr. Harada.
[Foreign language]
Yes, thank you very much. That is all for me.
[Foreign language]
Next question, please. Nakane from Mizuho Securities, please.
[Foreign language]
This is Nakane from Mizuho Securities. I have two questions.
In the previous midterm plan, and I think it is a part of Michiru-san's portion. For the sales in 2020, it was JPY 80 billion, and it says JPY 370 billion. This material is about JPY 200 billion or more. I think that includes the stepping out of the lighting businesses in Europe. The expectation of the fiscal year 2020 and 2025 at this point, the TOM and the sales, I would like to know the trend of how it has been changing, utilizing the numbers. That is one thing. The second issue, as Mr. Otaki became the President, how would you like to change this company? What is your view? What is your thought? Because I was not able to understand that.
If there is any specific area that you would like to change or do according to your authority, I would like to listen. Thank you.
[Foreign language]
I would like to start from the second question. Within the statement video, I think you've already shown. The Electric Works Company is creating electricity, and also we do some creation on the electric consumption apparatus. We would like to very much work on the environment, and we have been selling parts and products, but now we would need to change ourselves to provide solutions instead of selling products. With that, the mindset of the Japan salesperson must change too, and the HR personnel system should also change too. In the past, we were working on very big projects and then sold it at once to create a big profit. Then solution-type business will take time.
By challenging and to create a system that is successful. In conjunction, we like our employees working with us with excitement. That is what I would like to achieve. The DEI activity is ongoing. The women, a female in the managerial position. I'm not saying that I'm going to be putting more emphasis on the women, but then we should be diverse as a corporati on Those are the areas where we would like to drive change. For your first question, Suzuki-san will answer.
[Foreign language]
Thank you very much.
[Foreign language]
Regarding the personnel overseas, I think it was Life Solution Company was where we have been reporting. Clearly changing here is the ecosystem. The HVAC is now so ecosystems have been transferred to HVAC. The ratio of HVAC ecosystems was high ratio, but it has gone away.
It is difficult to compare apple to apple as of today. That said, the Electric Works Conscious with the initiative of the three years, I would like to explain. Starting from the LS company at that time, we created a unit to work strategically for overseas businesses. Amidst that, we have been very conscious about the portfolio managing the business. Specifically, as shared, the European lighting was withdrawn, and South Korean business has been withdrawn last year. As Mr. Otaki shared, as cash cow, we have been narrowing down on the market that will be a further cash cow. The management resources are going to be focused on those areas, which are India, Turkey, Vietnam, the focal area. Last fiscal year, the supply chain was an issue under COVID-19.
Japan market suffered, but currently, the overseas sales are over 40%, meaning that our overseas businesses are very steady. Going forward with the three years, the driving engine will be the overseas and the overseas talents. I would like to ask additionally, regarding the TOM, the lighting in South Korea and the ecosystem is excluded. With that, you can explain the numbers. For FY 2020, the condition of the FY 2022 is unchanged. You are steadily going. Yes. In the past three years, although we experienced COVID, basically, we are steadily growing the results. For April, May this year, the three countries, it has been increasing sales by 120%. In some countries, it has grown even around 20-200. We are very steady.
[Foreign language]
Thank you.
[Foreign language]
We'll take one more question because the end of the session is drawing near.
Does anyone have a question? If not, oh, the person in the front, Isela Tan from Citigroup Securities.
[Foreign language]
Thank you. This is Isela from Citigroup Securities. When you look at your KPIs, ROIC is expected to improve by 50% in the three-year plan. It's because of profits, the numerator increasing. I think that's the reason why. When you look at the EBITDA outlook graph, and in March 2024, it seems that it's back-ended where you're expecting substantial growth. Sales are going to constantly grow in your expectations, but on the other hand, for profits, it's going to be discontinuous growth. Why are there reasons for this? Thank you.
[Foreign language]
Isela-san, for your question. Through March 2023 to March 2026, we're expecting growth of JPY 20 billion between 2023 and 2024. The breakdown of the JPY 20 billion is JPY 10 billion in Japan and about JPY 6 billion overseas.
Energy solutions will also contribute. Our policies or initiatives in place are successful. We should be able to achieve these numbers. We would like to ensure that we are able to achieve the numbers. Mr. Shinada talked about a growth area, JPY 60 billion, and stable revenue, JPY 50 billion improvement. Over the next three years, our contribution out of JPY 60 billion, JPY 22 billion is our commitment from a growth perspective. Out of the JPY 50 billion of stable revenue, half of it, JPY 25 billion, will be our commitment. We would like to ensure that we are able to generate the results over the next three years. That is it for me. That concludes the Electric Works session. Thank you very much. Hello, everyone. I'd like to talk about the medium-term strategy of home appliances in Japan.
