Panasonic Posts First Profit in Six Quarters on Cost Cuts

Panasonic Corp. (6752), the Japanese consumer-electronics maker trying to recover from a record annual loss, posted its first profit in six quarters after cutting jobs and shutting factories.

Net income totaled 12.81 billion yen ($164 million) in the three months ended June 30, compared with a 30.4 billion-yen net loss a year earlier, the Osaka-based company said in a statement today. That beat the 9.2 billion-yen average of three analysts’ estimates compiled by Bloomberg News. Panasonic kept its full- year profit forecast unchanged at 50 billion yen.

The maker of Viera televisions and Lumix cameras is trying to turn around its unprofitable TV, electronic component and battery operations this fiscal year after closing plants and eliminating 36,000 jobs amid falling prices and a surging yen. President Kazuhiro Tsuga, who replaced Fumio Ohtsubo in the role last month, has pledged to revive the Japanese manufacturer “by all means.”

“The result was good and shares may rebound, but it probably won’t last long,” said Mitsushige Akino, who oversees about $500 million in assets at Tokyo-based Ichiyoshi Investment Management Co. “Panasonic just started to tackle its structural problems. I see nothing that can improve the company’s long-term outlook.”

The stock rose 4.6 percent to close at 546 yen in Tokyo trading before the announcement, narrowing its loss this year to 17 percent. Japan’s benchmark Nikkei 225 Stock Average has added 2.8 percent in the past seven months.

Cutting Costs

Panasonic will probably cut costs by 130 billion yen this fiscal year after reducing them by 64 billion yen in the first quarter from a year earlier, Chief Financial Officer Hideaki Kawai told reporters.

The audio-visual network division had a first-quarter operating profit of 7.4 billion yen, compared with a 3.8 billion-yen operating loss a year earlier. Profit at the appliance unit rose 7 percent from a year earlier to 37.4 billion yen, the company said.

The devices unit had an operating profit of 7.3 billion yen in the quarter compared with a 2.7 billion-yen loss a year ago. The energy unit had an operating profit of 100 million yen compared with a loss a year earlier.

The company kept its annual TV sales target at 15.5 million units.

Sony, Sharp

“Tsuga will probably need to take further measures to fix the unprofitable operations of panels, semiconductors and batteries,” Yasuo Nakane, a Tokyo-based analyst at Deutsche Bank AG, said before the announcement. “Investors are expecting to see some sort of reform plan, which may include closure, suspension or sales of some businesses.”

Consumer-electronics makers Sony Corp. (6758), Sharp Corp. and Panasonic are restructuring after competition with South Korea’s Samsung Electronics Co. (005930) and Cupertino, California-based Apple Inc. (AAPL) pushed them into losses. Sony reports its earnings Aug. 2.

Panasonic is considering measures including an alliance for its large-scale chip operations, Kawai said.

“There are possibilities that reform measures may cause additional restructuring costs,” he said. “Nevertheless, we’ll do all we can to absorb such increase in cost.”

Restructuring Costs

Restructuring costs this fiscal year may exceed an initial estimate of 41 billion yen as Panasonic plans to take charges to cut jobs and accounts for depreciation of factories, Tsuga said July 10, without providing a new target. Panasonic may decrease the number of staff at its headquarters to “a few hundred” from about 7,000, he said.

Panasonic, planning to draft a new mid-term business strategy by February, may rearrange businesses and consider withdrawing from sectors that can’t be turned around in six years, Tsuga said. Sony has had four consecutive years of losses.

Panasonic posted a net loss of 772.2 billion yen in the year ended March 31, a record for the company largely stemming from charges to write down assets at its TV business and battery subsidiary Sanyo Electric Co.

To contact the reporter on this story: Mariko Yasu in Tokyo at myasu@bloomberg.net

To contact the editor responsible for this story: Michael Tighe at mtighe4@bloomberg.net

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