Thank you very much. Let me now present the fiscal 2023 financial results as well as fiscal 2024 financial forecast. This is a summary of consolidated financial results starting with the impact of the U.S. Inflation Reduction Act or IRA. Although the detailed rules are not yet announced, an amount equivalent to the assumed tax credit is recorded in Q4 as a tax deduction and factored into the FY 2024 forecast as adjusted operating profit. Overall sales increased year-on-year due to the higher sales mainly in lifestyle, automotive, and connect, and by currency translation. Adjusted OP decreased due to the large profit decline in industry and energy despite higher profit of automotive and connect. Net profit increased due to the tax deduction equivalent to the IRA tax credit.
Operating cash flow increased year-on-year due mainly to efforts to reduce inventories and impact of a one-time tax payment last year. The annual dividend is set at JPY 30 per share, same as the previous forecast. For the FY 2024 forecast, both sales and profits are expected to increase overall due to the demand recovery and profit recognition of an amount equivalent to the IRA tax credit. Net profit forecast is record high level of JPY 350 billion. Both sales and profits are expected to increase in lifestyle, automotive, Connect and energy. Sales and profit are expected to decrease in industry. Let me explain the impact of IRA tax credit on our financial results and forecast. There are three ways to monetize a tax credit: deductible, refundable, direct payment by the government, and transferable, with each requiring different accounting treatment.
In Q4 in FY 2023, we are assuming that the deductible tax credit will be applied. We recorded JPY 40 billion in net profit as a tax deduction equivalent to the IRA tax credit. For FY 2024, we are assuming to elect refundable tax credit. Considering an aim of U.S. IRA, which is to reduce excessive inflation and to promote energy policies in the U.S., we believe we should use the credit to promote EVs in North America. In addition to investing in our U.S. EV battery business, we are also considering a way to effectively use the credit with our customers to strengthen and expand our business in North America. For FY 2024, JPY 80 billion, about half of the total tax credit amount, is factored into the adjusted OP in energy.
In addition, we are assuming the amount effectively used with customers will be applicable for deferred tax accounting or DTA. JPY 20 billion is expected to be recorded in DTA. As a result, the impact of the IRA on net profit is expected to be JPY 100 billion in FY 2024. Next is the details. This shows the consolidated financial results. As shown on the right-hand side, overall sales and each profit number in P/L statements as well as EPS, ROE, and EBITDA exceeded the forecast of February 2. These are the results by segment. An analysis of year-on-year comparison for sales and operating profit are shown in the next slides. Starting with sales. Overall sales increased due to higher sales mainly in Lifestyle, Automotive, and Connect, and by currency translation. Details are shown on this slide by segment. Next is operating profit analysis. Adjusted OP decreased overall.
This is due to major decline of adjusted OP in Industry and Energy in the second half, while it increased in Automotive and Connect. Details by segment are shown on this slide. On the right-hand side, other income and loss is shown. It decreased year-on-year. Excluding the impact of JPY 58.3 billion revaluation of existing equity over Blue Yonder upon acquisition in FY 2022, it actually improved due mainly to lower restructuring expenses. This is a result of the lifestyle by divisional company. On April 20th, the recall of Clothes Drying Dehumidifiers was announced. Recall related expenses are recorded in other income and loss of Heating & Ventilation A/C Company. This is our operating profit analysis by factor. From the left, profit from sales expansion increased by JPY 40.2 billion.
Fixed costs were a negative factor of JPY 84.8 billion due mainly to investments in lifestyle and energy aimed at growth of the business. Price hikes in raw materials and logistics were a negative factor of JPY 224.3 billion. The price revision and rationalization effort was the positive factor of JPY 224.6 billion. The consolidation impact of Blue Yonder and temporary factors of lifestyle led to the increase of JPY 0.7 billion. As for Blue Yonder, profit increased by JPY 2 billion and the breakdown is shown at bottom right. Overall Forex impact was zero, almost no impact. By segment, it had positive impact on industry and energy, but negative impact mainly on lifestyle. As a result, adjusted OP decreased by JPY 43.6 billion.
