Weak demand takes toll on Panasonic

Panasonic confirmed the trend amongst Japan’s technology companies on Friday when it said that economic conditions remain severe, but that it hopes to post a small operating profit this year, prior to the cost of further restructuring.

The electronics group, which will be Japan’s largest once it completes the takeover of Sanyo Electric, forecast a further 10 per cent decline in sales this year to Y7,000bn ($73bn), an operating profit of Y75bn and a net loss of Y195bn for the year to March 2010.

“The company currently expects to encounter severe conditions because two trends are developing simultaneously. One is the world recession and shrinking demand, and the other is changes in market structure such as the expanding emerging markets and a demand shift to lower-priced products,” Panasonic said.

Panasonic’s outlook is further evidence that, while there is little sign of economic recovery, aggressive moves to close factories and cut temporary staff have allowed Japan’s electronics companies to stem the operating losses caused by weak demand and the strong yen.

On Thursday, Sony forecast that it would break even at the operating level this year, but make a net loss of Y120bn once restructuring costs are taken into account. That is in spite of Sony’s expectation of a further 6 per cent decline in sales.

Panasonic made its forecast alongside the announcement of results for the year to March 2009 which, like Sony’s, were a little better than the company’s last forecast in February.

Panasonic’s operating profit was Y72.9bn, compared to its February forecast of Y60bn, although the net loss of Y379bn was almost exactly as expected. Sales were down by 14 per cent on the previous year at Y7,766bn.

Among its sprawling operations, Panasonic said that sales of audio and video equipment were down by only 6 per cent last year, but in more industrial areas such as electronic components and factory automation equipment, sales were down by 21 per cent and 14 per cent respectively.