Panasonic slashes profit forecast by 90 percent

Thu Nov 27, 2008 5:16 AM EST

Panasonic slashed its annual profit forecast by 90 percent, blaming a strong yen, sluggish sales and heavy discounting as electronics makers fight for market share amid a global economic downturn.

Panasonic Corp. said Thursday it now expects 30 billion yen ($316 million) in net profit for the fiscal year ending March 2009 — less than a tenth of its earlier profit forecast of 310 billion yen ($3.3 billion).

The Osaka-based company also lowered its sales forecast for the fiscal year to 8.5 trillion yen ($89.5 billion) from an earlier 9.2 trillion yen ($96.8 billion).

Panasonic, which changed its name from Matsushita Electric Industrial Co. on Oct. 1, said its business conditions were "deteriorating sharply," battered by sluggish consumer spending and intense price competition.

The surging yen, which erodes the value of overseas earnings, is another negative, and write-downs on investments caused by nose-diving stock prices will also take a toll, it said.

The latest projection would mark a 89 percent plunge in profit from the previous fiscal year. Panasonic reported 282 billion yen in profit on 9 trillion yen in sales for the last fiscal year.

Panasonic has been trying to take over smaller Japanese rival Sanyo Electric Co., a move that would create one of the world's biggest electronics companies.

But Goldman Sachs, a major Sanyo investor, said Wednesday it has ended negotiations to sell its stake in Sanyo. Panasonic says negotiations are ongoing.

Panasonic's July-September profit slumped 16 percent to 55.46 billion yen ($596 million) as a strong yen, declining gadget prices and rising material costs chipped away at the Japanese electronics maker's earnings.

Panasonic's sales in the fiscal second quarter slipped 4 percent from a year earlier to 2.192 trillion yen ($23.6 billion) from 2.286 trillion yen.

Sales were healthy in digital gadgets, such as flat-panel TVs and DVD recorders, as well as home appliances, it said in a release.

But that wasn't enough to offset the damage from intensifying price competition and the rising costs of energy and raw materials, according to the company.

Japanese rival Sony Corp. has also revised its projections for the year ending March 2009, to 150 billion yen ($1.6 billion) profit from an earlier 240 billion yen ($2.6 billion) profit projection.

The dollar has slipped from about 107 yen earlier this year to 90 yen-levels recently, as jitters about a credit crunch, corporate failures and a global stock plunge sparked wild gyrations for currencies.

Panasonic shares dipped 4.7 percent to 1,284 yen in Tokyo.