Other income and loss was down by JPY 25.3 billion due to one-time gains in FY 2022. Operating profit decreased by JPY 68.9 billion. Next is cash flows and cash positions. Operating cash flow was JPY 520.7 billion, up from FY 2022. This is due to efforts to reduce inventories as well as the impact of one-time tax payment in FY 2022. Inventories started to decline after peaking out in Q3, mainly by revising the strategic inventory level. We will continue to reduce the inventories in FY 2024 and onwards. Net cash on the right was the negative JPY 591.4 billion, better than the end of fiscal year 2022. This shows the shareholder returns. Today, the board of directors resolved to pay the year-end dividend of JPY 15 per share.
Combined with the interim dividend, the annual dividend for FY 23 is JPY 30 per share, the same amount as the dividend forecast announced on the February 28th. Our approach to use the IRA tax credit is shown in the middle of this slide. As I mentioned earlier, we believe we should use the credit to further promote the EVs in North America using the cash from the IRA tax credit for investments in our EV battery business in the United States. Our dividend policy in principle is to distribute profits to shareholders based on the business performance and strive for stable and continuous dividend payments. Dividend payout ratio target is about 30% vis-a-vis the consolidated net profit. Considering the aim of the US IRA, dividends are determined based on the amount of the net profit excluding the IRA impact.
We continue to try to provide returns to our shareholders by achieving enhanced corporate value through business growth and profit expansion by investing mainly in growth areas.
This is consolidated financial forecast for FY 2024. This shows the consolidated financial forecast. Both sales and profits are expected increase year-on-year. Sales are up 4% to JPY 8.5 trillion excluding exchange rates. Adjusted pro OP and operating profit are expected at JPY 430 billion. Net profit is expected at JPY 350 billion, EPS at JPY 149.95. ROE is expected at 9% and EBITDA JPY 880 billion. All these figures are above the levels in FY 2023. This slide shows our outlook on the business environment. This chart shows the changes in demand by segment as an assumption for the FY 2024 forecast.
For the four segments, except for industry, both sales and profits are increasing on the assumption of market conditions being better than in the previous year. Industry sales and profits are expected to decrease due to year-on-year decrease in demand, in particular for the ICT terminals. However, a recovery trend is expected from the second half. Price hikes for raw materials and a shortage in semiconductor parts and materials, which had a significant impact for the past two years, are expected to be mostly resolved for FY 2024. As explained at the Q3 announcement, Energy segment faced price hikes for certain raw materials, but there was a time lag before reflection in sales prices. This is likely to be normalized. This slide shows analysis of OP. From left, profit from sales expansion is positive JPY 100 billion.
Fixed costs are a deteriorating factor of JPY 90 billion. This is due to investment for future growth in lifestyle and energy, as well as increased personnel and other costs due to inflation. Price hikes in raw materials and logistics is a decreasing factor of JPY 35 billion. As a positive factor, we have JPY 86.3 billion from price revision and rationalization. We have JPY 80 billion in profit recognition related to IRA tax credit. As for Blue Yonder, a decrease of JPY 5.4 billion is expected. As for the exchange rates, we expect a year-on-year decrease of JPY 20 billion, assuming a stronger yen to the dollar and the euro compared to FY 2023. As a result, adjusted OP is expected to increase by JPY 115.9 billion.
Other income and losses is up JPY 25.5 billion. OP is up JPY 141.4 billion. This is the forecast by segment. In industry, both sales and profit are down. Both sales and profit are up in lifestyle, automotive, connect, and energy. Moving on to sales analysis by segment in the next slide. First of all, a sales forecast analysis. Lifestyle sales are expected to increase due mainly to higher sales of HVAC in Europe and electrical construction materials in Japan and overseas. This is also with the marketing enhancement and the price revisions for the consumer electronics in Japan and recovery of consumer electronics demand in China.
Automotive sales are expected to increase due to higher automotive production and the sales of industry segment products, mainly in green vehicle. Connect sales are expected go up with the sales growth of Avionics and Blue Yonder. Industry sales are expected to decrease due to decreased sales as the semiconductor sales channel will change after the business transfer in FY 2021. Despite increased sales of relays and capacitors, energy sales are expected to increase. In-vehicle sales are expected to be favorable with their continuously expanding EV demand and improving production and productivity. Industry consumer sales are expected to increase for full year with recovery from Q2, although the ongoing year-on-year decrease in weak market conditions, it will continue until then. Other elimination adjustments, sales are of both entertainment and communication and housing are expected to increase. This is the adjusted OP forecast.
