Sluggish Panasonic TV sales cause profit to miss estimates

Panasonic president and chief executive Kazuhiro Tsuga gives Panasonic president and chief executive Kazuhiro Tsuga gives the keynote address Tuesday at the 2013 International Consumer Electronics Show at the Venetian casino in Las Vegas. Later Tsuga told reporters that his company is considering closing some divisions as it retools for the new electronics market. (Jan. 8, 2013) Photo Credit: Getty Images

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Panasonic Corp. forecast annual profit that missed analyst estimates after Japans second-biggest television maker continued to lose market share to Samsung Electronics Co. and LG Electronics Inc.

Net income will probably be 50 billion yen ($495 million) in the year started April 1, compared with a net loss of 754 billion yen in the previous year, the Osaka-based company said in a statement Friday. The forecast missed the 63.7 billion-yen average of 16 analyst estimates compiled by Bloomberg.

President Kazuhiro Tsuga plans to spend 250 billion yen on restructuring during the next two years to end losses from TVs, semiconductors, mobile phones, circuit boards and optical devices, adding to 1.1 trillion yen spent since 2011. Panasonic, which has lost more than 1.5 trillion yen in the past two financial years, fell further behind South Koreas Samsung and LG in the global TV market in 2012.

Panasonics consumer electronics business is in a secular decline, Damian Thong, a Tokyo-based analyst at Macquarie Group Ltd., said before the earnings. Panasonic is losing ground in televisions and lacks a significant position in smartphones and tablets, which are central to the consumer electronics business today.

Panasonic rose 3.7 percent to close at 749 yen in Tokyo trading before the announcement. The stock has gained 43 percent this year, compared with an 87 percent increase by Sony Corp. and a 41 percent advance by Japans benchmark Nikkei 225 Stock Average.

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OPERATING TARGETS

Full-year operating profit for the maker of Lumix cameras and Viera televisions will rise 55 percent to 250 billion yen while sales will fall 1 percent to 7.2 trillion yen, Panasonic said.

Tsuga announced a three-year revival plan for Panasonic in March, outlining a target to boost the companys operating margin to 5 percent by eliminating losses at five divisions and pursuing growth in businesses including housing, eco-solutions and automotive products.

Panasonic will stay in the plasma TV business and try to make it profitable, Tsuga said in March. The TV operation has been unprofitable since April 2008, according to Chieko Gyobu, a Panasonic spokeswoman. Sony, Japans biggest TV maker, said Thursday its TV unit lost money for a ninth straight year.

TELEVISION LOSSES

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Panasonic expects it television losses to narrow to 34 billion yen this year from a loss of 88.5 billion yen. Sales will fall 16 percent to 11.5 million units this year, the company said.

We made significant efforts in terms of restructuring, Chief Financial Officer Hideaki Kawai told reporters in Tokyo Friday. More needs to be done this fiscal year and we will carry out measures with speed.

Panasonics share of revenue in the global flat-panel TV market dropped to 6 percent last year from 7.8 percent in 2011, according to Santa Clara, California-based DisplaySearch. Suwon, South Korea-based Samsung boosted its share to 27.7 percent while Seoul-based LG expanded its share to 15 percent from 13.8 percent, according to the researcher.

Sony said Thursday net income may rise 16 percent this fiscal year as the company expects to sell more TVs and smartphones. The yens weakening to the lowest in four years is also boosting Japanese electronics makers earnings from overseas.

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CURRENCY ASSUMPTIONS

Panasonics forecast is based on an exchange rate of 85 yen to the U.S. dollar. That compares with Sonys assumption of 90 yen, while the Japanese currency traded at more than 101 yen Friday.

Samsung, Asias largest electronics maker, last month reported record quarterly profit as its smartphone sales surged. Net income jumped 42 percent to 7.15 trillion won ($6.5 billion) in the three months ended March 31, Samsung said April 26.

Panasonics long-term credit rating was cut to one level above junk by Moodys Investors Service, which cited challenging market conditions, in November.

The company is considering selling a stake in its health-care unit, it said in March. The electronics maker also said it agreed to sell a majority stake in its logistics unit as early as in July to Nippon Express Co.

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