Panasonic Information Systems (4283)

Transcription

1 URL: Written by Yoshiyuki Muroya Phone: Panasonic Information Systems (4283) Consolidated Fiscal Year Sales OP RP NP EPS DPS BPS (Million Yen) (Yen) (Yen) (Yen) FY03/ ,221 4,205 4,269 2, ,004 FY03/ ,373 4,254 4,293 2, ,145 FY03/2013CoE 38,000 4,300 4,300 2, FY03/2012 YoY 6.3% 1.2% 0.6% (13.7%) FY03/2013CoE YoY 4.5% 1.1% 0.2% 16.7% Consolidated Half Year Sales OP RP NP EPS DPS BPS (Million Yen) (Yen) (Yen) (Yen) Q1 to Q2 FY03/ ,215 1,996 2,029 1, Q3 to Q4 FY03/ ,158 2,258 2,264 1, Q1 to Q2 FY03/ ,864 2,023 2,033 1, Q3 to Q4 FY03/2013CoE 21,136 2,277 2,267 1, Q1 to Q2 FY03/2013 YoY (7.4%) 1.3% 0.2% 3.9% Q3 to Q4 FY03/2013CoE YoY 16.4% 0.8% 0.1% 31.5% Executive Summary (20 November 2012) Long-Term Stable Growth Panasonic Information Systems, belonging to Panasonic Group led by Panasonic Corporation, is mainly involved with development & operation for systems, with a high exposure to Eco Solutions Company, which is another group company, as the key customer. The parent Panasonic Corporation holds 63.6% of the Company, while 80% of sales here are accounted for by sales associated with Panasonic Group, effectively referring to Eco Solutions Company. The remaining 20% are associated with general market. The Company is applying its expertise, acquired as a user-related information service provider, in developing general market, while development of general market gives opportunities for the Company to pursue efficiency in providing Panasonic Group with own services. The Company aims at seeing high profit margin rather than trying to enhance sales, and thus the Company plans to achieve long-term stable growth. It may look the Company holds excess cash & equivalents, as a result of the pursuit of high profit margin, but the Company sees reasonably high ROE10.6%. 1 In Q1 to Q2 FY03/2013, sales came in at 16,864m (down 7.4% YoY), operating profit 2,023m (up 1.3%). After one-off demand increases, driven by integration of systems within Panasonic Group, System Solutions (development of business systems etc.) suffered major adjustments in sales, while there were some delays in posting sales in a part of the businesses. As a result, the Company saw one-off adjustments in overall sales trends. Nonetheless, the Company aggressively reduced costs, resulting in operating profit margin 12.0%, up 1.0% points YoY. The Company continues pursuing profit margin in H2 and this is likely leading to some shortfalls in full-year prospective sales. Still, prospective operating profit 4,300m is achievable, as the Company is seeing larger-expected impacts from own cost cutting measures.

2 Eco Solutions Company, being involved with businesses whose final demand is associated with domestic housing starts, is likely maintaining the current levels of demand for system solutions in a long-term view. On the other hand, general market offers high potentials to get developed by the Company to a large extent. The Company has strengths as a provider of operation of business systems, standing on the user side, being a user-related information system company, and this gives decent opportunities for the Company to develop general market in the future. IR contacts: Legal Department Takashi Yamasaki ( yamasaki.takashi@is-c.jp.panasonic.com) Atsuko Nakamoto ( nakamoto.atsuko@is-c.jp.panasonic.com) 2.0 Company Profile User-Related Information Service Company Company Name Panasonic Information Systems Co.,Ltd. Company website IR Information Share Price Established 22 February 1999 Listing 12 July 2001 :TSE1 (Ticker : 4283) Capital 1,040m (as of the end of September 2012) No. of Shares 10,656,000 shares, including 372 treasury shares (as of the end of September 2012) Main Features System Services (operation of business systems), the mainstay 80% of sales associated with Panasonic Group Great room to develop in general market (20% of sales) Businesses Ⅰ. System Services (operation of business systems etc.) Ⅱ. System Solutions (development of business systems etc.) Ⅲ. System and Communication Equipment (trading of equipment etc.) Top Management President: Kazuhiro Maegawa Shareholders Panasonic Corporation 63.6%, BHH FOR FIDELITY LOW-PRICED STOCK FUND 4.6%, EPOP2.3% (as of the end of September 2012) Headquarters Kita-ku, Osaka, JAPAN No. of Employees Consolidated:687, Unconsolidated: 626 (as of the end of September 2012) 2 Source: Company Data 3.0 Recent Trading & Prospects FY03/2013 Q1 to Q2 Results In Q1 to Q2 FY03/2013, sales came in at 16,864m (down 7.4% YoY), operating profit 2,023m (up 1.3%), recurring profit 2,033m (up 0.2%) and net profit 1,234m (up 3.9%). Compared with initial Company forecasts (as of 25 April), sales were worse 8.3% but operating profit and recurring profit and net profit were roughly in line with expectations. In regards to shortfall in sales, delayed order intake is accused of as the

3 key negative factor, while order backlog stood at 4,779m (up 1,055m YoY), showing a trend of improvement. At the operating level, there were negative factors, collectively, 610m, comprising price erosion 286m and sales decreases 324m, while positive factors, collectively, 637m, comprising streamlining 288m (reductions in costs of leased lines, operations, maintenance etc.), decreases of development costs 191m (reductions on costs for quality control), investment-related 158m (reductions of depreciation etc.). As a result, operating profit marginally improved. In terms of operating profit margin, the improvement is 1.0% point YoY to 12.0% from 11.0%. Out of positive factors, it is worthy of paying attention to decreases of development costs 191m (reductions on costs for quality control), in particular. Generally speaking, it is taken for granted that one of the key issues, in developing any business systems, is to prevent cost overruns. This is carried out by the Company in both development and operation processes, with some costs spared. Most recently, the Company is seeing persistently decreasing ratio of projects to be watched for this out of the total, while losses, stemming from system failures, are on the decreases. As a result, the Company saw reductions in costs 191m. The Company s services are always under pricing pressure, which is reflected in price erosion 286m, mentioned as one of the negative factors. Still, this is roughly all compensated for by streamlining 288m (reductions in costs of leased lines, operations maintenance etc.). In regards to investment-related 158m (reductions of depreciation etc.), it appears to be in line with decreasing capital investments as a result of decreasing sales. As a whole, it is presumed that the contributor to operating profit margin, on a net basis, is decreases of development costs 191m (reductions on costs for quality control). The level of cost reductions here equates to 1.1% against sales, which is in line with the level of operating profit margin improvements 1.1% points. 3 Gross profit margin came in at 20.8%, up 1.7% points from 19.1% in Q1 to Q2 FY03/2012 results. SG&A expenses came in at 1,482m, effectively unchanged YoY, but their ratio to sales went up 0.7% points to 8.8% from 8.1% in line with decreases in sales. While sales in Q1 to Q2 FY03/2013 came down 1,351m YoY, gross profit went up 29m. By domain, System Services (operation of business systems etc.) contributed to increases in gross profit ( 235m), but both System Solutions (development of business systems etc.) and System and Communication Equipment (trading of equipment etc.) saw decreases in gross profit, respectively, 160m and 48m. Sales of System Solutions (development of business systems etc.) were negatively affected by adjustments after integrations of systems within Panasonic Group, having suffered from decreases 906m YoY and thus from decreases in gross profit as well. Trading items in System and Communication Equipment (trading of equipment etc.) are effectively all associated with projects in System Solutions (development of business systems etc.), and thus the business trends are heavily influenced by those of System Solutions (development of business systems etc.)

