Panasonic on track for second $10B loss

People ride an escalator past a Panasonic advertisement in Tokyo.

Story highlights

  • Panasonic has warned it will suffer a loss of nearly $10B for the second consecutive year
  • Discards an earlier prediction that it would return to profit, showing depth of problems

Panasonic has warned it will suffer a loss of nearly $10bn for the second consecutive year, discarding an earlier prediction that it would return to profit, in a move that underscores the deep and persistent problems facing Japan's consumer electronics sector.

The Osaka-based company on Wednesday said it expected to end the financial year to next March with a net loss of Y765bn ($9.6bn), a dramatic reversal of its previous forecast for a Y50bn profit. It said it would not pay a dividend this year for the first time since 1950.

A loss of that scale would be only slightly smaller than Panasonic's record Y772bn deficit last year, and would bring its cumulative losses for the past five years to nearly Y2tn.

The company said it was writing down the value of past investments in solar panels, lithium-ion batteries and mobile phones, areas on which it had bet heavily only to be undone by cheaper or more innovative foreign competitors.

The decision broadens a restructuring that began with the company's unprofitable television division last year.

Panasonic is also taking a large tax charge, of Y412.5bn, related to its prolonged earnings slump.

Not all of its reversal came from one-time write-offs, however: it cut its annual sales forecast by 10 per cent, to Y7.3tn, and its projection for operating profit -- earnings before restructuring charges, taxes and other items -- by nearly half to Y140bn, citing weakening global demand for consumer electronics.

The company said it was writing down the value of goodwill and other intangible assets related to the solar, battery and phone businesses by a total of Y355.5bn.

"In solar and consumer lithium-ion batteries, we are revising our sales and investment strategy in light of continuous price falls," it said. In mobile phones, it acknowledged that its "domestic share is falling and we are rethinking our foreign expansion."

Panasonic made a last-ditch effort to compete in smartphones with the likes of Apple and Samsung this year by resuming sales of the devices in Europe, a market it had previously abandoned. But the move has not borne fruit and the company on Wednesday said it was withdrawing from the market for good.

The tax charge was forced on Panasonic by accounting rules governing the treatment of so-called deferred tax assets -- credits that are accumulated during loss-making years and redeemed when a company returns to profit. If losses persist for too many years, accountants deem the company's prospects for redeeming them to have receded, and their value is written off.

Other Japanese consumer electronics groups are also struggling to compete as products such as flatscreen TVs have become nearly indistinguishable commodities, and plunged in price as a result. The high cost of manufacturing in Japan -- exacerbated by a strong yen -- has given a decisive advantage to rivals in South Korea and China.

Sony and Sharp, which like Panasonic suffered heavy losses last year, may also be forced to revise their forecasts when they report their earnings on Thursday.