Good evening. This is Umeda speaking. Thank you very much for joining us on a conference call on financial results for fiscal 2020 ended March 31, 2020. Please bear with my join. Summary of the fiscal 2020 financial results: FY 2020 results were broadly in line with the revised forecast announced on April 27. Overall sales decreased due to COVID-19 impact, in addition to business portfolio reform and weak investment demand in China. Adjusted operating profit decreased with decreased sales despite the steady progress of efforts such as fixed cost reduction. Operating profit and net profit decreased due mainly to business restructuring expenses. Free cash flow improved significantly. In addition, the company ensured sufficient cash liquidity. We will close the FY 2021 or disclose the FY 2021 forecast when reasonable calculation becomes possible, considering the great uncertainty caused by COVID-19 impact. Slide 2: The consolidated financial results.
Overall sales decreased to JPY ¥7,490.6 billion. Adjusted operating profit decreased to JPY ¥286.7 billion. Operating profit decreased to JPY ¥293.8 billion due mainly to restructuring expenses. Net profit decreased to JPY ¥225.7 billion despite improvements in income taxes due to one-off effects resulting from the reorganization of subsidiaries. ROE was 11.5%, which decreased year on year but achieved a level of above 10%. The annual dividend is JPY ¥30, the same as in the previous year. Slide 3: Operating profit analysis. Decreased sales lowered profit by JPY 89 billion. This was due mainly to weak capital investment demand in China, as well as COVID-19 impacts. Rationalization and others led to an increase of JPY ¥43.2 billion, mainly through efforts at the automotive cylindrical battery factory in North America.
Fixed cost reduction improved operating profit by JPY ¥30.6 billion, due mainly to efforts to enhance management structure by reducing various indirect costs and others, despite an increase in automotive batteries related to expanding production capacity. The consolidation impact of housing business and others was a decrease of JPY ¥13.3 billion. Adjusted operating profit decreased by JPY ¥40.3 billion overall, although efforts such as fixed cost reduction partially offset impact of lower sales. Other income and loss decreased by JPY ¥77.4 billion overall year on year. Major factors in fiscal 2020 include JPY ¥122.6 billion of gains from business transfer and JPY ¥115.5 billion of restructuring expenses and others resulting from promoting business portfolio reform. These two factors nearly offset each other, but there was also rebound impact from one-time gains, etc., recorded in the previous year. As a result, overall operating profit was down JPY ¥117.7 billion.
Slide 4: FY 2020 results by segment. The chart shows differences from FY 2019 results, as well as differences from the revised FY 2020 forecast as of February 3. First, the figure is by comparison to the FY 2020 forecast as of February 3, which did not factor in COVID-19 impact. Adjusted operating profit was below forecast by JPY ¥13.3 billion, while we further promoted fixed cost reduction efforts. COVID-19 impact was felt mainly as appliances and connected solutions. Other income and loss was above forecast by JPY ¥7.1 billion. This was due to increased gains from business transfer, despite an impairment loss related to the automotive business and other factors affected by COVID-19. Slide 5: The major increase in decreased factors of sales and operating profit by segment. For details, please refer to reference materials from Slide 16.
For appliances, sales decreased overall due to lower sales in smart life network and COVID-19 impact, despite higher sales in air conditioners. Operating profit decreased due to lower sales, restructuring expenses, and others, despite profit increases for home appliances in Japan, as well as air conditioners. For life solutions, sales decreased due mainly to deconsolidation impact of Panasonic Homes, etc., despite steady sales such as electrical construction materials, including wiring devices and housing systems. Operating profit increased due to profit increase in housing-related businesses, along with recording gains from business transfer. For connected solutions, sales decreased due to lower sales in process automation and avionics, as well as COVID-19 impact on all businesses. Operating profit decreased due to lower sales, despite profit increases in mobile solutions and PSSJ, and gains from business transfer.