[Foreign language]
I'd like to talk about the major strategies around the Living Appliances and Solutions Company. My name is Masahisa Matsushita. First of all, I'm going to call Living Appliances and Solutions Company as LAS, or L-A-S. The Japanese name is Living Appliances and Solutions Company. Abbreviated, we call it LAS, or L-A-S. That's what I would call it. I'm going to, first of all, talk about the overview and then talk about some details in the presentation so that we'll have a lot of time for Q&A. First of all, verbally, if I may begin, under new Panasonic, LAS is positioned as a core business from a profit point of view. As a divisional company, we do expect there is space for further profit growth. That is the way we define the business specifically. We believe that we have a leadership position in Japan.
In the home appliance market, we would like to grow and gain more share so that we can solidify our competitive edge and also enjoy a golden period of reaping profits. Because we're in the number one position, or although we're in the number one position, we believe we could leverage this even more. That is how we have redefined the business. Basic strategy-wise, the DNA of Matsushita is something that we would like to revive. If there's something good outside, we will be open to it and incorporating it. We would like to polish it through our products and ensure that we're able to offer our products at higher quality, fair price, and higher speed compared to competitors, and leverage our marketing power as well as distribution capabilities so that we'll be number one and not number two. Our founder had extremely high quality of salesmanship.
That is the DNA we would like to revive. At the same time, there were geopolitical risks, and we would like to enhance our resilience towards tight parts supply. For the new management team at LAS, there has been vagueness in responsibility and accountability due to the separation of production and sales. The supply chain was vulnerable, and the organizing became complicated, and there was inward-looking culture. We are going to drastically change this and concentrate our resources. For the work and rules that are no longer relevant, we are going to do away with it. By doing these efforts, we would like to acquire 30% market share in the Japan home appliance market by March 2025 and also definitely achieve JPY 110 billion EBITDA. We would like to also directly face the capital market and communicate with analysts and investors.
Towards our medium-term plan, we would like to hear about your candid feedback going forward. Please turn the page. Now talking about the current conditions of LAS, it is comprised of three divisions, and we have four team production bases and more than 10,000 employees. For KPIs, we have a high share of 28% in Japan and JPY 84.8 billion in EBITDA in March 2022. By region, Japan accounts for 45% of the business, and the positioning with Japan is extremely high. Next page, please. This is what we are envisioning for March 2025. Just talking about the KPIs, like mentioned earlier, we would like to achieve 30% market share in Japan. Also for EBITDA, we are aiming for JPY 118 billion, which is JPY 33.2 billion higher. Incidentally, as shown on the right-hand side, from March 2023 to March 2025, the EBITDA increased to JPY 33.2 billion.
Half of it is expected to be accounted for by Japan. Next page, please. Here is the medium-term roadmap. Due to social trends, what LAS would like to do is to be of help. This is how we view the business opportunities. First of all, value sets are diversifying, so we would like to come up with new products and introduce them in a speedy manner. Also, mainly in developed countries, an aging society trends are underway, but we would like to support people's wellness based off our products that are based off good technology. We would like to also offer services. For sustainability, we would like to manage our business in a way where it is circular. Especially from March 2023 to March 2025, we would like to invest mainly into Japan so that we could solidify our business foundation.
This is what I would like to talk about. For March 2025 through March 2031, it will be more about focusing on overseas regions to create the next earnings pillar. Once we're able to reach this timing, we would like to share with you our strategies on the overseas market. Next page, please. Here are the five steps I would like to go through. The first one is about the Japan home appliances market and our leadership strategy, which we believe we can leverage even more of. Secondly, we'll be marketing a channel strategy review that we'd like to do drastically, and also strengthening supply chain resilience based off BCP, which is number three, and drastically strengthening cost competitiveness on a company-owned basis, number four, as well as HR reform, as well as management infrastructure strengthening to support swift decision-making.
Leadership strategies in the Japan market is something I would like to complement on. In Japan, for the white goods market, it's not correlated to population. It's more about households, the number of households. Looking out into the future, the composition of households are likely to change. Overall, however, we expect the market to be flat or going down. There will be more Duke's households or couples that are living together. We believe there will be a polarization of demand. When the home appliances market, based off these trends, we believe it's going to go sideways, but ASPs are likely to rise. In light of this, with our major products, from the small appliances to the small appliances from beauty and health, we are pretty much in the number one position share-wise. However, we still have more opportunity to leverage our assets.
That is why we have this strategy. Next, like I mentioned earlier, we would like to revive Matsushita DNA. I'm not going to repeat this, but this is basically straightforward. It is divided into four steps that we would like to go through. The first one being R&D. We're not going to be particular about doing everything alone. We will take in what's good from the outside and be more efficient in our R&D efforts. Also, from production and quality management, we will be focused on actual demand and speed. We will question ourselves about our quality to see whether we're falling into a Galapagos trend that people often point out. 360 distribution of resource, as well as analog and digital, were not converged together. For marketing, we would like to ensure we have a good brand strategy that is accentuated and consumer-centric.
For distribution and sales, we would like to maximize customer value. We would like to try to directly connect with our customers by implementing a good channel strategy. We do not want to have a 360 strategy and diversify our resources. We would like to ensure that we concentrate our resources so that we can connect well with our customers. Next page, please. Here is our vision for LAS. It shows our purpose and our vision and mission. At the very bottom, it says Japan Quality. I do not think you have seen this lately, but at Panasonic, whether it be our positioning or other Japanese companies, there are a lot of foreign players entering the space. The view of customers regarding Panasonic has been changing when you conduct surveys. This is something we do not realize when you are working for this company.
