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Panasonic Sees Q1 Operating Profit Decline 7%, FY2016

July 29, 2015 - Written By Kishalaya Kundu

Japanese consumer electronics manufacturer Panasonic Corp. has reported a 7 percent drop in its operating profit, missing analyst expectations and disappointing investors. The stock fell by 0.8 percent at the Tokyo stock exchange in the lead up to the results, with the market already factoring in the less than ideal financial situation of the company. The company’s net profit for Q1, FY2016 rose to 59.52 billion Yen ($480 million), while its operating profit fell to 76.56 billion yen ($619 million), which is significantly lower than the 92.7 billion Yen ($750 million) estimate held out by 19 market analysts in a poll by Thomson Reuters. Overall sales remained basically flat at 1.86 trillion Yen ($15.1 billion). While the company reported growth in its automotive business, its consumer electronics and housing technology divisions substantially underperformed on the back of weak demand for its televisions and solar panels respectively.

The Kadoma, Osaka headquartered company released a statement which revealed that its bottom line grew 35 percent from Q1, FY2015 “due mainly to rationalization in materials, fixed-cost reductions and the positive impact of exchange rate fluctuation”. The company, in recent times, has been looking to reshape its business by focusing less on the consumer segment and more on the enterprise segment. It has its eyes firmly set on the high-margin automotive sector, where it makes navigation systems and electrical components for automotive companies like Tesla Motors, the makers of the Model S and the Tesla Roadster electric cars. Panasonic has also been investing money towards the manufacturing and marketing of components like energy saving home systems that fit in with visions of the smart home of the twenty-first century, which many tech companies seem to be betting on, including biggies like Google and Microsoft.

Panasonic however, has been less than bullish on its consumer electronics business which includes televisions and smartphones. The company reported 3 percent lower sales for its consumer appliances and electronics division on the back of reduced marketing spend on comparatively low-margin product categories like televisions. Panasonic sold 599 billion Yen ($4.8 billion) worth of consumer electronics in Q1, FY2016, while sales of its housing technology products also fell by 4 percent to 370 billion Yen ($3 billion). The company however said that it continues to believe its operating profits will rise in the next three quarters of the current fiscal, as it expects to end FY2016 in line with its previously released guidance for a net profit of 180 billion Yen ($1.5 billion) on a revenue of 8 trillion Yen ($65 billion).

Panasonic has also revealed that it plans to spend around 1 trillion Yen ($8.1 billion) over the next few years on acquiring strategic technology that it believes will help it in its endeavor of becoming a leading producer of smart electronics for the automotive and housing sectors. As part of its plan, the company last month, took a 49 percent stake in Spain’s Ficosa International, with which, it will now jointly produce electronic mirror systems. The company also has plans to invest between $1.5 billion to $2 billion in Tesla’s upcoming Gigafactory plant, which is said to cost up to around $5 billion when it eventually comes up in Nevada.