4 System and Communication Equipment (trading of equipment etc.) mainly relates to value-added operations on top of pure trading and this business has high profit margin almost as high as System Solutions (development of business systems etc.), respectively, 15.8% and 17.2%, in terms of Q1 to Q2 FY03/2013 results. System Services (operation of business systems etc.) are the mainstay businesses with the Company. They account for the largest proportion of sales (64%) and the highest gross profit margin (23.1%) and thus account for 72% of gross profit. System Services (operation of business systems etc.) appear to have suffered from price erosion least while benefiting from streamlining to a large extent, having shown improvements of gross profit margin 2.6% points YoY. In free cash flow, the Company saw net outflow as much as 8,208m, but this is basically due to outflow 10,100m to be deposited in Panasonic Corporation. When this deposit is included as a part of cash, net cash stands at 15,592m (up 2,957m YoY) which equates to 65.8% of equity capital. Meanwhile, equity capital ratio stands at 81.6%. As a whole, the Company appears to hold excess cash, but the Company sees ROE10.6% (net profit in Q1 to Q2, multiplied by 2, divided by average equity capital during the same period), suggesting a reasonably high profitability. 4

5 Income Statement (Cumulative, Quarterly) Income Statement Cons.Act Cons.Act Cons.Act Cons.Act Cons.Act Cons.Act Cons.Act Cons.Act Q1 Q1 to Q2 Q1 to Q3 Q1 to Q4 Q1 Q1 to Q2 Q1 to Q3 Q1 to Q4 YoY Sales 8,290 18,215 26,615 36,373 7,843 16, (1,351) CoGS 6,671 14,738 21,626 29,238 6,334 13, (1,380) Gross Profit 1,618 3,476 4,989 7,134 1,509 3, SG&A 758 1,479 2,208 2, , Operating Profit 860 1,996 2,780 4, , Non Operating Balance (23) Recurring Profit 878 2,029 2,826 4, , Extraordinary Balance 0 0 (102) (451) Pretax Profit 878 2,029 2,724 3, , Tax Charges etc ,115 1, (42) Net Profit 524 1,188 1,608 2, , Sales YoY +7.2% +9.4% +8.8% +6.3% (5.4%) (7.4%) Operating Profit YoY +16.0% +4.7% +0.9% +1.2% (16.4%) +1.3% Recurring Profit YoY +15.7% +4.3% +0.6% +0.6% (17.4%) +0.2% Net Profit YoY +31.8% +5.7% (0.2%) (13.7%) (16.4%) +3.9% Gross Profit Margin 19.5% 19.1% 18.7% 19.6% 19.2% 20.8% % (SG&A / Sales) 9.1% 8.1% 8.3% 7.9% 10.1% 8.8% % Operating Profit Margin 10.4% 11.0% 10.5% 11.7% 9.2% 12.0% % Recurring Profit Margin 10.6% 11.1% 10.6% 11.8% 9.3% 12.1% % Net Profit Margin 6.3% 6.5% 6.0% 6.1% 5.6% 7.3% % Tax Charges etc. / Pretax Profit 40.2% 41.4% 40.9% 42.0% 39.4% 39.3% - - (2.1%) Income Statement Cons.Act Cons.Act Cons.Act Cons.Act Cons.Act Cons.Act Cons.Act Cons.Act Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 YoY Sales 8,290 9,925 8,400 9,758 7,843 9, (904) CoGS 6,671 8,067 6,888 7,612 6,334 7, (1,043) Gross Profit 1,618 1,858 1,513 2,145 1,509 1, SG&A (28) Operating Profit 860 1, , , Non Operating Balance (7) (11) Recurring Profit 878 1, , , Extraordinary Balance 0 0 (102) (349) Pretax Profit 878 1, , , Tax Charges etc Net Profit Sales YoY +7.2% +11.3% +7.6% (0.1%) (5.4%) (9.1%) Operating Profit YoY +16.1% (2.5%) (7.7%) +1.7% (16.4%) +14.8% Recurring Profit YoY +15.7% (2.9%) (7.9%) +0.5% (17.4%) +13.6% Net Profit YoY +32.0% (8.8%) (13.8%) (36.1%) (16.4%) +19.9% Gross Profit Margin 19.5% 18.7% 18.0% 22.0% 19.2% 22.1% % (SG&A / Sales) 9.1% 7.3% 8.7% 6.9% 10.1% 7.7% % Operating Profit Margin 