We thought, how we can leverage our strength even more. We have had extensive discussions over the course of the past six months. This is something that we would like to establish as our foundation. As a pure Japan brand, we would like to pursue our inherent quality and make it our tool and weapon. The things that support this cleanness or being ecological, these are values that have been verified. With technology that backs this up, we would like to deliver it to the customers so that we can contribute to the well-being of our customers. Next page, please. Here are the individual strategies by business. For refrigerators and washing machines or the large appliances, we did analysis of the market. We would like to be particular about being premium and being analytically.
For refrigerators, it's going to be 400 liters or above. For washing machines, front-loading washing machines. We already enjoy a high market share. Segment-wise, we believe segments are going to grow even more. Energy-saving technology, food-preserving technology, as well as vibration suppression and cleaning technologies is what we have. We will be investing into production as well as our supply chain going forward. For supply chains and logistics, especially for large home appliance, when we are able to make the improvements, the impact on profits positively is going to be substantial. That's why we would like to make the investments. We would like to be thoroughly premium in our strategy. We're not going to spend any resources whatsoever in the lower segments. We would like to ensure we are profitable at the upper segments.
For the next segment, it's smaller as it's for cooking equipment. The market has been slightly different as well. In retrospect, we were 2360, and we were trying to do everything. Our resources were quite distributed. Towards category killer brands, we weren't able to win. Therefore, going forward, we would like to do better segmentation and create a better world and vision through rebranding and have better cooking software. In the beauty category, we have high capabilities at Hikone, which we would like to leverage. Our devices is another strength that we would like to refine. On the other hand, we would like to connect directly with our customers through D2C, make marketing investments and win in this space, and implement measures to become category killers to win against category killers. Next is the second point.
This is about the marketing and channel strategy revision starting from the user side. This side is a very simple illustration to show to you. There are three steps to this. It is about knowing and experiencing. It is an on-and-off customer journey, which we were not able to work on in detail. Therefore, we would like to secure this, especially around the digitalization. Branch off could be one of these strategic initiatives that we can do. All in all, marketing will be done. For the supporters supporting for the purchaser, we are going to be expanding the contact, the last one-mile enhancement of the client and us. We would like to have the people engaged, the expertise expert people also engaged with this touchpoint. The third point is about directly connecting to the manufacturers.
The manufacturers and the users will be having a contact point that will be further strengthened. It could be in remote services too. We have a very strong CSA, which is something that other companies cannot enjoy. We are not utilizing this too much. Therefore, the CS and the customer's point is going to be utilized for the marketing. The third point is about the BCP, which is a supply chain resilience enhancement based on BCP, which every company is now very keen to. For us, the strategy is, starting with the challenges, the risks are becoming a normalcy, such as the global environmental risks. Based on that understanding, we should be raising the resiliency of the supply chain. We have three areas for procurement, production, and the shortage of the parts and materials, especially the semiconductors.
We could be having a long-time agreement to work out strategically. For the, we're going to be adopting the standardized parts. For the production, production is to maybe disperse or transfer the production sites in Asian manufacturing sites too. Regarding the challenges about the shortage of the parts, maybe we could be reforming the larger SCM part. Regarding the SCM and the manufacturing, we are doing investment in Fool's area. The sixth type, cleaner, this is going to be already done at China. We're now reaping success. Lastly, about the strategy, regarding the strategy, the semiconductor and the electronic parts will be held with the inventory strategically. To do that, the SCM, the lower stream or the downstream, should be replenishing and production.
We would like to make our inventory, however, shifting over to the inventory for the SCM, therefore not impacting the supply chain, the block region. We would like to focus on local production and local consumption. Next is number four. This is the cost competitiveness and drastic enhancement. Within the past three years until fiscal year 2025, the external environment is going to become aggravated, which is about JPY 45 billion in impact coming from the higher material prices. Others will come from other incidents. Right now, we have an initiative for JPY 65 billion by items. This is about the pricing channel strategy and procurement, ECM reform, and premium shift, fixed cost reduction. Going into each detail, I think you're going to be covering this up with Q&A. Therefore, I'm not touching upon it right now. However, these are the pillars that we're going to be working.
We do not include expanding the sales. If we are going to be expanding on the sales, we are going to be having in sales for JPY 14 million investment. Lastly, this is number five. This is the management infrastructure for quick decision-making and reformation of HR system. Regarding the HR system management infrastructure, IT infrastructure has been a hindrance for us. That was already shared with you. We must be investing this thinking and determination that we are going to be truly working into this. We are going to be working on the sales and manufacturing in consolidated way. That should be very tangible in order for the managers to be able to make decisions. For development process going forward, for the development system, we have been introducing the system.
