Panasonic Seen Cutting Forecast as TV Makers’ Misery Deepens

Panasonic (6752) Corp., Sony Corp. (6758) and Sharp (6753) Corp. may cut full-year earnings estimates by a combined 136 billion yen ($1.7 billion) as restructuring costs and falling demand hamper recoveries by Japan’s top three TV makers.

Panasonic may post a loss of 24.7 billion yen in the year ending March 31, according to the average of 17 analyst estimates compiled by Bloomberg, compared with its projection for net income of 50 billion yen. Sony’s net income may be 5 billion yen, compared with its 20 billion-yen forecast, and Sharp’s loss may be 296 billion yen, or 18 percent wider than it forecast, according to the estimates.

The sluggish global economy and political tensions with China may slow the companies’ rebound from record annual losses caused by declining TV sales, a strong yen and competition from Samsung (005930) Electronics Co. and Apple Inc. A territorial dispute that fueled anti-Japan sentiment in China already contributed to forecast revisions at Canon Inc. (7751) and Honda Motor Co.

“The pain for Japanese consumer electronics makers isn’t going to let up,” said Seiichiro Iwamoto, who helps oversee about $34 billion at Mizuho Asset Management Co. in Tokyo. “It will take time for them to return from the brink of disaster.”

CEOs Replaced

Panasonic is scheduled to announce second-quarter earnings at 3 p.m. in Tokyo today, and Sony and Sharp will disclose results tomorrow. Atsushi Hinoki, a spokesman for Panasonic; George Boyd, a spokesman for Sony; and Miyuki Nakayama, a spokeswoman for Sharp, all declined to comment before the announcements.

Panasonic, Sony and Sharp replaced their top executives earlier this year to speed up reforms after posting combined losses of more than $20 billion in the year ended March 31.

“They’ve all bet on the global economy, so they’re vulnerable to slowdowns in the U.S., Europe and China,” said Mitsushige Akino, who oversees more than $600 million at Ichiyoshi Investment Management Co. in Tokyo.

Global TV shipments fell 8 percent to 51.6 million units in the quarter ended June 30 from a year earlier, a second straight quarterly decline, DisplaySearch said Sept. 11. Japan was hardest hit, plunging 77 percent, while developed markets overall recorded a 23 percent decline, the researcher said.

China Protests

At Panasonic, slowing China sales and a weak industry outlook may force President Kazuhiro Tsuga “to make bold choices in the second fiscal half for businesses that are loss- making or have little prospect for improvement,” Takashi Watanabe, an analyst at Goldman Sachs Group Inc., said in an Oct. 16 report. He cut his full-year estimate for Panasonic to a 335 billion-yen net loss from an August projection for a 30.4 billion-yen profit.

China’s economic growth slowed for a seventh straight quarter in the July-September period. Protests in the country, where Panasonic generated 14 percent of its first-quarter sales, disrupted local operations last month as one of its factories was set on fire.

A dispute over islands in the East China Sea claimed by both countries sparked anti-Japan demonstrations, halting output by Japanese manufacturers and reducing demand for their products in the world’s second-largest economy.

Canon, the world’s biggest camera maker, cited lower demand in China as one reason for cutting its annual profit forecast 6.4 percent last week. Honda, Japan’s third-largest carmaker, lowered its profit forecast 20 percent this week as Chinese consumers shunned Japanese cars.

Samsung, LG

At Sony, Chief Executive Officer Kazuo Hirai, who was promoted in April, is cutting 10,000 jobs and selling assets to revive the inventor of Walkman music players after four consecutive annual losses.

The world’s third-largest TV maker expects the slow global economy to hurt business this fiscal year, Masashi Imamura, senior vice president in charge of the unit, said Sept. 28. The maker of Bravia TVs is monitoring sales in China as some local outlets halted promotions of Japan-made goods, he said.

Sony’s share of the TV market shrank to 8.3 percent in the quarter from 9.4 percent the preceding three months as it lost sales to Samsung and LG Electronics Inc. (066570), the world’s two largest makers, according to DisplaySearch. The Tokyo-based company lost 692 billion yen from selling TVs in the past eight years and projects those losses may continue this fiscal year.

Writedowns, Restructuring

Sharp, which turned to lenders for financial support amid losses at its liquid-crystal-display business, is struggling with low operation rates at its factory for medium-sized panels because of low demand, said Junya Ayada, an analyst at Daiwa Securities Co. in Tokyo. Margins at Sharp’s large-display business may worsen as the company offers discounts, he said.

Sharp also is vulnerable in China, where it generated 20 percent of sales last fiscal year, making it the company’s largest overseas market, according to data compiled by Bloomberg.

Japan’s largest LCD maker may take 200 billion yen in charges for losses on LCD panels and other inventory, a writedown of deferred tax assets and restructuring costs, the Nikkei newspaper reported, without citing anyone.

The maker of Aquos TVs is cutting more than 10,000 jobs and selling plants in an attempt to return to profit next year, people with knowledge of the plans said Sept. 26. The Osaka- based company presented a revival package to lenders that included asset sales and job cuts as it sought 360 billion yen in loans, the people said.

“There’s nothing much these three companies can do to recover this fiscal year,” said Masamitsu Ohki, a manager at Stats Investment Management Co., a Tokyo-based hedge fund.

To contact the reporters on this story: Mariko Yasu in Tokyo at myasu@bloomberg.net; Naoko Fujimura in Tokyo at nfujimura@bloomberg.net

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

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