Lifestyle Profit is expected to increase with increased sales of priority businesses and the impact of temporary expenses in China in FY 2023. Automotive Profit is expected to increase with increased sales, cost reduction, and a price revision to offset price hikes in parts and materials despite increased fixed costs and persisting impact of price hikes in parts and materials due to continuous semiconductor shortages in automotive. Connect Profit is expected to increase due to higher Avionics sales, lower costs from the resolved procurement issues despite the decrease of Blue Yonder due to strategic investments for growth. Industry Profit is expected to decrease due to exchange rates despite increased sales of relays and capacitors, as well as rationalization and a price revision to offset impact of raw material price hikes.
Profit is expected to increase even excluding JPY 80 billion IRA tax credit. The time lag before material prices are reflected in sales prices, this is expected to be mitigated. Production and sales expansion for both in-vehicle and industry consumer are expected, while fixed costs for future growth are expected to increase. In other elimination adjustments, profits are expected to decrease. This is due mainly to temporary increase in income in FY 2023 from intellectual property despite increased sales of elimination in communication and housing. This is the forecast for lifestyle segment by divisional company. Adjusted operating profit and OP are up in all divisional companies. This is the forecast for adjusted OP for Blue Yonder. Details are explained earlier today by Panasonic Connect.
Adjusted OP is expected to decrease even on a sub standalone basis due to investments for future growth, including product enhancement and a synergy creation. It is expected to increase, excluding investments, due to the steady sales growth of SaaS business, which we are focusing on. Here is the progress of our initiatives for the three growth areas. For automotive battery, in February 2023, Energy started construction of the factory in Kansas. In April 2023, Energy signed a contract with Hexagon Purus to provide EV batteries. In supply chain software business, connected to continuing its transformation towards future growth, as explained in today's briefing. Air quality and air conditioning business, the growth in A2W business in Europe is there.
In March 2023, Lifestyle is maintaining a strong plan and production at the Czech factory. In addition to the announcement in October 2022, going forward, Panasonic Group will keep you updated on those progress. Finally, the slide shows the IR announcements since the new structure was implemented in April 2022. For FY 24, we are planning to host a group strategy briefing on May 18th. In addition, each company is holding a planning meeting strategy briefing on June 1st and 2nd. As shown in this slide, the group strategy briefing will be hosted by Group CEO, Mr. Kusumi, and operating companies, the strategy briefings will be hosted by each CEO. We look forward to your participation at these meetings. Thank you very much. This is all my explanation. Thank you.
Thank you very much for your attention. Now I'd like to take questions from mass media. If you have any questions, please raise your hand. We are only taking questions in Japanese. Once again, we are only taking questions in Japanese. Once again, please note that the questions are not accepted on the English line. First question is from Furukawa of Bloomberg.
Thank you very much. I am Furukawa of Bloomberg. I have two questions. First, about the IRA related. This term, JPY 80 billion adjusted OP is booked, which is about half of the total, we understand. I would like to know the total amount. The remaining amount, I think, is the amount effectively utilized with the customers. This is to invest in the expansion of the batteries for Tesla? Is that how you use it? The second question is about the 4680, about the delay of the mass production. Could you give us the more detailed reasons? On page 21 of your presentation, 4680 development probably is delayed. Is that the case, or are there any other reasons behind this delay?
Thank you very much for your questions. First of all, about the IRA, JPY 80 billion, which is about, which is the half of the total. The total is JPY 160 billion. This JPY 80 billion, specifically, what purposes do we use it? In any case, as I explained in my presentation, IRA, aim of the IRA must be considered, so that is to expand the EV and battery business in North America. Of course, with the customers, we want to have a win-win relationship. We assume such way of usage.
Right now, conservatively, we are booking or expecting JPY 80 billion on our profit. That is my answer to your first question. About the 4680, the production or the development, we said that within or in the second half of FY 2024. Actually, previously, when we made an announcement about the new plant in Kansas, we are starting up with 2170. After that decision, 4680 start up timing, what should be the best timing? Before the start up, we have to improve the capacity. We originally thought that we would start with 4680, so that step was skipped. Since we are starting quickly with 2170 so that we can respond to the demand.