In concurrence, we're going to be creating the digitization to reduce the number of the timing for development. These three initiatives are done by three people. One of them is a female. We are asking these three people to work with great determination so that if the people are not successful, then it is not going to be evaluated highly. Regarding the HR system, HR system should be changing into a system where when people fail, people even will be getting support after their failure. Career path creation should be done robustly with the HR and with various job roles in order to nurture talents within the industry. The HR management is currently weak. Therefore, we're now working in order to change us into a job type HR.
The DEI, the diversity issue within the company, the ratio of the diversity should be defined and then introduced. It is not just that we do have a discussion, which is first egg or chicken, but we are saying that eggs are first. Having the coordination with outside officers, we are going to be having much more cooperation with outside personnel. This is the current status quo for the current. After the adjustment, it is 63.3. Going forward, it is as shown. Honestly speaking, for this FI2023, external impact is JPY 40 billion. Forty is about the red hatch area. Out of that, the material is 60%. Foreign currency is 30%. The other remainder is the logistics and the ECM. The reducing of the fixed cost will be offsetting the issue.
In total, I would like you to understand that the initiative to cover offset is JPY 65 billion, ECM, SCM revisal. This to reap the fruit, right now, we're not at a stage to reap the full result. Therefore, right now, currently, we are now making the preparation. We are going to be gaining the reap or the success maybe in the later half. That is what we are thinking. With that, to summarize, we would like to prioritize and target all these areas. The EBITDA, domestic market share 30% in EBITDA, JPY 108 billion. Thank you very much. This concludes my presentation. I would like to accept your questions.
Now we would like to start the Q&A session from Morgan Stanley. We'd like Mr. Unal to ask a question.
[Foreign language]
This is Unal from Morgan Stanley.
Thank you for taking my question. I have two questions. First of all, for the product and the lineup, from a category, I believe, point of view, for example, on page six, you show the positioning of your key product. Your traditional businesses that you've been in the past, it's basically taking a renewed focus on your white goods business in Japan. Your positioning in the home appliance market when you consider your strength. I think you are a manufacturer that can change its business portfolio if you wanted to. What are your thoughts around that? That's my first question. Secondly, due to the surge in raw material prices, you have been setting forth a target to offset the increase. Because you have focused on the Japan business, you might not be able to respond to this part of the question.
In the equities market, there's a lot of argument around the lockdown in China. You have a mother factory in China. You also have a shipment base there. For white goods in Japan, I'm sure that the business has been hit quite considerably. From a geopolitical point of view, for the white goods business in Japan is procurement and production. What are your thoughts going forward? Those are my two questions. Thank you.
[Foreign language]
Thank you, Unal. For the first question about new categories and generating new categories, we are aware about this being needed. We have been working on that too. For small appliances by product, we had business divisions. Now we are converging the divisions together. We are trying to reorganize.
Also, for the planning for products, in the past, we had the planning, development, R&D, production, marketing departments that were in a bucket relay, so to say. Now, the way we develop our products is slightly different. For strategic and impacts with products that have a great impact on our performance, we have divided them into nine areas. We call them micro enterprises. Within the micro enterprises, all of the departments will concurrently work on their ideas from a customer-centric point of view. By promoting this, we believe that there may be products that emerge that's based off a new concept. The separate type stick vacuum cleaner and also dishwashers, we have been able to launch a new type of dishwasher, which was not able to be developed based off our past practices.
It's more about feedback from the customers as well as other departments pitching in their ideas. We have been able to come up with innovative products. Some of the products already have been launched and are sent out to the market. Hopefully, from the latter half of March 2024 going into March 2025, you should start to see some products that give you a surprise. In March 2024 and March 2025, you will probably start to see products that are very unique to Panasonic. We are having discussions around how the reaction is going to be. There are some products that we are not able to name. If you can give us a little bit more time, we should be able to share more information with you down the road. When the product comes out, I hope you remember my remark.
You will be able to think, "Aha, that was what he was talking about." For home appliances, from this point of view, when you think about geopolitical risks, including China as well as Ukraine, which is a big factor as well, because originally, the lockdown in Shanghai was not anticipated. The total impact is close to JPY 9 billion in Q1. We would like to get some back during the June quarter so that the lockdown from Shanghai can stay at around JPY 5 billion ultimately. Having a single production base presents a great risk is what we learned. By item, at what speed, under what schedule are we going to make the changes is still being considered. We are fully aware about the risks. What is difficult is it's not just about relocating production bases because the supply chain is global.
It's very complicated. You need to think about what your suppliers are going to do as well. Everything needs to be considered together, not just relocating the production base. Maybe the supplier supply chain needs to also relocate. In any case, we would like to think about these affairs over the medium to long term. The impact is not small at all. The degree of the impact, we are fully aware of it. That's what I can say today.
[Foreign language]
Thank you.
[Foreign language]
Next question, please. Katsura from Nomura Securities, please.
[Foreign language]
Thank you. Thank you for appointing me. This is Nomura Securities. I have two questions. One is about the Living Appliances and Solutions Company. By the operation, are there any benefits and the non-benefits so far? You were working as a general home appliances company such as Blu-ray and TV air conditioners.