10.4% 11.4% 9.3% 15.1% 9.2% 14.5% % Recurring Profit Margin 10.6% 11.6% 9.5% 15.0% 9.2% 14.5% % Net Profit Margin 6.3% 6.7% 5.0% 6.3% 5.6% 8.8% % Tax Charges etc. / Pretax Profit 40.2% 42.3% 39.6% 44.7% 39.4% 39.1% - - (3.2%) 5 Order Backlog Order Backlog Cons.Act Cons.Act Cons.Act Cons.Act Cons.Act Cons.Act Cons.Act Cons.Act Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 YoY System Services (52) System Solutions 4,419 2,940 2,184 1,463 2,139 4, ,103 System and Communications Equipment Order Backlog 5,216 3,724 2,957 2,235 2,878 4, ,055 System Services 15% 21% 26% 34% 26% 15% System Solutions 85% 79% 74% 65% 74% 85% System and Communications Equipment 0% 0% 0% 0% 0% 0% Order Backlog (Composition) 100% 100% 100% 100% 100% 100% - - -

6 Performance by Domain (Cumulative, Quarterly) Performance by Domain Cons.Act Cons.Act Cons.Act Cons.Act Cons.Act Cons.Act Cons.Act Cons.Act Q1 Q1 to Q2 Q1 to Q3 Q1 to Q4 Q1 Q1 to Q2 Q1 to Q3 Q1 to Q4 YoY System Services 5,573 11,102 16,607 22,244 5,454 10, (232) System Solutions 1,628 4,224 6,028 8,044 1,356 3, (906) System and Communications Equipment 1,088 2,888 3,979 6,125 1,033 2, (212) Sales 8,290 18,215 26,615 36,373 7,843 16, (1,351) System Services 1,081 2,276 3,305 4,605 1,102 2, System Solutions ,019 1, (160) System and Communications Equipment (48) Gross Profit 1,618 3,476 4,989 7,134 1,509 3, System Services 19.4% 20.5% 19.9% 20.7% 20.2% 23.1% % System Solutions 21.1% 17.3% 16.9% 19.2% 19.1% 17.2% - - (0.1%) System and Communications Equipment 18.0% 16.3% 16.8% 16.2% 14.4% 15.8% - - (0.5%) Gross Profit Margin 19.5% 19.1% 18.7% 19.6% 19.2% 20.8% % Performance by Domain Cons.Act Cons.Act Cons.Act Cons.Act Cons.Act Cons.Act Cons.Act Cons.Act Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 YoY System Services 5,573 5,529 5,505 5,637 5,454 5, (113) System Solutions 1,628 2,596 1,804 2,016 1,356 1, (634) System and Communications Equipment 1,088 1,800 1,091 2,146 1,033 1, (157) Sales 8,290 9,925 8,400 9,758 7,843 9, (904) System Services 1,081 1,195 1,029 1,300 1,102 1, System Solutions (76) System and Communications Equipment (1) Gross Profit 1,618 1,858 1,513 2,145 1,509 1, System Services 19.4% 21.6% 18.7% 23.1% 20.2% 26.0% % System Solutions 21.1% 14.9% 16.0% 26.1% 19.1% 15.9% % System and Communications Equipment 18.0% 15.3% 18.1% 15.1% 14.4% 16.7% % Gross Profit Margin 19.5% 18.7% 18.0% 22.0% 19.2% 22.1% % Cash Flow Statement Cash Flow Statement Cons.Act Cons.Act Cons.Act Cons.Act Cons.Act Cons.Act Cons.Act Cons.Act Q1 Q1 to Q2 Q1 to Q3 Q1 to Q4 Q1 Q1 to Q2 Q1 to Q3 Q1 to Q4 YoY Operating Cash Flow - 1,021-3,834-2, ,706 Investing Cash Flow - (2,584) - 6,908 - (10,936) - - (8,352) Operating CF + Investing CF - (1,563) - 10,742 - (8,208) - - (6,645) Financing Cash Flow - (437) - (903) - (473) - - (36) 6 Sales by Customer Sales by Customer Cons.Act Cons.Act Cons.Act Cons.Act Cons.Act Cons.Act Cons.Act Cons.Act Q1 Q1 to Q2 Q1 to Q3 Q1 to Q4 Q1 Q1 to Q2 Q1 to Q3 Q1 to Q4 YoY Panasonic Group 6,810 14,541 21,641 29,019 6,489 13, (978) General Market 1,479 3,673 4,974 7,354 1,354 3, (373) Sales 8,290 18,215 26,615 36,373 7,843 16, (1,351) Panasonic Group (4.7%) (6.7%) General Market (8.5%) (10.2%) Sales (YoY) (5.4%) (7.4%) Panasonic Group 82% 80% 81% 80% 83% 80% General Market 18% 20% 19% 20% 17% 20% Sales (Composition) 100% 100% 100% 100% 100% 100% Sales by