Panasonic Corp said it will lose almost $10-billion (U.S.) this business year as it cleans house of risky assets, writing down billions of dollars of goodwill and assets in its mobile and energy units while its new boss readies for a fresh bout of restructuring.
Panasonic, founded in 1918, is heading for a fourth net loss in five years after forecasting a ¥765-billion ($9.6-billion U.S.)) loss for the year to March, nearly matching a record net loss of ¥772-billion last business year. The result would boost its cumulative loss over five years to nearly $25-billion.
Kazuhiro Tsuga, who became Panasonic's president this year, has promised a harsh revamp, to be unveiled by next March, that is expected to beat a path away from money-losing TVs and other consumer electronics.
Panasonic's multibillion-dollar write offs, including deferred tax assets, are a sign that Tsuga is already scaling back businesses that do not add to the bottom line as a weak global economy takes its toll.
"We believe we have removed everything that posed a writedown risk," Panasonic's Chief Financial Officer Hideaki Kawai said at a news conference on Wednesday in Tokyo.
Even after a 36,000 reduction in its workforce last year, Panasonic remains Japan's largest corporate employer with 330,000 workers. The company trimmed its projection for annual TV sales to 13 million sets from 15.5 million.
The maker of Viera TVs, which had been projecting ¥50-billion in net profit in the year to next March, also cut its annual operating profit target to ¥140-billion from ¥260-billion.
Panasonic said on Wednesday that it will write off ¥238-billion in goodwill related to its mobile phone unit and its businesses in solar panels and small lithium batteries, which are used in PCs and smartphones.
The company last year boosted output capacity of solar panels by half, to 900 megawatts, with a new plant in Malaysia, and is planning to ramp up capacity to 1.5 gigawatts by March 2016. But with weak demand, particularly in Europe, the company is reconsidering that expansion, sources at the company told Reuters this week.
Tsuga will halt sales of smartphones in Europe after having just returned to the market this year, a source with knowledge of the decision told Reuters this month.
Overall restructuring charges in the first half ballooned to ¥356-billion, and the company expects such costs to reach ¥440-billion for the year compared with an earlier ¥41-billion estimate. The company also said it incurred a provision of ¥413-billion for income taxes.
"It's highly possible that Panasonic will cut its outlook again later," said Mitsushige Akino, chief fund manager at Ichiyoshi Investment.
"It's very difficult for them to judge how much restructuring will cost at this point, before they've carried it out."
As the company prepares to rejigger its business portfolio, Panasonic this month secured $7.6-billion (U.S.) of loan commitments from Sumitomo Mitsui Financial Group, Mitsubishi UFJ Financial Group and other banks, which will allow it to sidestep fund-raising in the credit markets.
Moody's Investors Service in September cut its rating on Panasonic two notches to Baa1, citing a low level of profitability and elevated leverage.
In the three months to Sept. 30, Panasonic posted an operating profit of ¥48.8-billion compared with a profit of ¥42-billion a year ago. The result was lower than the average ¥55.6-billion profit estimated by five analysts surveyed by Thomson Reuters I/B/E/S.
Since the start of the year, Panasonic's shares have dropped more than 20 per cent, compared with a more than 5 per cent gain in the benchmark Nikkei 225. Panasonic shares rose 4.5 per cent on Wednesday to close at ¥514 before it released its results for the quarter.