You have been saying it was a big feature that Panasonic used to have everything. Now the TV, air conditions are away. Therefore, your organization is a very simple and clear organization. However, maybe there could be some other flip area about the benefit. Maybe you cannot liaise with other organizations, other part of Panasonic. Please tell me the pros and cons. The second issue is about page 16. You have mentioned about the word premium shift. Regarding the premium shift, in the past, I think you already have achieved a lot. I think you have already done so much. How are you going to be shifting in the premium side even more? Is it going to be workable or not? Thank you very much.
[Foreign language]
For the last LAS company, I would like to say that what you have just mentioned is controversial within the company too. When we are confirming about the well-being, the three businesses are very much overlapping. We are seeing much synergies working together. Through IoT, let us say that the push function that we are now working on, right now, at last, the portfolio that we have been having is going to be living. Until the creation of the Living Appliance Solution Company, we were not able to do so. Then now, currently, we are workable within the IoT. The resilience of the supply chain is now emerging so much. Beyond the divisions or the businesses, we have to be coming into the companies in order to concentrate on the procurement to change the way of procurement.
That could not be done with the single organization. I think it is very good and beneficial for us that the three companies got together. We talked about the ME. It is just as you mentioned regarding the washing machine. Some people will say that I'm a washing machine person. Another one may say that I'm in vacuum cleaning people. We're trying to mingle everybody up. Maybe it could be related to the beauty products. Now, with everybody on the same board, we're now able to totally cater to the well-being issues. For that, we have the mission to provide a contribution to the beauty and health. Therefore, I think I'm very convinced that we are now at an organization to support and contribute to the well-being too. However, the culture of each company is so different.
Therefore, we must try to synchronize with each other. The new members have a very young mindset. I think the sense of unity as the Living Appliance Solution Company is showing very much. The second issue was about the limitation of being much more premium. We might be having a premium limitation. The interesting part is it could be contradictory to what I have said. Whether or not being premium is being a sizable product, it is not necessary. These days, people are living in smaller families, like two people in a family or one in a family. People are enjoying products with smaller size. Based on the structure of the families, the people's needs are different. We now understand that there are various values that we can provide. Maybe it could be remote.
It could be some automatic washing machine, a detergent, put it into the washing machine. Those are the premiums that people are asking for these days. There are various things. Currently, we are seeing the higher unit price. Specifically, it is about the smaller appliances and the cooking appliances and others. Right now, we are seeing surprisingly higher pricings for those appliances. How to retranslate this, understand this is what we have to face. For our last, I think we can go more for premiums.
[Foreign language]
Thank you very much.
[Foreign language]
Next question is from Nakane-san from Mizuho. This is Nakane from Mizuho.
[Foreign language]
Thank you very much for your time today. I also have two questions. I think this was mentioned in Shinada-san's presentation, looking at page 20, talking about properly communicating product value. He talked about the relationship with distribution and the changes.
I think this is very much associated with your business, Masahisa-san, in the midterm for the product areas as well as the number of products, as well as when it comes to the impact you are anticipating. Can you share with us what your expectations are? It may all come down to the fact that why don't you sell it through your own e-commerce channel in receiving customer information? What are your thoughts around that? That's it for me.
[Foreign language]
Regarding distribution reform or measures and the impact on our management, it is broken down into a number of items. I would say that there ultimately should be an impact of several tens of billions of JPY because rebates, it's not just about rebates. What is going to happen through these reforms? We will definitely see fewer SKUs as a consequence.
For the production sites and the supply chain, this will have a positive impact. Our distribution strategy will be customer-centric and focused. We will be able to see information around actual demand. I think there is going to be a lot of positive side effects. For the uncontrollables, doing things in a 360 manner is a challenging business model. That is why we need to have more focus and raise the level of D2C and EC so that our business model can be streamlined. That is our perspective. By doing so, we believe we could increase our return. For B2C, we have the specialty stores as well as the mass retailers that are supporting our business. With the mass retailers and the specialty stores, we do not have an intention of changing this relationship. We will continue to build a strong relationship.
From an EC point of view and the weight it has, when it comes to R&D and also being connected to our customers directly, we are feeling a sense of crisis that we need to be more directly connected. That is why we will be making investments with priority so that the D2C channel can be reinforced. Specifically, I hesitate to say this, but March 25, D2C hopefully will be higher than 10% by then, which is direct to customer, direct sales to customers. In various ways, as we are striving to establish an improved business model for the specialty stores and mass retailers when we communicate with them, I do not think this is going to be something that is going to be a bottleneck or a deterrence. I believe our distributors understand.
We would like to have a specialty store scheme combined with e-commerce so as to improve our business. お
[Foreign language]
This will be the last question. Katsura-san from SMBC Securities, please.
[Foreign language]
Katsura from SMBC Securities, thank you very much for pointing me. I have one question. You said on the onset from Mr. Shinada that you would like to change the corporate culture. In that sense, Masahisa-san mentioned about the very front-runner type of issue. Within that, going into slide seven, you have been indicating that Masahisa DNA will be revived. You are meaning that you are coming back to the original start point, meaning that you are coming back to the real intrinsic strength that you have. Slide 14, it is about the production issues too that you have been sharing with us.