Customer Cons.Act Cons.Act Cons.Act Cons.Act Cons.Act Cons.Act Cons.Act Cons.Act Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 YoY Panasonic Group 6,810 7,731 7,100 7,378 6,489 7, (657) General Market 1,479 2,194 1,301 2,380 1,354 1, (248) Sales 8,290 9,925 8,400 9,758 7,843 9, (904) Panasonic Group (4.7%) (8.5%) General Market (8.5%) (11.3%) Sales (YoY) (5.4%) (9.1%) Panasonic Group 82% 78% 85% 76% 83% 78% General Market 18% 22% 15% 24% 17% 22% Sales (Composition) 100% 100% 100% 100% 100% 100% - - -

7 Balance Sheet (Quarterly) Balance Sheet Cons.Act Cons.Act Cons.Act Cons.Act Cons.Act Cons.Act Cons.Act Cons.Act Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 YoY Cash & Deposit (15) Accounts Receivables 3,608 5,016 4,232 5,325 3,731 4, (732) Inventory , ,290 Deposit 13,462 12,467 12,290 13,999 14,914 15, ,972 Other 2,207 3,043 2,551 2,649 2,410 1, (1,512) Current Assets 19,927 20,948 19,634 22,299 21,464 22, ,003 Tangible Assets 3,938 3,967 3,693 4,013 3,800 3, (243) Intangible Assets (304) LT Investment Securities etc. 1,900 1,971 2,031 1,951 1,804 1, (227) Fixed Assets 6,827 6,866 6,532 6,712 6,284 6, (774) Total Assets 26,755 27,815 26,167 29,011 27,748 29, ,229 Accounts Payable 1,998 1,653 1,583 1,846 1,677 1, (70) Short Term Debt Other 2,536 3,359 1,789 3,871 2,782 3, Current Liabilities 4,534 5,012 3,372 5,717 4,459 5, Long Term Debt Other (327) Fixed Liabilities (327) Total Liabilities 5,241 5,656 3,930 6,152 4,826 5, (318) Shareholders' Equity 21,444 22,109 22,182 22,801 22,893 23, ,580 Other (34) Net Assets 21,513 22,158 22,236 22,858 22,922 23, ,547 Total Liabilities & Net Assets 26,755 27,815 26,167 29,011 27,748 29, ,229 Equity Capital 21,513 22,158 22,236 22,858 22,922 23, ,547 Interest Bearing Debt Net Debt (13,643) (12,635) (12,463) (14,174) (15,051) (15,592) - - (2,957) ROE (Net Profit / Equity) 9.8% 10.9% 9.8% 10.1% 7.7% 10.6% ROA (Net Profit / Total Assets) 13.0% 14.7% 14.1% 15.2% 10.2% 14.0% Equity Capital Ratio 80.4% 79.7% 85.0% 78.8% 82.6% 81.6% Quick Ratio 84% 103% 131% 96% 87% 88% Current Ratio 440% 418% 582% 390% 481% 457% Net Debt Equity Ratio (63.4%) (57.0%) (56.0%) (62.0%) (65.7%) (65.8%)

8 FY03/2013 Company Forecasts In FY03/2013, Company forecasts are going for sales 38,000m (up 4.5% YoY), operating profit 4,300m (up 1.1%), recurring profit 4,300m (up 0.2%) and net profit 2,600m (up 16.7%). Initial Company forecasts (as of 25 April 2012) have remained unchanged to date. Dividend per share is expected to be 65.0, implying payout ratio 26.6%. Quarterly Sales & Operating Profit Margin 12,000 Sales(Million Yen) Operating Profit Margin(%) 10,000 8, % 15.1% 13.1% 14.5% 6, % 10.4% 11.4% 10.8% 10.8% 9.6% 9.3% 4, % 20.0% 15.0% 10.0% 2, ,733 8,918 7,805 9,765 8,290 9,925 8,400 9,758 7,843 9,021 10,568 10, % Q1 FY03/2011 Q2 FY03/2011 Q3 FY03/2011 Q4 FY03/2011 Q1 FY03/2012 Q2 FY03/2012 Q3 FY03/2012 Q4 FY03/2012 Q1 FY03/2013 Q2 FY03/2013 Q3 FY03/2013 Q4 FY03/ Sales came in at 7,843m, operating profit margin 9.2% in Q1, while 9,021m and 14.5%, respectively, in Q2. Compared with these numbers, sales are to be 10,568m and operating profit margin 10.8%, on a quarterly basis in H2 (when they are presumed by deducting Q1 to Q2 results from full-year Company forecasts and equally divided into two). In H2 over H1, sales are unlikely expanding as much as this, due mainly to the Company s