TOKYO Panasonic Corp (6752.T) said it will lose almost $10 billion this business year as it cleans house of poorly performing operations, 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 on Wednesday a 765 billion yen ($9.6 billion) loss for the year to March, nearly matching last year's record net loss of 772 billion yen. 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.
"It's unfortunate, but we are among the losers in consumer electronics," he told a news conference.
Panasonic's Japanese peers Sharp Corp (6753.T) and Sony Corp (6758.T) have also struggled with heavy losses in TVs and other mainstay electronics goods as more nimble, better-funded rivals - especially South Korea's Samsung Electronics Co (005930.KS) - take over turf they once dominated.
But 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.
Even after a 36,000 reduction in its workforce last year, Panasonic remains Japan's largest corporate employer with 330,000 workers.
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.
Its projection for annual TV sales was trimmed to 13 million sets from 15.5 million.
The size of this year's loss may come as a shock to some investors, but analysts have long argued that the company needed drastic reforms that break Japan's corporate traditions if it is to secure its future.
"There's a strong possibility of some initial panic selling (of the stock)," said Kabu.com Securities market analyst Tsutomu Yamada. "What happens to the price after that will depend on the substance of its structural reforms."
Since the start of the year, Panasonic's shares have dropped more than 20 percent, compared with a more than 5 percent gain in the benchmark Nikkei 225 .N225. Panasonic shares rose 4.5 percent on Wednesday to close at 514 yen before it released its results for the quarter.
In the three months to September 30, Panasonic posted an operating profit of 48.8 billion yen compared with a profit of 42 billion yen a year ago. The result was lower than the average 55.6 billion yen profit estimated by five analysts surveyed by Thomson Reuters I/B/E/S.
Panasonic 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 has been planning to ramp up capacity to 1.5 gigawatts by March 2016. But with weak demand, particularly in Europe, the company said on Wednesday it is reconsidering that expansion.
Tsuga also said he would halt sales of smartphones in Europe after having just returned to the market this year.
Sony's response, in contrast, has been to double down on consumer electronics with a push into smartphones and tablets.
Panasonic's overall restructuring charges in the first half ballooned to 356 billion yen, and it 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."
As the company prepares to rejigger its business portfolio, Panasonic this month secured $7.6 billion of loan commitments from Sumitomo Mitsui Financial Group (8316.T), Mitsubishi UFJ Financial Group (8306.T) and other banks, which will allow it to sidestep fund-raising in the credit markets.
Moody's Investors Service in September cut its rating on Panasonic two notches to Baa1, citing a low level of profitability and elevated leverage.
(Additional reporting by Reiji Murai, Hirotoshi Sugiyama and Sophie Knight; Editing by Edmund Klamann)