As for the mass production start-up of 4680, in the first half of fiscal 25 is our plan. That would be the next step after improving the capacity, start up the 4680. That's our plan. I hope you understand. Thank you. About the customer, just one point. When you say customer, is that equal to Tesla, or are there any other customers in addition to Tesla? Well, specific customers, it's difficult for me to say. IRA, in order to benefit from it, the Gigafactory, which is exclusively for Tesla, so that's where we can get the credit, and that would limit the customer naturally. I hope you understand. Thank you.
Thank you very much. We'd like to entertain the next question from Nikkei Shimbun. Izumi-san, please.
From Nikkei newspaper. My name is Izumi. Can you hear me?
Yes, we can hear you.
Thank you. I have two points. First, regarding CapEx. Today, you gave us the supplementary information material. On page 10, I'm looking at page 10 of the material. For FY 2025 , fiscal year, overall CapEx, compared with FY 2024, there is a large increase. By segment, lifestyle business as well as energy business seems to have a particularly large increase. What are the factors behind those increases in CapEx for those two businesses? That's the first question. The second question, this is for FY 2023 and on actual and FY 2024 forecast. By segment, you have OP margin information. For automotive, it seems that margin is a little bit less. What is your assessment? Do you have any factor analysis on this topic? Please share if you do. That's the second question.
Thank you very much. Regarding the CapEx, you are right. For energy, there is an increase. This is because for the Wakayama 4680, we are starting up the production capacity. That's why there is an increase for the CapEx. For the lifestyle business, for the air quality and air concditioning, especially for Air-to-Water, there is an investment. For Czech facility, we are going to expand the capability. That's why the CapEx is increasing. That's my explanation for your question about CapEx. Mainly for energy and lifestyle, we have an increase. For the automotive margin, there was another question. Well, even in the past, we have been telling you about this. For European manufacturers, high voltage charger equipment. Well, in those areas, the products are quite challenging. That's what we have got.
For a while, we are anticipating that we have difficulty, the loss of more than JPY 10 billion will continue for a while. We already communicated that. The loss peak was in FY 2022, and then we are already seeing improvement. For FY 2024, JPY 10 billion or more loss is going to continue, however. Because of that situation, infotainment business is improving. For the charger business, this is becoming some burden. That's why our margin is depressed to a certain extent. On the other hand, for the operating company's IR announcements from Mr. Nagayasu, there was a mentioning about this. In Europe, for high voltage charger, there is a great need at the moment for these products. When we get the orders, we had some difficulty. Today, we are doing the mass production.
Specifically 9.6 kW, 11 kW, and 22 kW. Those are high voltage products, high output products. For all of these, we have all of these items in the lineup, and we are able to produce and manufacturing, and we are getting demands for those products. In the beginning, we thought that we would have some difficulty in the beginning. Today, we are doing a fine job in manufacturing, and we are thinking about the future investments so that we can focus on this business. Thank you. Did that answer your questions?
Yes, it did. Thank you very much.
Thank you
. Thank you very much. Next question. Kaburagi-san from Jiji Press. Kaburagi-san from Jiji Press, are you there? We are unable to hear you, so we are moving on to the next question. Nakamura-san from Asahi Shimbun. Nakamura from Asahi Shimbun.
I hope you can hear me. Thank you. I also have two questions. First, the accumulated excess flow of more than the ROA of more than 10%, and what is the likelihood of achieving those numbers of JPY 2 trillion and 10%? Within those, now the two years are over and Mr. Kusumi, I think, is referring to the review of the portfolio. If you can comment on that.
Yes, thank you very much. Well, as our first year, originally, we were working on the improvement of the competitiveness, and we shifted to the operating company system, and we expected acceleration of those. In the first year, it appears that it was weaker than expectation. Just at OP, it's a little bit behind. The operating cash flow, actually, we are mostly on track. That is feeding. JPY 1.5 trillion. We did not expect the IRA at that time, so including that, without giving it up, we are aiming for those numbers. As for ROE, the shareholder equity is expanding and the equity ratio is 45% right now, so we need to consider that. Generating the steady profit, so ROE 10% and considering the capital efficiency, right now we have no plans to give them up, and it's not necessary to do so.
