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Panasonic fails to recoup massive investments, plans restructuring

Publication Date : 02-11-2012


Panasonic Corp.'s projection of a net loss of more than 700 billion yen on a consolidated basis for two consecutive years in fiscal 2012 was attributed to the loss of the prospect of recouping massive investment due to a drop in sales of the firm's main digital home appliances.

Revising downward its projected results for the business year ending in March 2013, Panasonic announced Wednesday newly projected sales of 7.3 trillion yen, down 800 billion yen from the previous estimate in May.

It also said its operating profit will be 140 billion yen, down 120 billion yen from the previous estimate.

Amid the further economic slowdown in China and other parts of the world, Panasonic is expected to walk a rocky path toward improved management.

Panasonic President Kazuhiro Tsuga admitted to a failure in business investment at a press conference Wednesday.

"We made a massive investment in an effort to revive operations, but failed to produce profits as we expected," Tsuga said.

The dismal outlook was attributed partly to poor results in the firm's solar battery operation which it had hoped to bolster through spending about 670 billion yen on the acquisition of Sanyo Electric Co.

Sales of solar batteries have been largely sluggish due to demand doldrums in Europe. The lithium-ion battery enterprise for personal computers also continued to bleed red ink because of intensifying competition with South Korean manufacturers.

Restructuring of divisions

Panasonic was also buffeted by a severe mobile phone operating climate.

Panasonic reentered the European smartphone business in April, but decided to pull out of the European market after less than a year as it failed to compete with devices from Apple Inc. of the United States and South Korea's Samsung Electronics Co.

The firm further expanded the loss as it wrote off 237.8 billion yen for the goodwill value of Sanyo--the difference between the acquisition price and the business' net asset value--for the half-year ending Sept. 30, based on the expectation that it will see much lower-than-expected revenues in its solar battery, lithium-ion battery and mobile phone operations.

The firm's audiovisual-related operation, which continued to be stuck in the doldrums, is not showing signs of recovery either.

Panasonic's TV sales were 6.79 million units in the April to September period, down about 30 per cent from a year earlier. Its sales of Blu-ray players declined about 60 per cent year-on-year and digital camera sales decreased about 30 per cent.

In an effort to rebuild operations, from April, Panasonic will reorganize its existing nine groups of business divisions into four groups responsible for audiovisual-related products, major home appliances such as refrigerators and washing machines, environment-related business and vehicle products and parts.

About 40 per cent of 88 business divisions under these groups will also be reorganised.

Panasonic will seek to achieve at least 5 per cent of operating margin by fiscal 2015 in all business divisions, and consider withdrawing from relevant markets if it fails to meet the target.

Since the firm also plans to curb investment, it is unlikely to achieve a large earnings recovery.

"The firm will strive primarily to pull out of its critical situation for the time being," Tsuga said.

"There was a pressing need for Panasonic to introduce such measures as the booking of impairment loss to cope with the deteriorating profitability of solar battery, mobile phone and other operations," Deutsche Securities Inc.'s Yasuo Nakane said.

Nakane said although Panasonic's projected loss was largely beyond what was expected, it is to the company's credit that it admitted to the failure.

Still, Nakane said, the management's misjudgment was the prime cause of the business downturn. "Their way of taking management responsibilities is lenient, which may invite low worker morale."

US$1 = 80 yen


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