For automotive, sales decreased due to investment effect of production expansion for automotive batteries, being unable to offset decreased sales resulting from market slowdown, COVID-19 impact, and product cycle trends of automotive solutions. Operating profit decreased. The North American factory for automotive cylindrical batteries was profitable in the fourth quarter, following the third quarter, thus significantly improved profitability. However, increased fixed costs for automotive prismatic batteries increased development expenses in onboard charging systems for orders received in Europe. Goodwill impairment and others led to decreased profit. For industrial solutions, sales and profit decreased due mainly to U.S.-China trade friction, along with COVID-19 impact, impairment loss of semiconductor business, and other factors that decreased profit. Slide 6: Free cash flow and cash. Free cash flow was JPY ¥224.2 billion, a significant improvement year on year.
While we made upfront investment in automotive prismatic batteries, such efforts at thorough control of other capital investments and reduction of inventories contributed to this improvement, along with business transfer and others. The graph on the right describes our cash position. The company ensured sufficient liquidity, proved cash was secured over JPY ¥1 trillion towards the end of FY 2020, and while there was a repayment of trade bonds of JPY ¥220 billion this March, improvement of free cash flow, as well as issuance of bonds and other factors, contributed to this amount. In addition, the company has entered into commitment line agreement of total of JPY ¥700 billion. During FY 2021, there will be no repayment of trade bonds. Net cash balance was minus JPY ¥ 419.5 billion, a significant improvement from the beginning of FY 2020.
This was contributed by the improvement of free cash flow and the exclusion of lease liabilities related to housing business due to deconsolidation as part of business portfolio reform.
Slide 7 shows our progress made in business portfolio reform. During FY 2020, the company promoted initiatives for co-creation with partners in automotive prismatic batteries, town development, and security systems to enhance competitiveness of each business. In terms of loss-making businesses, we have firmly set the direction for semiconductors, LCD panels, and solar. Page 8 shows a review of FY 2020. There are two major points I'd like to make. First, we have pursued steady execution of our business portfolio reform. As explained in the previous slide, we have promoted co-creation and made progress in setting the direction for loss-making businesses. Second, we've enhanced our management structure. We have made efforts to reduce fixed costs and, at the same time, significantly improved free cash flows.
While sales and profit decreased compared to the previous year due to the decreased sales, mainly affected by the weak market conditions in China and COVID-19 impact, we continued and accelerated our initiatives to overcome the low cost of the business structure. On this slide, I will explain our outlook for FY 2021. First, our response to the spread of COVID-19. Second, factors affecting financial performance, including COVID-19 impact. Page 10. Here, I will explain three aspects of Panasonic Group's response to the spread of COVID-19. First, securing the health and safety of various stakeholders, including customers, business partners, employees, and others. In accordance with the laws and policies of the government in the nation's regions, we are taking initiatives to prevent further spread of the disease as a top priority, including work-from-home, taking infection prevention measures at factories. Second, we will continue to contribute to the society.
Company is mobilizing resources to help solve social concerns by providing products and services, as well as medical supplies and others, according to the situation in the nation. The third is business continuity planning. In order to fulfill the social responsibilities, we are taking measures for business continuity from various perspectives, including factory production, maintaining and securing supply chains, and ensuring cash liquidity in case of prolonged COVID-19 impact. On page 11, I will explain the COVID-19 impact on our businesses in Q1 as possible factors affecting FY 2021 financial performance. In the press release dated on April 27, we qualitatively explained the impact for Q4 of FY 2020. During the current Q1 of FY 2021, we have seen some changes that are underlined on this slide. First, in terms of demand affecting our sales. During Q4 of FY 2020, the impact was felt mostly in China.
In Q1 of FY 2021, the impact is expanded beyond China due to weak market conditions of automobile and aviation industries and restrictions on movement within various nations. Second, in terms of supply affecting our production. While the supply chain issues in China seen in Q4 are gradually being solved, the impact of temporary factory suspensions due to the lockdowns in Asia and others is starting to arise. The impact on each segment is shown on this slide. Finally, page 12 shows our initiatives to improve profitability as possible factors affecting FY 2021 financial performance. During FY 2021, we will continue to enhance management structure, such as reducing fixed costs and taking measures for loss-making businesses.
For our automotive business, which needs to be turned profitable urgently, we will make efforts to improve profitability by reducing development expenses at automotive solutions and by expanding sales and improving productivity of automotive cylindrical batteries. We will continue our steady execution of our business portfolio reform. While we anticipate further uncertainty in the management environment due mainly to the further spread of COVID-19, we will steadily promote these initiatives to overcome the low profitability structure. Thank you for your attention.