strategy to be selective in incoming projects based on profit margin. Still, more-than-expected benefits from cost cutting measures are to feed through, making the Company achieve prospective operating profit 4,300m. Long-Term Prospects The Company is aiming at a long-term stable growth. As it puts emphasis on profit margin, sale are unlikely to grow rapidly, but profit margin is to maintain and/or edge up by corporate efforts to do so. This means that the Company will not be involved with low profit margin projects and thus top-line growth will be limited, while it plans to see edging up sales basically by cultivating general market. The current management midterm plan (FY03/2011 to FY03/2013) expects sales 40,000m, operating profit 4,900m and operating profit margin 12.3% in the last year, i.e., FY03/2013. Meanwhile, the latest Company forecasts in FY03/2013 expect sales 38,000m, operating profit 4,300m and operating profit margin 11.3%, lower than the plan by 5.0%, 12.2% and 0.9% points, respectively.

9 Long-Term Prospects Sales (Million Yen) Midterm Plan Sales (Million Yen) Act CoE Operating Profit Margin (%) Midterm Plan Operating Profit Margin (%) Act CoE 50,000 40,000 30,000 20, % 12.5% 12.5% 12.4% 11.9% 12.3% 12.2% 12.0% 12.3% 11.7% 11.3% 13.0% 12.5% 12.0% 11.5% 11.0% 10, ,385 40,225 39,066 37,319 36,650 36,000 34,221 37,500 36,373 40,000 38, % 10.0% FY03/2006 FY03/2007 FY03/2008 FY03/2009 FY03/2010 FY03/2011 FY03/2012 FY03/2013 FY03/2014 FY03/2015 FY03/2016 In FY03/2011 and FY03/2012, sales fell short of expectations in midterm plan, presumably due mainly to more frequent occasions to intentionally avoid low-margin projects than initially expected. This trend appears persisting in FY03/2013. Still, operating profit margin in FY03/2013 could achieve initially-expected level, i.e., 12.3% in midterm plan. In FY03/2013, as mentioned earlier, there is an increasing possibility for the Company to suffer from some shortfalls in sales, but that for unexpectedly higher operating profit margin than the latest estimates in line with larger-than-expected benefits from cost 9 cutting, as well. The Company plans to work on and release its new midterm plan (FY03/2014 to FY03/2016), after confirming results in FY03/2013, those of cost cutting in particular. 4.0 Business Model User-Related Information Service Company As a user-related information service company, the Company is mainly involved with development & operation for systems. Panasonic Corporation is its parent company which holds 63.6% of the shares outstanding with the Company. The Company is 80% exposed to Panasonic Group led by Panasonic Corporation in terms of sales in Q1 to Q2 FY03/2013 results, while the remaining 20% to general market. The Company was established, in February 1999, as Matsushita Electric Works Information Systems Co., Ltd., a 100% subsidiary of Matsushita Electric Works, Ltd. This, effectively, relates to a spin-off for information service division of Matsushita Electric Works, Ltd. (subsequently called as Panasonic Electric Works, Ltd.). In July 2001, the Company s shares were listed on the over-the-counter market (JASDAQ), followed by the listing on second section of TSE in December 2003 and that on first section of TSE in November Meanwhile, the corporate name was changed to Panasonic Electric Works Information Systems Co., Ltd.