Those three KGIs are the ones that we are aiming for. As for the competitiveness enhancement, on 18th of this month, Mr. Kusumi will be giving you the overview. Specifics will be mentioned there. Roughly speaking, this is the financial results briefing. If you look at the first half and second half on page 28, fiscal 2023, first half and second half are shown in a table. FY 2023, the higher sales and a lower profit was recorded. In the first half, at the bottom you see the consolidated number. It's down by JPY 53.9 billion. In the second half, it's up by JPY 10.3 billion. In the first half, there was a Shanghai lockdown, and Q1 was suffered. For the full year, the lower profit. In Q4, the profit turned positive.
Based on those. With the high price hike of the raw materials and supply chain disruption, we had a major impact. Through our efforts on the enhancement of the competitiveness, like KPI and our operating companies and others, we try to break it down to lower levels. I think we are starting to see the likelihood of achieving KCIs. As for the details, please wait until May 18, when Mr. Kusumi will explain the specifics of the strategies. I hope those answers your questions. Thank you very much.
Thank you very much. We'd like to entertain the next question. Toyo Keizai Shimpo, Umegaki-san, please.
From Toyo Keizai. My name i s Umegaki. Can you hear me?
Yes.
I have two questions. Well, those are general questions. Except for IRA for FY 2024, your expected OP. The increase in profits, how do you assess this? Is this large enough for the company or you wish it was larger, but you are taking a conservative view on this? Could you give us some more color on this? Another question is about PBR. Well, there were some comments made on your PBR, but in terms of the capital policy, are you going to make any changes or are you discussing any changes to the capital policy? That's all.
Thank you very much. First of all, excluding IRA, JPY 35.9 billion. Well, in OP we have JPY 61.4 billion. Those are increases in profits, especially for OP. Recently... Well, in the past, there were some volatility because of the structure reform costs and expenses, but now those expenses are subsiding. Regarding the increase in OP, we think that we have a clear uptrend. For the adjusted OP of JPY 35.9 billion in increase in adjusted OP. For China industry business, well, operating companies are in this segment. In Connect we have process automation companies, like SMT companies. Also in the energy company, well, the auto batteries are doing well, but for ICT and other areas, the market conditions are quite difficult. That was the anticipation we had. Well, we had a slide on the impact of those economic conditions, so we are anticipating those difficult situations.
I think that this is at least that we can do. That's the kind of feeling I have towards this number. Regarding the one-time OLS for PBR, we take it seriously first and foremost. However, at the phase where we are, well, if we do share buyback to reduce equity to increase ROE, that's one way to go. We can do a special dividend to reduce the surplus and increase ROE. That's another way. We had a ROE of 15% in the past. At that time, equity was about JPY 1.8 trillion-JPY 2 trillion. In terms of the IRA, we talked about it a little bit, but we want to focus on the business, especially for the medium term to long term.
I don't want to boast on what we are doing at this stage, but in terms of shareholder return, we want to keep focusing on that. That's all the comments I can give.
Thank you very much. I understood very well.
Thank you.
Our time is running short. Those people from the mass media, we can take 2 more questions. Kaburagi-san from Jiji Press.
Can you hear me?
Yes.
Good. Thank you. About IRA related tax credit, I'm sorry, maybe this was already asked, but, up to FY 2024 this was included for Nevada. This is the end of it for Nevada plant? As for the new plant in Kansas, this is also, applicable. In the future, this, tax credit is, can be expected for Kansas? If that is the case, what would be the timeframe and how much would it be? If you can comment on that.
Yes. IRA, it's really up to the budget, overall budget of the IRA. 38 GW is already we have in PENA, together with Tesla. We already make those products. FY 20 25, this would continue. Also 2026, FY 2026. Also in the United States, as for the expansion of our capacity, the Kansas is starting with 2170. So this is for FY 2025 or second half or from the end of it starting up. Then FY 2026, we can start the mass production, and in 2027, maybe 30 GW level can be achieved. So that's the rough timeframe. That will be eligible for IRA. So this, the IRA expected equivalent to the IRA tax credit will continue in FY 2025 and 2026. From the government, Section 45X is what we can apply to us. The budget of this specific amount is not yet mentioned.
The green energy, $270 billion, so it's about JPY 35 trillion. Section 45X and various fields will be included. That budget, unless we have the detailed rules, we won't know the details. In a year or 2 years, if it continues for those years, those companies who are interested in this will not benefit. I'm sure that this will stay for several years and we can benefit. We can assume that this will continue for several years. That is what we understand. Thank you very much.