As your company and yourself, what is the legacy that you would like to remain and keep? Or what would you like to do yourself? What are you going to be contracting outside, subcontracting outside? Going forward, within the five years ahead, ten years ahead, what is your handfeel about this? Maybe a rough image about this. If you can share it with me, I would be very happy.
[Foreign language]
Thank you very much. This is a very essential question that you have been posing me. I am not saying that bring everything back to Japan or the other way around. Everything must go outside because of a cause. That is not something that I am doing or saying. We have been revising over what we have been doing. We were working sort of systematically.
Therefore, maybe there is looking at the other peer company. Peer company has been having a criteria for making a judgment. I feel that they are growing. For instance, in Hikone Factory in Kusatsu, regarding the white goods, of course, they are consumed in the local area. If it is large appliances, that is difficult to bring it over to overseas. We must be working in Japan for that. We have to be really thinking whether the device is needed and how much scope of work must be done in Japan. While saying that, for instance, there could be some discussions about China. For Vietnam and China, there is a lot of speedy things. People are skipping over and thinking fast. Sometimes Japan is thinking and trying to pack up our thinkings.
Sometimes the other area, other countries within the globe will think or skip some layers in order to make some decisions. Therefore, we would like to pair these differences up in order to create our decision-making. That is why we are trying to draw up a different matrix. What you have been questioning is very essential of our questions or what we are doing. Therefore, at some point, when we are going to be discussing about the strategies going forward, I would like you to come over to listen. With that, the explanation from the Living Appliance Solution Company will be concluded. Thank you very much.
[Foreign language]
This is our last leg regarding all the presentations. We are going to be accepting questions for the whole presentations. The CEO, Shinada, and CFO, Nakashima will be entertaining your questions. First, Mr.
Shinada is going to be adding some comments.
[Foreign language]
Thank you very much for staying with us for such a long time. This time, the three divisional presidents have been discussing and presenting to you. Everybody is now challenging a very new area for his works and jobs. I think I'm very happy if their passion is translated and understood with your side. Okazaki san has been mentioning and making a comment. I thought I should add that the Living Appliance Solution Company is now in charge of the white goods. However, in Panasonic Corporation, there's a consumer marketing Japan headquarters, which is a marketing organization for Japan. This one is having an everyday home appliances called PEEK, or else it could be handling the lighting product or partially handling some housing construction materials.
With all these materials, the consumer marketing Japan headquarters is facing the customer. Actually, that portion is not changed. Living Appliance Solution Company is working for home appliances, white goods. However, the home appliances had three directors in charge. Therefore, home appliances or white goods is one band. Then to advance it is one missing. Therefore, catering to the customer, the touchpoint with the customer is unchanged. That is something I wanted to point. Nakane-san mentioned about the sales based on new scheme. Already, for the last LAS, the new scheme sales. Already, we're seeing some improvement, like three-digit Oku in several double-digit bidding to the market. There's a supply issue happening. It's not only us. It's a conundrum with the distributors too.
Taking this year, we have to be thinking how the distributors and us and the consumers are going to be working in consistency. It is a big challenge for everybody. The sales ratio should be increased for those areas. Our direction is headed in that way. For this fiscal year, 15%. Plus, we would like to shift for 5% or 10% more within that direction. From Mr. Masahisa in charge, I think there is going to be much more improvement. That is what he meant. That was an additional explanation. Thank you. Starting, I would like to accept your additional question. This is all about today's presentation. If you are at the venue, please raise your hand. If you are online, please push the hand. Nishimura from Credit Suisse. I limit your question to one per person, please.
[Foreign language]
Thank you very much.
Following your presentation, the explanation was from the management side, and I understood it fully. One thing is about the material, slide 13, and the EBITDA growth within the three years has been summarized within a chart. Regarding the increase of sales, you're saying that the sales is going to be increased by 8%. As far as I hear, I think, honestly speaking, there's some product that could be achievable, but some not, impression-wise. In order to answer that in the current condition, can you just share with me that this product or this business is okay and this not? What is your feeling?
[Foreign language]
Yes, there's various factors to this. The large point is about the HVAC. It's going to be impacting the sales a lot. I think this was already shared by Michiru-san.
The air-to-water business in Europe is especially impacted by the Ukraine issue. It is rapidly withdrawing from gas. We already have a backorder of several billion yen. It is a discontinuous growth currently. Because of that, for the HVAC businesses, the increase of sales is especially for the overseas sales. If to say, it is a different story if we are not able to insure our parts. For Europe, I think the probability is very high. Today, we did not speak about the cold chain. Once again, when the world is open after the COVID-19 era or ages, the home alliances is going to be impacted in a negative way because people are going to be spending more on their travel and food.
