Panasonic Corp said it will lose almost $10 billion 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 yen ($9.6 billion) loss for the year to March, nearly matching a record net loss of 772 billion yen 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 October 31 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 yen in net profit in the year to next March, also cut its annual operating profit target to 140 billion yen from 260 billion yen.
Panasonic said on October 31 that it will write off 238 billion yen 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 yen, and the company expects such costs to reach 440 billion yen for the year compared with an earlier 41 billion yen estimate. The company also said it incurred a provision of 413 billion yen 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 of loan commitments from Sumitomo Mitsui Financial Group, Mitsubishi UFJ Financial Group and other banks, which will allow it to side-step fund-raising in the credit markets.
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