Panasonic May Beats Profit Forecast as Yen Stokes Exports

Panasonic Corp. (6752), Japan’s second-largest television maker, said full-year earnings could beat its forecast as a weaker yen lowers prices for its products in overseas markets.

“We’re seeing better numbers than we had anticipated,” President Kazuhiro Tsuga, said in an interview yesterday, declining to give details. The company in July forecast net income of 50 billion yen ($502 million) for the year ending March 2014.

Panasonic is headed for its first annual profit in three years as Tsuga deepens efforts to revive the electronics maker after back-to-back losses totaling 1.5 trillion yen. The Osaka-based company plans restructuring spending of 250 billion yen through March 2015 to end losses in operations for TVs, semiconductors, mobile phones and optical devices. Consumer smartphone operations will likely shrink due to falling sales, according to Tsuga.

The Japanese currency has declined about 21 percent against the U.S. dollar in the past 12 months as Prime Minister Shinzo Abe uses fiscal and monetary policy to try and revive economic growth. An expected rise in Japan’s consumption tax has boosted large-sized spending for housing and will probably help the sale of whitegoods, the executive said.

Photographer: Tomohiro Ohsumi/Bloomberg

Kazuhiro Tsuga, president of Panasonic Corp. Close

Kazuhiro Tsuga, president of Panasonic Corp.

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Photographer: Tomohiro Ohsumi/Bloomberg

Kazuhiro Tsuga, president of Panasonic Corp.

Tsuga, who took the top job in June 2012, also cited higher sales of electric-car batteries and housing systems for the potential earnings boost.

“We had long battled quite severely from strengthening yen,” he said. “That changed and our devices are more competitive than before.”

Consumption Tax

Japan’s feed-in-tariff system is also boosting sales of solar power systems, he said.

Japan is due to raise the nation’s 5 percent sales tax to 8 percent in April before an increase to 10 percent in October 2015 to curb the world’s heaviest debt load. Abe will decide whether to go ahead with the plan after the Oct. 1 release of the Bank of Japan’s quarterly Tankan survey of business confidence.

Japan’s solar market is booming thanks to an incentive program that pays above-market rates for power produced from renewable sources such as the sun and wind. Introduced in July 2012, the program is intended to diversify the country’s energy mix following the 2011 Fukushima nuclear disaster.

In July, the maker of Viera TVs reported first-quarter profit of 107.8 billion yen, outstripping analyst estimates, helped by cost cuts and one-time gain from changes in pension accounting.

Smartphones

While cost cuts and a weaker yen, triggered by Abe’s monetary stimulus, is helping Tsuga revive 95-year-old Panasonic, global competition in consumer electronics is adding to pressure.

The company has stopped offering handsets in Europe and is “reconsidering” how to sustain its mobile-phone operation, Chief Financial Officer Hideaki Kawai said July 31. The unit reported an operating loss of 5.4 billion yen during the three months ended June.

The company’s smartphone operation for consumers will probably shrink due to falling sales and Panasonic will seek to apply its expertise in making handsets to business-use products or automotive-related products, Tsuga said. The company doesn’t have a plan to sell any of its mobile-phone assets, he said.

Panasonic’s TV shipments dropped about 10 percent to 2.72 million during the quarter ended June 30, while the digital still camera segment was unprofitable, Kawai said in July. The company raised its portion of worldwide revenue for flat-panel televisions to 5.3 percent in the second quarter, up from 4.6 percent in the first three months of this year.

Business Review

Panasonic is reviewing its marketing operation for TVs in North America and China where price competition is harsh, Tsuga said. Making exclusive models for Wal-Mart Stores Inc. (WMT), a business it inherited from Sanyo Electronics Co., has been successful and Panasonic may replicate the structure with other partners, he said.

The company is reviewing smaller businesses. In July, it agreed to sell its ultrasound diagnostic equipment operations to Konica Minolta Inc. (4902)

Panasonic is also seeking a sale of its stake in a health-care unit. In June, the electronics maker selected KKR & Co. and Toshiba Corp. (6502) on a shortlist for second-round bids after receiving offers that valued the division at about 200 billion yen, people with the knowledge of the matter said at the time.

Panasonic, which has grown into a consumer-electronics giant producing everything from TVs to eyelash curlers, has eliminated 92,423 jobs since March 2010, data complied by Bloomberg show. Fourteen-months into the job, Tsuga, 56, is deciding what it can’t afford to make any more.

In his restructuring plan, Tsuga has said Panasonic will consider pulling out of businesses with operating margins below 5 percent by March 2016. None of the company’s main four divisions reached that target during the June quarter.

To contact the reporters on this story: Mariko Yasu in Tokyo at myasu@bloomberg.net; Grace Huang in Tokyo at xhuang66@bloomberg.net

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

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