When the food industry is going to be very robust, meaning that the restaurant or food eatery businesses is going to be purchasing the kitchen appliances. Therefore, we can follow up on that. The B2B businesses, at high probability, I think it's going to be directly linked to better or higher sales in number. Things are not very transparent. However, for the home appliances, not a great growth is factored in. That is the basis of the numbers that we have shown to you today. As mentioned, for the HVAC and overseas construction materials and the environment, CO2 issues, those are going to be giving a great impact. As already mentioned, in FY2022, there was a big headwind for us. We were not able to procure from the suppliers.
I think there is a high possibility that we can now start procuring from where we used to be. For 80%, I think the visibility is 80% at this point. For air-to-water, the environment last year, it was sold around 900,000 units. That was the total demand. For fiscal year 2025, the industry expects this sales unit to be double the size. The problem, this is the condition and forecast before the Ukraine and Russian issue had happened. Now the gas issue has been emerging. Therefore, right now, it is evident that the demand is going to be even higher. We are going to be having higher demand. We have a certain level of share. Therefore, to that, we can have bigger demand. I think we would like to reach the demand and the result.
In FY2026, you were saying that 900,000 units will become 3 million units. In fiscal 2031, it is going to be expanded to 6 million units. Therefore, the trending is becoming faster and larger. That is the trend that we see. Next question, please. では会場。
[Foreign language]
JPMorgan, Ayata.
[Foreign language]
Thank you. I'm Ayata from JPMorgan. For capital allocation and your point of view on that, it's related to the HVAC company. On page 16, it's hard to extrapolate from this, but it seems that the investments for HVAC over three years is going to be about JPY 200 billion, more or less. You were talking about air-to-water opportunities in Europe. It says here, strengthening the air quality business sites in North America. I guess North America is poised to grow, but it's also an area where you have weaknesses.
If you would like to expand the business in a serious way, you'll need to invest more. My question is, is this allocation going to be enough? If it's not enough, as shown on the left-hand side, growth investment funds from holdings are available as well, I think. How much upside is there to this? In getting this funding, what are the conditions that need to be met? What's the discipline you need to have? That's all from me.
[Foreign language]
May I? First of all, confirming the numbers. On the right-hand side, the total amount of investments is accounted for by JPY 3,165 billion, with JPY 120 billion going into the growth businesses. The majority of it is going to be going to HVAC systems. Then it's overseas electrical construction materials. HVAC-wise, we believe that the investments are going to be under JPY 100 billion.
That's what's accounted for here. In it, air-to-water production expansion in Europe, development are areas in which we will be able to sufficiently cover. For air quality business sites in North America, it's not HVAC, but it's more about ventilation business. We have been penetrating the market, so we would like to expand our capacity there. However, that's our expectation until March 2025 in achieving our KGIs. After, for further growth and for the larger game-changing opportunities that Mr. Michiru mentioned, there's a lot of areas we lack, which is the discontinuous investments that we would like to make. For the discontinuous investments, we would like to ensure that we generate operating cash flow. That is the fundamental aspect of having a divisional company system. We will also be doing reshuffling of our business portfolio where necessary in an autonomous manner.
Over the short term, temporarily, if we need more funds, the group CFO and ourselves will have a discussion so that as part of holdings capital allocation, we will see whether we could get some allocation for Panasonic Corporation. How we win that allocation, that is going to be key. I hope that answers your question. If I may follow up on this point, for air-to-water investments, we would like to do this on a standalone basis by ourselves. Originally, the production sites that used to produce TVs resided in the Czech Republic, but we ended the production in April. Environmentally considered products, which is air-to-water and pure hydrogen fuel cell production, is going to start. That is how the Czech Republic factory is going to be transformed. The products that are going to be produced will be changed drastically.
We would like to do this on a standalone basis. Also, for Europe, environmental regulations are really strict, especially for refrigerants and so forth. It can be a game changer. We expect it's going to be a game changer. That's what's predicted. With Kusumi-san's team, we will be sharing information constantly so that in consideration of changes in the regulations for refrigerants, we would like to fill the missing pieces. With Holdings, we would like to be aligned together to identify the missing parts and choose from the various options we have in place. I think these are the developments that are expected. For North America, we already have an operating base there, Apopka, that used to be a TV production base. It is being transformed into another base for a different purpose. With this, we would like to extend our assortment of products.
We would like to make additional investments so that we can increase the production SKU. That is what we would like to do in North America. Thank you.
[Foreign language]
Next question, please. Isela Song from Citigroup Securities, please.
[Foreign language]
Thank you. Citigroup Securities, Isela. I have a question. For the group headquarters, the funding and the expenses, how are you sharing the fundings? I think you have been mentioning about we have to be thinking about how to share the fundings, etc. The expense part, you are now an independent company. Therefore, I think the expense part has been increasing. I am interested in how you will answer to that. You mentioned that there was a dividend remark for the capital allocation. For dividend, I do not know how much to read.
Other than the dividend issue, are there any funds that you're going to be repaying back to the headquarters or the holdings? What is now different in line with the funding? Thank you.
[Foreign language]
Since we were a company system, we were having the internal dividend system. Basically speaking, that scheme is run and continued with the new scheme, the new operating corporation system too. The dividend is related to the investment. It's a cost at some limit. We will not say that it is a cost for capital. Within the investment, the holding and the operating corporation will have discipline. Naturally, if there should be a profit larger than the capital, then there's going to be an internal holdings. Therefore, with the judgment of the top personnel of the company, it's going to be used. That should be circulated.
