Nov. 5 (Bloomberg) -- Sanyo Electric Co., the target of a purchase by Panasonic Corp., posted profit that beat its own forecast on demand for batteries.

Operating profit, or sales minus the cost of goods sold and administrative expenses, in the six months ended Sept. 30 fell 11 percent to 24 billion yen ($244 million), Osaka-based Sanyo, the world's largest maker of rechargeable batteries, said today. That's more than company's August projection for 14 billion yen.

Sanyo increased its full-year forecast for battery profit by 62 percent because of rising demand for lithium-ion batteries, highlighting the appeal of what Carlos Dimas at HSBC and Yoshiharu Izumi at JPMorgan Chase & Co. call its most attractive asset. Shares of Sanyo have surged 57 percent this week on a plan by Panasonic to buy a controlling stake from Goldman Sachs Group Inc., Sumitomo Mitsui Banking Corp. and Daiwa Securities SMBC Co.

``We are having steady sales growth of lithium-ion batteries due to strong demand for laptop personal computer,'' Sanyo President Seiichiro Sano told reporters in Osaka. ``Also, growing demand for solar batteries in Europe helped.''

Sanyo gained 18 percent to close at 230 yen on the Tokyo Stock Exchange, while the benchmark Nikkei 225 Stock Average rose 4.5 percent.

The company maintained its full-year earnings forecasts made in August. Net income will probably climb 22 percent to 35 billion yen, sales will rise 0.1 percent to 2.02 trillion yen, while operating profit will drop 34 percent to 50 billion yen.

Battery Demand

Profit from batteries will increase 13 percent to 553 billion yen, more than the company's earlier estimate of 500 billion yen, while consumer-electronics earnings will fall 58 percent to 18.1 billion yen, resulting in the unchanged forecast, Sanyo said.

First-half net income more than doubled to 32.6 billion yen on an unspecified one-time gain from the 43.7 billion yen sale of its mobile-phone unit to Kyocera Corp. Sales climbed 2.5 percent to 1.01 trillion yen, Sanyo said.

Panasonic, formerly known as Matsushita Electric Industrial Co., is seeking to buy control of Sanyo from its biggest shareholders, a company official familiar with the negotiations said on Nov. 1.

The maker of Panasonic-brand electronics will make a formal acquisition proposal soon to Goldman Sachs, Sumitomo Mitsui and Daiwa Securities SMBC, the official said, declining to be identified because an official announcement hasn't been made.

Goldman and the two Japanese banks hold preferred shares equivalent to 70 percent of Sanyo, received when they bailed out the company in February 2006. They agreed to hold the securities until March 2009 and need Sanyo's approval to sell before then.

`Carefully Considering'

``We are carefully considering how we can dispose of the preferred shares, given the worsening state of financial markets,'' Sano said. Sano told reporters he couldn't comment on media reports that Panasonic plans to buy a controlling stake in the company.

``I would place top priority on keeping our businesses, our brand, and jobs,'' Sano said in response to a question on the reports.

Second-quarter net income fell 67 percent to 4.4 billion yen because of the yen's surge. Sales dropped 0.8 percent to 527 billion yen, while operating profit declined 7 percent to 19 billion yen.

In the six months ended Sept. 30, sales at the rechargeable battery business, including lithium-ion batteries used for mobile phones and laptop personal computers rose to 205.1 billion yen from 171 billion yen a year earlier.

Rechargeable batteries accounted for the largest portion of the company's sales, generating 12 percent of total revenue last year.

The solar-battery business had sales of 46.9 billion yen in the six-month period, up from 34.2 billion yen a year earlier.

The chip division, which had a first-half loss of 5.8 billion yen, will be profitable in the current six-month period, Sano said. It will have an annual profit in the year ending March 2010, he said.

To contact the reporter on this story: Hiroshi Suzuki in Tokyo at Hsuzuki5@bloomberg.net.

Last Updated: November 5, 2008 05:11 EST