Yes, thank you very much.
The last questioner is Hatanaka-san from Yomiuri Shimbun. Hatanaka-san from Yomiuri Shimbun, are you there?
Hello, can you hear me?
Yes, we can hear you.
Hatanaka from Yomiuri. I have a IRA related question. For FY 2023, there was downward revision, but, looking at the final profit number, it looks better than expected. For the current fiscal year, carbon neutral expectation is very high. Given the IRA, what is the impact of the IRA in the financial results and your assessment?
Well, in terms of the size of the amount that is stipulated by the act, so that's how the size is decided. We already have 38 GW for the energy business, so simple calculation tells us that we have JPY 160 billion per year. This is the number that we can simply calculate from the act. The location was important, I think. And also for FY 2023. There was a question in the past, why not?
Well, there was no detailed rules, but we included this this time. Because of the decision by the accounting auditor, we can't do this on our discretion, on our own only. This is a huge amount. In the act, why it was changed is that in the draft act, it says that for the new accounting year of U.S. companies, refundable is applicable. However, that's the only information available. For U.S. companies, their financial years are from January to December. In our case, even in the U.S. subsidiary, it is from April to March. Therefore, from April, we can apply the new accounting year, and this is applicable for the refundable tax credit. This is the subsidy that we can include in the COGS.
Whatever is outside of this is not clear because there is no rule announced. We thought that we should just apply the deductible tax credit. That was the judgment of the accounting auditor. That's how we applied this. Did that answer your question?
Thank you very much.
That's all the Q&A session for journalists. Now I'd like to take questions from the institutional investors and analysts. Once again, please note that the questions are not accepted on the English line. From Morgan Stanley MUFG, we have Ono-san.
Yes, this is Ono speaking. Thank you very much for this opportunity. About the IRA, JPY 80 billion and how you consider it, I have two questions on that. Section 45X, based on that, 38 GW hour, if you multiply. Output forecast needs to be multiplied, and I think that you get the JPY 80 billion from it. As Mr. Umeda said, at the full operation, JPY 160 billion could be or could have been booked, I thought. What is the process to come up with the JPY 80 billion adjusted OP? 1 kilowatt hour, $35. For example, OEM manufacturers can use it to reduce the price, you are halving it, and you multiply 38 to that, and you came up with the JPY 80 billion. If you can explain how you have obtained JPY 80 billion.
That's my first question. The second question is also related to this. What is the possibility of variability? Talking with the OEM and this is within the framework of the price and so forth, did you come up with that through that kind of discussion, or are you just conservatively estimating this number? Even if it goes below that, you will not have to make that downward revision. Also, about the suppliers, cooperation from the suppliers, do you consider that as well? Thank you. Those are the questions that I want to ask.
Thank you. 45X, 38 GW and that would can be calculated to $160 billion. Half of that, about half of that, the aim of IRA, we cannot realize it alone. Inflation control and energy policy, that is the introduction of the green energy, which needs to be accelerated. We have to work with other stakeholders. From those perspectives, specifically how this will be used is not yet clear. It's not yet decided. JPY 80 billion is something that we can invest in the automotive business in North America. Remaining JPY 80 billion, for example, if the OEMs, based on the aim of the IRA... Of course, that would coincide with what we want to achieve, so we are hoping that we can use it for that kind of purpose.
It's not yet finalized, but we consider that about half is the reasonable level, and that's how we book this number. That's my answer to your first question. As for the probability of variability or whether it will change or not, we want to, well, manufacture batteries as much as possible, especially. Well, right now, Tesla is telling us to do so. If it is no longer necessary, then the production will not be continued. I think we are on the same boat. Otherwise, the improving the productivity and increasing the output, we're very much focused on that. The potential variability based on the current condition to improve the efficiency and increasing the output, it's the more likely to have upside. The remaining JPY 80 billion, what do you do with it, and with whom do we work with specifically? I'm sorry that we cannot explain that.
JPY 160 billion, booking that as a profit once and the accounting treatment, without the detailed rules, we cannot decide. As JPY 80 billion, in that sense, the net book number will be JPY 80 billion. That is how we would like you to understand. Thank you.
Thank you very much.