We will now take questions from Nomura Securities. Mr. Okazaki, please.
Thank you. This is Okazaki from Nomura Securities. I have two questions. First, the impact of COVID-19. You did describe the situation by situation for the first quarter. Can you talk about the size of the impact by segment? My second question, in terms of the business portfolio reform, I understand that there is a very strong message at the very end to promote this. Now, in the current situation, there is a disruption, some of the weaknesses that were not visible in the past. I think you do see some visibility in terms of the improvement as well. Under the current situation, I wonder if there has been any change made to the business reform efforts in terms of the direction, overall direction.
Thank you for your questions.
The impact of COVID-19 in the first quarter by segments, which is more affected than others. In terms of sales for April, maybe that will give you some idea as to which segment is more affected than others. Sales in April overall, about 80% level compared to the previous year. A little less than 80% compared to the previous year by company, automotive-related business. Reduced to less than 50% due to the impact of lockdowns in different parts of the world. In appliances, in Japan, compared to the previous year, the level was somewhat similar. In China, it was at the same level as in the previous year. In India, where the size of our business is not that large, the sales were zero. The impact was different from region to region, market to market.
Appliances, about the same impact as the average for the company overall. For life solutions, over 80% level compared to the previous year. UNS, avionics, somewhat affected, but other areas, higher sales than the company average in terms of comparison to the previous year. Industrial solutions are doing pretty well. 5G-related business, there is a strong demand. Close to the previous year's level of sales recorded in April. For the first quarter overall, it is very hard to foresee what the results are going to be. Based on the results for April, we believe that the overall characteristics would be the same for the three-month period as well.
As for the portfolio reform, anything related to mobility, like airline business, although our business is only limited to avionics in that field, since our customers are really suffering, I think we need to pay close attention going forward. In the automotive industry, the automakers are announcing rather difficult results. There are differences from region to region. China and Japan, for instance, the decline is not that significant. Whereas North America, Europe, and Southeast Asia are in a more difficult situation, given that there have been nationwide lockdowns in those regions. Going forward, as automakers are saying, toward the second half of this fiscal year, some recovery is expected. Our business related to automotive industry, the factory solution and parts. We do business with different aspects of the automotive industry. From business to business, I think the size of the impact is different.
We have to continue to monitor the situation closely.
Thank you. Let's move on to the next question. From Citi Group Market Japan , we have Elizabeth Warren.
Thank you very much. This is Reza Warren. I have two questions. On the actual term, the higher profits, there is a slide for that. On that slide, others minus JPY 77.4 billion, it is mentioned on page 3. A breakdown of that is mentioned here. Among those, Q4 changes, could you explain that? Q4 specific items, the positive ones and negative ones, maybe you can list them up. Also, another question about the structural reform or restructuring. I think you touched upon this. The major pillar is the business portfolio reform. That would be one of the major pillars for the restructuring of the new fiscal year. Is that correct? Aside from the corona impacts, what you are trying to promote as a restructuring, what are the major ones? Could you talk about that? Reduction of the fixed costs.
For example, aside from the TV business, non-profitable businesses, do you need to expand that effort to other areas?
In Q4, major profits and other losses occurred. The housing company transfer was about JPY 100 billion. That is the gain on this side. As for other incrementals, the negative side, the impairment loss was incurred. There are impairment losses related to their businesses. On page 4, here under other incrementals, there are positive numbers and negative numbers. Life solutions, as I mentioned, this is positive. As for automotive, those are related, TCOSA-related impairment loss was booked. Most of the amount was already included in this impairment loss. This is the China business and others. We estimated the loss. Also, company-wide, about JPY 20 billion level. This is 2002 Matsushita. The delisting of the Matsushita wiring business. We reorganized the business portfolio.
As others, this was booked. Those are the major ones in Q4. That was for the Matsushita Electric Works. You mentioned the business platform reform. Yes, as you said, we will continue with this reform. As for the loss-making business and how to eliminate those businesses, JPY 100 billion, that is JPY 40 billion for the non-profit business. Also, the fixed cost reduction is about JPY 60 billion. The non-profitable businesses, the direction was set in 2020. The loss-making businesses, in comparison to 2019, there were no major changes in terms of the amount. The change of the JPY 40 billion would be incurred in 2021 and 2022. After 2021, those businesses, we will be reducing the deficit for them.
