TOKYO (Reuters) - Japan’s Panasonic Corp cut its annual profit outlook after disappointing quarterly earnings it blamed on a slowing Chinese economy hit by a trade war with the United States that hurt demand for auto components and factory equipment.
Panasonic forecast an operating profit of 385 billion yen ($3.51 billion) for the year ending March, down from the previously predicted 425 billion yen and missing the 420.25 billion yen average of 18 analyst estimates polled by Refinitiv.
“Demand for mechatronics, mostly motors, has plunged since November as our clients making equipment for smartphone factories cut their investment,” Panasonic Chief Financial Officer Hirokazu Umeda told a briefing.
China’s shrinking car market has crimped demand for automotive components, Panasonic said, while sales have also dropped for electronic devices used in air conditioners.
Panasonic’s operating profit for the October-December quarter fell 19 percent to 97.6 billion yen, far below the average 122.35 billion yen estimate of eight analysts.
The energy division, which includes its battery business with U.S. electric car maker Tesla Inc, provided some good news in a bleak quarter, posting its first operating profit in three quarters.
“Sales and profit at the Tesla business have improved,” Umeda said of the division’s 16.5 billion yen operating profit.
He said additional lines at Tesla’s “Gigafactory” battery plant in Nevada would be installed by the end of March, bringing the plant’s total capacity to the 35 Gigawatt hours (GWh).
Panasonic, the exclusive battery cell supplier for Tesla’s current production models, saw its profits squeezed early last year by the U.S. EV maker’s initial production delays for the mass-market Model 3 sedan.
Tesla expressed optimism last month that it would post profits in every quarter in 2019, but the winding down of a U.S. tax subsidy this year is expected to make Tesla cars more expensive and could hurt sales.
At the briefing, Umeda said a decision had not been taken yet on how Panasonic would supply battery cells for Tesla’s new Shanghai car factory. Tesla has been in discussions with other suppliers, including China’s Tianjin Lishen.
“We have production sites for cylindrical batteries in the United States, Japan and China,” Umeda said. “We are in the process of analyzing where would be the best to supply batteries.”
To reduce its heavy reliance on Tesla, Panasonic has teamed up with Toyota Motor Corp to jointly develop and produce thin, rectangular-shaped prismatic batteries, a type different from the cylindrical batteries used in Tesla EVs.
Panasonic plans to supply prismatic batteries to its existing customers such as Honda Motor Co through the Toyota joint venture.
“We are aiming to develop the best batteries in the industry that would be wanted by a wide range of carmakers,” Umeda said.
($1 = 109.8400 yen)
Reporting by Makiko Yamazaki; Editing by Muralikumar Anantharaman and Darren Schuettler