10 as a result of the corporate name change with the current Panasonic Corporation. Eventually, the Company has been called Panasonic Information Systems Co., Ltd. since July 2012, after reorganization of Panasonic Group. Two Bases for Date Centers and A Support Center Osaka Central Data Center(External Appearance) Osaka IDC(Introspection) Data center, based in Nishi-ku, Osaka-city, dedicated to customers of general market: high convenience of geographical access but geographically apart from Tokyo metropolitan area Support Center(Osaka IDC) Data center, based in Kadoma-city, Osaka-pref., dedicated to customers of Panasonic Group: coping with risk diversification and high convenience of access at a time as in Osaka Central Data Center Providing customers with solutions by coping with enquiries from them through telephone calls etc., 24-hour a day, 365 days a year: contributing to high quality of the mainstay System Services (operation of business systems etc.) 10 Source: Company Data Panasonic Group, in the context of the Company s customers, relates to Eco Solutions Company, which is one of the group companies and belongs to Solutions which is one of the business domains of Panasonic Group. Simply speaking, the customer is an entity that basically succeeds Panasonic Electric Works, Ltd. That is to say, the customer is involved with development, manufacture and sales for lighting, wiring, housing equipment and environmental air quality control equipment as well as providing customers with comprehensive solutions associated with all those aforementioned products. Thus, Eco Solutions Company is mainly exposed to final demand associated with domestic housing starts, and there will be stable needs for development & operation for business systems in a long-term view, although high growth is unlikely in the foreseeable future. The Company is to trying to make this business here a stable source of earnings in a

11 long-term view by means of applying own expertise for pursuing efficiency, developed in line with development of general market. In terms of Q1 to Q2 FY03/2013 results, System Services (operation of business systems etc.) accounted for 64.4% of sales, System Solutions (development of business systems etc.) 19.7% and System and Communication Equipment (trading of equipment etc.) 15.9%. For acquiring new projects and/or renewing existing ones, the Company basically starts with making proposals of System Solutions (development of business systems etc.), while doing so to supply equipment for the systems in System and Communication Equipment (trading of equipment etc.) at a time and doing so, as well, to take care of operation of the systems in System Services (operation of business systems etc.). To date, the Company has accumulated its involvements with System Services (operation of business systems etc.) and this has become stock to consistently generate sales, which is now the key factor to stabilize overall sales with the Company. More importantly, it should be noted that the Company is seeing increasing opportunities to start with System Services (operation of business systems etc.) for the systems developed by peers. It looks the Company well applies its strengths, here, stemming from the fact that it is a user-related information service company with distinguished expertise to operate systems from a standing point as a user. The Company is to utilize strengths here in order to cultivate general market in a long-term view. Meanwhile, another issue to be spotted is that the Company intentionally keeps own exposure to external subcontractors lower than peers, in order to prevent cost overruns and to accumulate expertise internally. As of the end of Q2 FY03/2013, consolidated headcounts stood at 687 versus 978 for external business partners, superficially implying that the Company is just exposed to subcontractors to a large extent. Still, the Company never consigns overall processes of a project, but assigns own project managers for all the projects and own employees to take care of the core parts for them, so that the overall process of the development should be transparent and their skills improve. 11 Disclaimer Information here is a summary of IR Information of the Company, compiled by Walden Research Japan, from a neutral and professional standing point, in the form of a report. IR Information of the Company comprises a) contents of our interview with the Company, b) contents of presentations for institutional investors, c) contents of timely disclosed information and d) contents of the homepage etc. Company name: Walden Research Japan Incorporated Headquarters:# Hatchobori, Chuo-ku, Tokyo , JAPAN URL: info@walden.co.jp Phone: Copyright 2012 Walden Research Japan Incorporated