In addition to that, we would also make sure that we will promote the improvement of the management structure at JPY 60 billion level. When we can make an announcement, we would also be talking about, as we did in fiscal 2020, we will be able to give you the update on the others. I hope that answers your question. Sorry. Talking about the unprofitable business, one more thing. The JPY 40 billion, by eliminating that, how much of the increase of the profit do you expect? It has been flat. This number, JPY 40 billion, is unchanged. Is that correct? This fiscal year and the next fiscal year are the ones that you start to see the effect. Compared to this fiscal year, it will be eliminating further losses in the coming fiscal year. Right. JPY 40 billion in 2019.
Also, JPY 40 billion in 2020. We continue to have that number. The direction was set in fiscal 2020. Yes, that's correct. In 2022, we are also working on the promotion of this and 50% progress can be expected for that timing. Thank you.
From Macaulay Security. Damien Hassan, please.
Damien Hassan. Can you give us some clues into the amortization and depreciation, especially in relation to the prismatic battery business? How much CapEx are you planning? Year on year, are you going to be reducing CapEx? That's my first question.
Thank you.
For fiscal 2021, CapEx. With the absence of major investments like prismatic batteries, of course, we'll see how the COVID-19 impact is going to be. JPY 270 billion was last year. It may go down to JPY 200 billion this year. Because the prismatic battery-related investments are not going to be made this year. That should account for this year-on-year decrease in CapEx. The relationship between CapEx and depreciation, the investment in itself is not going to hurt the cash flow. We don't foresee such investments to be made going forward.
I see. Thank you. My second question.
In avionics, Boeing, Airbus, they are really suspending production. I think that is going to have an impact for the first quarter and the second quarter as well. Now, cost reduction in others, those efforts will be made. Can you give us a clue as to what actions are feasible?
Thank you for your question. In the month of April, we did not see a surprising effect. Looking at the aircraft companies, we do expect, and airlines as well, there might be some major impact. As is already reported by these media, large reduction in workforce has been implemented in April. The industry, the impact of COVID-19, because there has been a strong restriction on the mobility of the people, it's very difficult to foresee how things will evolve going forward. Entertainment, the products themselves might be affected.
The services and maintenance orders are coming in. Currently, it is hard to see what the impact on those aspects is going to be. The airline companies, the governments in different countries are supporting the airlines. We are going to have to take a closer look at that to see what the impact on our business is going to be.
Thank you. We are still taking questions. Yasreen from UBS Securities.
Thank you. This is Yasreen from UBS Securities.
April sales, minus 20%, was mentioned. In terms of the level, quite tough level. That's my personal impression. Based on that, in a year, this year, cost reduction or something that you can do right away in the first half or in a year, are there any cost reduction master plan or plan?
Maybe with those numbers, whatever you are doing as a cost reduction, maybe you can share them with us. The second question. You have global businesses. As I mentioned, the impact of the business in India is huge. We are seeing the impact in different regions. Are there any regions which had unexpectedly bad impact or a very difficult situation? I'm sure that would impact other companies as well. If you can talk about that. The COVID-19 impact is quite tough.
For example, in avionics, the restructuring and TCOSA is also one of the examples. According to the government law, a kind of a temporary suspension, depending on the regions, we are taking measures, including further. For the master plan, about JPY 100 billion, strengthening of the management structure is something that we have been doing towards fiscal 2022. We will continue to do so. We make sure that we will not move away from it. Also, out of that, JPY 40 billion, that is for the unprofitable business elimination. That would be emerging in fiscal 2021 and onwards. As for JPY 60 billion, one-third is 2020. In the future, depending on the situation, we would try to promote it further. At the same time, as for India, this is an extreme example. The size of the business is not so big.
