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Panasonic Downgraded by S&P After $9.6 Billion Loss Forecast

Pedestrians walk past Panasonic Corp.'s office in Tokyo.  Photographer: Haruyoshi Yamaguchi/Bloomberg
Pedestrians walk past Panasonic Corp.'s office in Tokyo. Photographer: Haruyoshi Yamaguchi/Bloomberg

Nov. 2 (Bloomberg) -- Panasonic Corp., Japan’s No. 2 TV maker, had its credit rating downgraded two levels by Standard & Poor’s after forecasting a loss 30 times bigger than analyst estimates because of restructuring costs and falling demand.

The long-term debt was rated BBB, down from A-, S&P said in a statement today, citing “huge” losses and the outlook for a slow recovery at the Osaka-based maker of consumer electronics, solar panels and home appliances. It’s the second-lowest investment grade. The rating was assigned with a stable outlook.

Panasonic’s net loss may be 765 billion yen ($9.6 billion) in the year ending March 31, the Osaka-based company said in a statement Oct. 31, scrapping its May projection of 50 billion yen in net income. The forecast for the second-highest loss in its history prompted Panasonic to say it won’t pay a dividend for the first time since 1950 because of an “urgent need” to improve its financial position.

“Such huge losses for the second year in a row weaken the company’s financial profile and could further slow its recovery,” S&P said in today’s statement. “The company’s profitability and cash flows should be stable, benefitting in the next one to two years from the company’s recent restructuring efforts and its diverse business portfolio.”

The bulk of Panasonic’s projected loss will come from 440 billion yen of restructuring expenses, which includes writedowns of goodwill on solar cells, lithium-ion batteries and mobile-phone operations, the company said in its earnings statement. Panasonic is also taking 412.5 billion yen in charges to write down deferred tax assets, it said.

‘Severe Outlook’

Panasonic has “a severe outlook for the second half,” Chief Financial Officer Hideaki Kawai said Oct. 31, citing worse-than expected demands for TV, cameras, Blu-ray disc players and personal computers.

Kawai said the company may sell real-estate assets to generate cash and that the company doesn’t have a plan to cut jobs in significant numbers.

Panasonic fell 2.2 percent to 405 yen as of 2:45 p.m. in Tokyo trading. The stock declined by the daily limit yesterday, plunging 19 percent to the lowest level since February 1975, following the previous day’s earnings announcement.

To contact the reporter on this story: Terje Langeland in Tokyo at tlangeland1@bloomberg.net

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

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