Panasonic Raised to Investment Grade by FitchAaron Clark and Takashi Amano
Panasonic Corp. was raised to an investment grade rating by Fitch Ratings Ltd. following debt restructuring efforts and as the supplier to Tesla Motors Inc. reported profit margins improved.
Fitch upgraded Panasonic to BBB- from BB+ after the Osaka-based consumer electronics company posted improved margins and reduced debt in the year ended March, bolstering its credit profile, the rating company said in a statement yesterday.
President Kazuhiro Tsuga, appointed in June 2012, is cutting costs and focusing on meeting demand from automakers including Tesla for batteries after the company reported its first annual profit in three years last month. Net income will rise 16 percent to 140 billion yen ($1.4 billion) in the year started April 1, the consumer electronics company said in a statement April 28.
“Panasonic has changed its structure under the leadership of President Tsuga,” Yusuke Ueda, a Tokyo-based credit analyst at Bank of America Merrill Lynch, said by phone. “The market consensus is that Panasonic has produced successful sales and profit after structural reforms and they are stable.”
Panasonic’s operating profit margin expanded to 3.9 percent in the year ended March from 2.2 percent a year earlier, according to data compiled by Bloomberg.
The company last month forecast sales of 7.75 trillion yen and operating profit of 310 billion yen in the current fiscal year, unchanged from forecasts it gave on March 27. The company plans to boost sales to 10 trillion yen by the 2018 fiscal year, Tsuga said in March.
The company posted a net loss of 122.6 billion yen in the three months ended March 31 as it took restructuring charges. Panasonic has reduced risks and potential downside for investors after booking a one-time impairment loss, according to Ueda.
Tsuga has suspended plasma panel production, trimmed smartphone and circuit-board operations, and sold chip factories to Israel’s Tower Semiconductor Ltd. last year.
Panasonic’s rival Sony Corp. this month in preliminary earnings reported a net loss of 130 billion yen in the year ended March, amid slumping consumer electronics sales.
The rating of Sony was cut by Fitch in November 2012 to BB- , the third highest non-investment grade, from BBB-, the lowest investment grade.
Panasonic’s rating was cut two levels by Fitch to BB, or the assessor’s second-highest non-investment grade, in November 2012. The company was lifted by a grade to BB+ in January, according to data compiled by Bloomberg.
BBB- is the lowest investment grade, while BB+ is the highest non-investment grade, or junk.