Next is Citigroup Securities. Ezawa-san, please.
Yes. Ezawa from Citigroup. For IRA, there is one question, and the other is regarding the disclosure. For IRA question, one point is in the fiscal year just ended, you had JPY 40 billion, you recognized it. On the cash flow statement in Tanshin report, how did you treat this JPY 40 billion? For the new year, you said 50%-50%. In that case, what kind of conviction do you have about the 50% range in deciding this? As a concept, you are allocating 50% to CapEx in the U.S. and 50% for the price reduction for cars. Is that the kind of rationale you have?
Well, for the investment funds for Panasonic, I think this is very important. If you use this as a fund for discount, you will be left with nothing.
What is the rationale for 50% ratio? That's the first question. The second question is about disclosure.
The operating company subsidiary, they have a company corporate entity status.
How about the disclosure in the current disclosure material that there is not so much improvement in the disclosure of subsidiaries or operating companies. When it comes to operating cash flow and inventory and working capital, is there anything that you can share in addition to what you have already shared for the new fiscal year? Could you share with us some more details about the operating companies? What number is improving, and how is it helping the overall earnings?
Well, at the timing of the accounting treatment and cash recognition, there will be some difference. Well, this time, DTA of JPY 40 billion has been recognized. Actually, with the U.S. authority, we have made an application and the tax deduction is applied. In the U.S., over the 20 years, we can use this against the profits in the future. I don't think that it will take so much time, but that's the rule. The cash itself, we don't have JPY 40 billion for this fiscal year. Without the announcement of the detailed rules, we don't know. In terms of the cash recognition, normally there is a time lag of about two years. That is something we can anticipate.
We will do the lobbying activity and other activities so that we can proactively work on this. That's the assumption. Well, in the cash flow, it is included in net profit, but in the other working capital, it is offset. There is no increase in cash by JPY 40 billion. Please understand that way. Regarding the 50% ratio, this is still just a rough guideline. Whether we use the fund for discount or others, nothing has been decided yet. As I said earlier, for IRA Act, we want to understand the objective of this act correctly, so that the way we use the fund is in line with the objective of the act and mutually beneficial. This, there is car sales, we cannot make batteries, therefore.
That's why, 50%, giving 50% equivalent in one way or another. If we are to do that, we would like to work out the details in those discussions. Regarding the major KPIs or KGI disclosure, in terms of the inventory, we can share some of those specific data. The sources of earnings, well, there is an issue of PBR less than one. When it comes to how much we are earning, one of the measurements for FY 2024 is the major business divisions businesses. For those, adjusted OP amounts, we would like to expand our disclosure to these items. Towards the Q1 announcement, we are discussing specifically how we can do that, but that's the direction. Your point is well taken.
Based on that, we would like to consider how to improve disclosure. The content of adjusted OP is to be disclosed for major parts of the businesses. We would like to consider how to improve disclosure. Thank you.
Regarding adjusted OP for the new pieces of information, is it for entertainment, housing, and those businesses which have weaker earnings? Are you going to intentionally do that?
For larger businesses, we are thinking about improving disclosure. Specifically, please wait until the announcement for the first quarter results. Thank you very much.
Thank you.
Next, from SMBC Nikko, we have Katsura-san.
Thank you. I am Katsura of SMBC Nikko. Thank you very much. I have two questions. First, slide 9 and 15. The price hike of the raw materials and logistics, the price revision to counter that, and also the assumptions for this fiscal year. In the past, from 2021 to 2022 and 2023 to 2024, if you look at those years, the raw materials and logistic cost increased about more than JPY 400 billion. In terms of the price revision or countermeasure, JPY 250 billion. Rationalization, the three-year cumulative, that would not be sufficient to offset the price hikes in raw materials and logistics. Your way of thinking, in the single year, it has been reversed. This year, when you created this forecast, are there any ideas? Especially the raw materials and logistics cost.
There are companies who are having the advantages. Is it due to the uniqueness of Panasonic to have this current situation? The second question is the clarification about the Blue Yonder in the market. The impairment loss is being discussed. It's not just you or Panasonic, but many companies, due to the change of the interest rate, the booking of the impairment loss is being discussed. This time, the detailed business briefing was conducted, and it was mentioned that you're in the investment phase, and you are targeting the very aggressive growth. Based on that, it is a case that you do not need to book the impairment loss. Thank you.