Therefore, the scheme itself has not changed largely. The very first of the beginning of becoming an operating corporate, we have been setting up the investment. The investment being established, based on that criteria, we are paying the dividend. Regarding the cost, rather than not increased, the way you should say is that it is not decreased. The Panasonic company, different from other companies, is that this company has three companies underneath. This company is working like a holding company. The day one of April 1, the holdings and ourselves, the strategic headquarters, which is about the organization, which is like in a headquarter function. We do have some reserves there too. Along with Mr. Kusumi, we have to be in line. We are in line already.
At least within the first half, we would like to streamline and clear up within the organization how we are going to be leading the way where somewhere that is overlapping for expense. This will not happen suddenly all at once. However, we would like to hold communications continuously. It is not increasing very much, but maybe, honestly speaking, at this point, I think it is necessary to say that it is not decreased. Thank you. で時刻超過しておりますので。
[Foreign language]
We will just take one more question because we are past our given time.
[Foreign language]
This is Nakane from Mizuho. Thank you very much for this opportunity. I am not sure if I can ask you this question, Shinada-san, but for entertainment and communication and housing, they are currently separate, but they are businesses that should have belonged to your business. I guess sales is still the same.
For two years, working off the assumption that they're going to work hard towards the next midterm plan. From your point of view, Shinada-san, what are your thoughts around these businesses? Can you share your thoughts as much as possible?
[Foreign language]
That's a very difficult question to answer. I cannot make decisions on a standalone basis. The intention, you're implying that for housing, and they are also in the lifestyle arena and conducting their businesses. For both businesses, their market conditions are not that great. Gaining more competitiveness should be the utmost priority for those businesses. I think choosing that decision is not wrong. At least the peak business was carved out, and I think that was the right thing to do because the burden became lighter. Toyoshima-san, decision-making speed for Toyoshima-san became faster.
I think at this stage, the current way we're organized is good. When the businesses become more robust, whether or not we should come together is something we should constantly have on our minds. With Toyoshima-san and Yamada-san, I frequently have opportunities to interact with them and share information and hear out what they're doing and what kind of challenges they face. I think the three of us are pretty much closely communicating with one another. At a good timing, if we think it's better to come together, if everybody feels that way, we may come together. If we feel that we should still stay separate in order to strengthen our businesses, we will probably stay separate. I think that's yet to be decided. On a group-wide basis, from the customer's point of view, it's a matter of being one Panasonic.
We should not forget that when we're facing customers. It doesn't really answer your question straightly, but that's my response. I hope that answers your question.
[Foreign language]
We'll take one more question. Katsura-san from SMBC Securities, please.
[Foreign language]
Thank you very much. You mentioned about the chart sharing about the diverse organization. My question is about your material around page 24. I have been following you since yesterday. For a long term, you have been broadcasting, and this is a three-year term. For the operating corporation, according to some cooperation, some operating corporation communicated even within the longer span. In your company, in your case, since you have various jobs and various areas, when we are thinking about the future image, what kind of a vision do you have for FY31? How did you decide to disclose this information, Shinada-san?
[Foreign language]
Honestly speaking, the Panasonic Corporation is already held 60% by the B2B businesses. Forty percent or less, a little slightly less than 40%, or excuse me, a little higher than 40% is coming from consumer businesses. B2B businesses is somewhere near 60%. Within such company, we are seeing that we are a consumer-facing company like White Goods Company. However, we have a capability, and we turned into a company to handle B2B businesses. As the divisional corporate heads mentioned, the real serious talent and the strength is that when we are able to face the customers going beyond the borders of the corporations, then we do have a various level of potentiality. In the near case, there is drugstores, which is growing rapidly. Drugstores, they must buy eliminations, and they work on cases, display cases, and they need refrigerations.
Of course, they're working on decreasing the use of energy. For such account, we don't have a common platform yet. For us, it's a big loss for opportunity. Conversely, it's the treasure that we can head for. We are going to be going into this land of treasure in order to pick up the opportunity. To that, we're going to be doing our utmost. In FY2031, the consumer businesses, the contact point with the customer is going to be very meaningful, significant. To our brand, the reliability is going to be driven. The B2C business and B2B businesses are existing within the corporation, which is going to create a synergy. Having both sides within one entity, it's a rare situation. I would like to have my corporation to be intertwining, utilizing both of these.
10% of EBITDA, and we have. I think you had an image that we're going to be having JPY 1 trillion sales and three companies which have the 10% EBITDA. From the divisional operation, going forward, we're going to be expanding. We should be changing ourselves into and appealing that we are very strong within the technical engineering issues. If that is achieved, I think corporate and clients will follow. At this point, even if we say about EBITDA and the percentages, right now, it's not meaningful. However, if I were to make a declaration at the very first, that is what I would say. If everything that I have been sharing with you is achieved, then we will be a very strong company. Thank you very much.