Panasonic sees annual profit down 11 percent after quake

TOKYO Mon Jun 20, 2011 6:51am EDT

Panasonic's logo is seen on an electronics shop's wall in Tokyo April 28, 2011. REUTERS/Kim Kyung-Hoon

Panasonic's logo is seen on an electronics shop's wall in Tokyo April 28, 2011.

Credit: Reuters/Kim Kyung-Hoon

TOKYO (Reuters) - Japan's Panasonic Corp forecast on Monday its full-year operating profit would drop 11 percent to 270 billion yen ($3.4 billion) in the year to March 2012, after the earthquake and tsunami in northern Japan hit production and sales.

Like many of its rivals, Panasonic delayed its profit forecast due to lack of clarity about the effects of the quake.

Market consensus was for a profit of 262.6 billion yen, based on the average of 21 estimates by analysts polled by Thomson Reuters I/B/E/S.

The maker of Viera televisions and Lumix cameras posted a 305 billion yen profit last year, and said in April it would have raised that to 310 billion yen in the current year, if it were not for the effects of the March disaster, which damaged factories and crimped domestic demand.

Profit is set to slump to 10 billion yen for the first half of the current financial year and rebound strongly in the second half, the company said.

Demand for televisions, car-related products and mobile phones has fallen since the quake, Panasonic said in a statement, while sales of low-energy consumption LED lighting, batteries, solar cells and housing-related products are expected to be healthy as reconstruction gets under way.

Panasonic is the world's fourth-largest maker of flat-screen televisions by revenue after Samsung Electronics, LG Electronics and Sony, according to research firm DisplaySearch.

But domestic television sales are set to slump this year after a government incentive scheme and the switch to digital terrestrial broadcasting frontloaded demand last year, and Panasonic's TV business is set to languish in the red.

"Like rivals Sony and Sharp, they have structural disadvantages," said Makoto Kikuchi, CEO of Myojo Asset management. "The low end is now all about price competition, and Chinese and South Korean makers have an advantage there. In the high end, for example 3D televisions, there were expectations, but things haven't progressed as hoped," he added.

JOB CUTS

Panasonic also said in April it planned to shed another 17,000 jobs and might close up to 70 factories around the world over the next two years, as it seeks to pare costs and rid itself of overlapping businesses following its buyouts of Sanyo Electric and Panasonic Electric Works.

The takeovers were aimed at refocusing the business from consumer electronics to environmentally friendly energy products like rechargeable batteries and solar panels, in which Sanyo has technological advantages.

"There is potential, but at this point it is nothing more than potential," said Kikuchi of the new direction. "We can't yet see how, when and how much it is going to contribute to profits."

Panasonic's chief financial officer agreed that the company's change of direction was one factor behind the poor performance of its shares. Panasonic's share price has fallen about 14 percent since March 10, the day before the quake.

"I think one reason is that the company is in the process of transforming itself from a consumer electronics maker to an environmental business," Makoto Uenoyama told reporters and analysts. "Although people are getting the concept...it is not yet making up much of our earnings. Another is the problematic television business. We have not been able to show everyone a solution." ($1 = 80.055 Japanese Yen)

(Editing by Muralikumar Anantharaman and Chris Gallagher)

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