For two years until now, the hikes of the raw material logistics were difficult for us. For FY 2023, the coverage of the price revision is about 70%, 70. To counter the hikes of the raw materials and logistics from Q1 to Q4, the coverage has been increasing. For FY 2024, as you can see on the slide, 1.5 times is expected, especially energy. How the prices are determined. Actually, the reflection of the raw material price hike will be delayed to FY 2024, but we are catching up. This is the major positive effect. 3-year cumulative number, roughly speaking, about 60%-70% of the price hikes in the raw materials and logistics are offset with the price revisions. That would be the case. For FY 2022, it was only 30% or so. It's not all price revisions, of course.
It's the corporate activity. We have to do the rationalizations as well. The remaining portion, through the rationalization and the production and increase of the sales, those are the factors that we consider to offset the remaining part. That's what we have been doing. As for the raw materials, it is on the rise slightly. In energy, the lithium is staying at the high level. Still that is the case. Also, we do not disclose this, but the housing raw materials are actually increasing. In comparison to the year before, we are not seeing the major increase of the raw materials, so the number itself has been shrinking. That is in relation to the raw materials. As about the Blue Yonder impairment, loss possibility. WACC, weighted average capital cost. In terms of WACC, WACC is on the rise, and goodwill and other present value is being reduced.
In Blue Yonder, the decision or the judgment of the impairment loss, risk-free rate, 20-year US government bond, if it's par with that, we will consider that as a level. It used to be 1.9% to 2%. Our judgment on the impairment loss as of the 1st of January, we used this interest rate. That is the rule that we have. At that time, it was 4%, so double of the previous number that I mentioned. WACC has been going up, and Blue Yonder goodwill, whether it's okay or not, was discussed. Of course, during the impairment loss testing and when you look at the present value, how should you evaluate this?
We have shrunk the gap. In terms of numbers, about JPY 50 billion is the level that we exceeded. In the past, it was JPY 100 billion, JPY 200 billion, or so. Whether there was an impact, yes, there was an impact, but it did not affect the book value. That's what I can say about the Blue Yonder. Thank you very much.
We have already passed the scheduled ending time, we'd like to entertain one last question from Nakane-san from Mizuho Securities. Nakane-san, the floor is yours. Nakane-san from Mizuho Securities? Sorry, we can't hear you, Nakane-san, we'd like to move on to the next question now. Goldman Sachs, Harada-san, please.
From Goldman Sachs. My name is Harada.
Yes, we can hear you.
Thank you very much. I have one question. Excluding IRA impact for each business, what is the underlying performance? In the previous year, there were different reasons for the downward revision for the final full year results, this year it seems that there is quite a lot of improvement in each of these businesses. In the past, for industry and... Well, it is still challenged, but for energy and data center, there was some difficulty or also consumer products as well. If you look at the macro economy as a whole, it seems that this year the sentiment is still weak. Some companies are assuming that the weak sentiment again for this year.
What is your assumption for the plan excluding IRA? How do you assess the business sentiment for the full year? For example, for the first half it's difficult, but it's improving in the second half. If you could answer even qualitatively, I would appreciate it.
Well, in terms of the business sentiment, on the presentation material page 14, we are showing some statements. Well, there are some differences depending on the business. For industry and others, well, there is some toughness, going to continuing. For energy, the blue color represents positive and the red color is negative. You can see differences. In Connect, for example, for the aircraft business for the Q4 2023, there was a quick recovery probably for FY 2024 compared with the pre-COVID 2020. Maybe we can recover 90% of the demand. Also auto production, we also expect, some semiconductor problem to be, unwinded and production to recover going forward. I think that's the view overall for the industry and our company as well. Given that, there are some difficulties in some areas, but in other areas we have some bullish, expectations. Please see the details on this page.
Having said that, if there is any major recession of the economy, are we expecting that?
We are not expecting such a significant event, but the ongoing tone of the business is something that we are watching carefully. As we announced those numbers for this fiscal year, we have carefully assessed those sentiment. Please understand that the numbers we have announced is based on what I have just talked about.
Yes, I understood clearly. Thank you.
With this, we would like to conclude FY 2023 full year financial results announcement. Thank you very much for your participation today.