Panasonic, Sony and Sharp hit by huge losses
Panasonic, Sony and Sharp hit by huge losses
Pierre Leblanc and Lee Jay Walker
Modern Tokyo Times
Panasonic, Sony, and Sharp, are bracing up to a very difficult year after heavy losses have been forecasted based on recent figures. The figures involved are indeed huge because Panasonic has forecast a loss of 780 billion yen ($10.2 billion dollars) based on figures relating to March one year ago. Sony and Sharp also expect a shortfall of $6.7 billion dollars which is a combined total and clearly all three companies face serious internal issues which need to be resolved.
Panasonic is making it clear that the reasons behind the huge deficit are based on the strong yen, major acquisition costs, and huge losses which were incurred after the devastating floods in Thailand. The acquisition cost applies to Sanyo Electric whereby the “goodwill value” is being written off. This applies to the gap between the price of the acquisition and net assets. Therefore, this burden of 250 billion yen accounts for nearly a third of the expected forecast.
Yuuki Sakurai, who is the chief executive in Tokyo at Fukoku Capital Management, commented that “We can’t see the market for consumer electronics improving anytime soon.” He also stated that “There’s a mismatch between the products they make and what consumers want.”
The second sentence is more worrying because “mismatch” is a strong word and the changing nature of the electronics sector means that companies can soon fall behind. Therefore, the President at Panasonic, Fumio Ohtsubo, faces major restructuring problems because core areas like rechargeable batteries and solar panels are very competitive.
Ohtsubo commented that “We’re in the midst of a transformation into an environmental innovation company…We’ll focus on carrying out reforms so that we can realize a V-shaped recovery.” However, workers at the Osaka based company may face the brunt of restructuring because it is apparent that Panasonic will further look to new initiatives outside of Japan.
Panasonic is the fourth largest company in the world in the field of television manufacturing behind Samsung, LG Electronics and fellow Japanese company Sony. Yet news about this company over the last year means that their share price is in freefall and down from 45% from a year before. Therefore, the usual vicious circle is adding to the huge pressure on this company.
Obviously, for Panasonic, Sharp, and Sony, the strong yen isn’t helping and clearly this is a wake-up call for the Japanese government because the health of corporate Japan is being hit because of internal and external factors. Therefore, these companies, and others, which have been the backbone of Japan need fresh momentum in order to overcome many areas.
Hisashi Kuroda, Meija Yasuda Asset Management, stated that “Sony’s earnings were worse than I had imagined” He also stated that “Sony has few businesses that have value. The only hope is, perhaps, film and music, or whether they can make a recovery in the game business – basically software business – not the hardware one.”
Panasonic had stated in November, 2011, that a new plant would be built in Malaysia with regards to solar cells and modules. Also, the procurement base is going to shift from Osaka to Singapore. Therefore, Panasonic is hoping to lay the foundation for greater stability and revitalizing the company which faces stiff competition from companies like Samsung Electronics Co.
Overall, all three companies face major internal problems and issues like the floods in Thailand should have been backed up by contingency plans. However, the strong yen is a different area which was unforeseen by most forecasters several years ago. The next year will be crucial for the health of all three companies and policy makers in Tokyo must be worried.
Japanese Yen Exchange Rate