Also, how long would it last, that is, the impact of COVID-19? It has to do with the secondary wave of pandemic, whether it would come or not. In a sense, the situation of the sales in different regions is something that we understand. As for our impression, Q1 probably was the bottom. Q2, we start to see some recovery. In the second half, maybe we'll be able to secure the same level as the previous year. When we look at the overseas markets, that's something that we expect. If that is the case, the April drop probably is the bottom or might continue somewhat in May. That is something that's very difficult to rationally foresee. That's why for 2021, we are not announcing the numbers. That is the feeling that we are getting. Thank you. Thank you very much.
From SMBC Nikko Securities. Mr. Katsura?
Thank you. I have two questions. First, I'm looking at slide four, comparison with what you disclosed on February 3rd. What was the impact of COVID-19? Is the difference shown on that slide be sufficient to look at the impact of COVID-19, or do you have some other figures in mind? Impact of COVID-19 on sales and operating profit forecast. My second question is slide three. Some others have already asked the question. The restructuring effort using JPY 6.5 billion, what will be the effect of that effort for fiscal 2021? I know there are positives and negatives. Looking at what you mentioned already, eliminating loss-making businesses, 20 plus 20, approximately JPY ¥40 billion, I think is the figure that you mentioned. Are there any other factors that you can talk about in that COVID-19 fiscal 2020 result?
Again, it's very difficult to have very precise, accurate calculations. Based on certain assumptions, we would see that JPY 130 billion impact on sales. Major ones, appliances, CNS, and automotive, in that order. Impact on profits, about JPY 30 billion, a little over JPY ¥30 billion, is what we estimate. Impact on operating profit, again, would be the same as impact on sales in terms of different segments. That is our current estimate. The restructuring effort and its effect for fiscal 2021. Restructuring efforts. Earlier, I mentioned that there are various impacts on different parts of the business, about JPY ¥20 billion. The structurally loss-making businesses, in particular, would be addressed to generate that effect. For fiscal 2022, we expect further effects. We can't eliminate immediately. We are working towards fiscal 2022. Thank you.
I have a question from two persons. One question per person. Morgan Stanley Securities? Hassan.
Yes. Thank you very much. I'm Ono from Morgan Stanley MUFG . One question. TCOSA impairment was booked in 2020. Aside from that, in the past month that we acquired or the rechargeable battery, the temporary loss of one time, how much of that should we expect for FY 2021? Would you comment on that? TCOSA, the goodwill, the whole goodwill was booked as an impairment loss. Hassman, prosperity itself, we looked at it under a lot of stress. It looks okay. As for the rechargeable battery, demand is strong, especially for Tesla. We are in the phase to expand production. There were no needs for the loss, impairment loss. Corporate-wide impairment loss, that is the unreached electric work, the delisting of it. There are some remaining.
In relation to the corona impact for COVID-19, our accountants and advisors have conducted analysis under a lot of stress. For FY 2021, due to COVID-19, the new impairment loss is not something that we expect.
From Ms. Hill, Mr. Nakane, please.
Thank you. This is Nakane, from Ms. Hill. Just one question. My second question was actually asked by Mr. Ono. I am just going to focus on one. April sales. ISYOY was almost flat, which I think is good news. Mechatronics and Vision, US Solutions, Energy Solutions, many other businesses. I think it was good thanks to 5G. For automotive solutions, I think some suffered. On a growth basis by segments, can you explain what the results were in April and what the momentum is for May?
Thank you. By business. You are right. There are positives and negatives. Overall, the driver was 5G-related business, as you mentioned. Electronic devices, materials, and SD cap, loss cap, the conductive capacitor. These were the drivers. In China, recovery has already taken place.
For automotive solutions, there's still some challenge. For communication systems and for the storage data centers, for energy storage, very strong demand there. In IS Industrial Solutions, even in post-COVID-19 phase, or even with the impact of COVID-19, we believe that the results were positive. That's it.
For automotive solutions, how much was the negative?
I expect a recovery going forward. Are you asking about March in IS?
No, April. The automotive solutions alone, how bad was it, is my question. In other words, how much was the positive other than automotive solutions?
Very hard to say. What I explained earlier was the overall situation. In terms of more specifics, they are negatives and positives. You're correct. We're still trying to identify what the quantitative impact is. Thank you.
Thank you very much. Our time is up. We would like to end the briefing session now. Thank you very much for joining us today. Thank you very much.