TOKYO: Panasonic Corp reported its first-quarter operating profit nearly halved, as Sino-US trade tensions dampened demand for its components business in China and the battery business with Tesla Inc remained in the red.
The trade dispute is making it more painful for Panasonic to execute its strategy of shifting focus to corporate clients and automakers from consumer electronics, after Tesla's production delays already posed challenges to the goal.
Higher US tariffs on Chinese goods battered sales of Panasonic's electronic devices, while the slumping automotive market in China prompted the auto industry to scale back manufacturing investment and took a toll on factory equipment sales.
"Automotive sales in China slumped and dampened investment appetite" in the automotive industry, Chief Financial Officer Hirokazu Umeda said at an earnings briefing on Wednesday.
Umeda also said the Gigafactory joint venture with the US electric car maker is still in the process of ramping up to the planned annual production capacity of 35 gigawatt-hours and related costs kept the Tesla battery business in the red.
Panasonic, the exclusive battery cell supplier for Tesla, posted an operating profit of 56.39 billion yen ($519.68 million) for the April-June quarter, down 44% from 99.96 billion yen a year prior.
That was below a consensus estimate of 70.93 billion yen from eight analysts compiled by Refinitiv.
The automotive business, which includes automotive batteries, posted a loss of 10 billion yen, larger than a year-before loss of 1.5 billion yen. It generated 20% of the company's overall sales.
Panasonic maintained its profit forecast for the year ending March at 300 billion yen, versus a consensus estimate of 319.97 billion yen from 20 analysts.
Umeda said weaker sales of Tesla Model S sedans and Model X SUVs have slowed battery shipments from Japan and hurt profits.
Tesla shares slumped last week after the car maker pushed back its profit timeline once again, reported lower margins and announced the departure of its chief technology officer.
Panasonic has turned cautious about further spending on capacity growth for Tesla battery production, while it is planning to launch a new battery joint venture with Toyota Motor Corp.
Panasonic shares have halved since late 2017, dragged down by concerns about a lack of growth drivers as well as the high susceptibility to Tesla's fortunes.
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