Panasonic Posts Profit Increase for 7th Straight Year

Oct 29, 2008 19:55 Mayuko Uno, Nikkei Electronics

Panasonic Corp announced its financial results for the first half (April to September 2008) of fiscal 2008. Though sales declined 4% year-on-year (YoY) to ¥4.3437 trillion (approx 44.8 billion), operating income grew 4% YoY to ¥228.2 billion. The company has logged income growth for seven first halves in a row.

Excluding sales at Victor Company of Japan Ltd, which became an unconsolidated subsidiary in August 2007, and the impact of exchange rates, sales increased 4% YoY in real terms, Panasonic said.

As factors behind the income growth, Panasonic cited (1) favorable sales of Olympics-related products, resulting in a 55% YoY rise in flat panel TV unit sales to 4.88 million units, (2) sales of home appliances and other products in BRICs and Vietnam, which rose 25% YoY (on a local currency basis) and (3) its efforts to cut costs to alleviate sharp rises in raw material prices.

Results by segment were as follows. Sales in the "Digital AVC Networks" segment including audio-visual equipment such as plasma TVs climbed 2% YoY to ¥2.1029 trillion, while operating income fell 7% YoY to ¥102.8 billion. Flat panel TV sales were favorable, in particular, with global sales soaring 31% YoY to ¥517.2 billion, aided by significant sales growth primarily in Europe, Asia and China.

Digital camera sales, on the other hand, seem to have slowed down. Sales in Europe decreased 4% YoY to ¥54.5 billion, while global sales grew less than 2% YoY to ¥127.7 billion. Panasonic is aiming to boost sales through such products as the "Lumix DMC-G1" interchangeable lens digital camera. The company explained the segment logged a decreased income due to lowering prices of audio-visual equipment and weak demand for automotive equipment.

The "Home Appliances" segment, which handles products including so-called white appliances, was the only segment that logged growth in both sales and income. Sales increased 3% YoY to ¥685.5 billion and operating income hiked 26% YoY to ¥46.9 billion.

Sales were favorable in Asia and China, with washing machine sales on a value basis growing 1.2 times larger than the sales posted last year in China. Total sales of air conditioners, refrigerators and washing machines rose 7% YoY to ¥61.1 billion in Asia and climbed 8% YoY to ¥56.7 billion in China.

Sales in the "Components and Devices" segment including semiconductors declined 6% YoY to ¥670.2 billion, and operating income inched down 1% YoY to ¥49 billion. Although semiconductor sales outperformed last year's sales, sales of general electronic components and batteries, for example, did not grow as expected, because of the decreased automobile production in North America and the contraction of the domestic mobile phone market in Japan, according to the company.

Sales and operating income in the "MEW and PanaHome" segment were down 1% YoY to ¥928.7 billion and 13% YoY to ¥35.8 billion, respectively. The "Other" segment saw sales increase 10% YoY to ¥598.6 billion and operating income fall 18% YoY to ¥28.8 billion. This is partly because sales dropped 11% YoY to ¥112 billion and operating income decreased 30% YoY to ¥15.3 billion at FA equipment business, as capital investments at factories have been decreasing since July 2008.

As for earnings forecasts for the fiscal 2008 full-term (April 2008 to March 2009), Panasonic reiterated its previous forecasts, insisting that current exchange rates have fluctuated too widely in only a matter of days and made it impossible for the company to review its business plan.

"It's more important now to accurately foresee the trend of the year-end sales season," Panasonic President Fumio Otsubo said. He added the company will revise its full-term forecasts some time during the third quarter.

However, anticipating that the environment in the second half will be bleak, Panasonic will take the opportunity to implement structural reform in preparation for fiscal 2009 and onward, Otsubo said.

He cited specific actions that the company is planning, including (1) the revision of its capital investments in the areas other than flat panel TVs and batteries, for which the company has already reaffirmed its investment plan, (2) considering withdrawing from overseas businesses and (3) a review of unprofitable businesses.

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