Matsushita Posts First-Ever Quarterly Loss

Jul 31 2001

TOKYO, - Japan's Matsushita Electri Industrial Co Ltd reported its first-ever quarterly loss o Tuesday after sputtering global demand for high-tech goods took toll on the world's biggest consumer electronics maker.

Matsushita, known for its Panasonic and National brands posted a 38.69 billion yen consolidate operating loss in the April-June quarter. Sales slid by 5. percent to 1.67 trillion yen .

On a net basis, Matsushita also fell into the red with 19.37 billion yen loss in the quarter and projected this t deepen to a loss of 45 billion yen for the first half, anothe first, compared with an original estimate of a nine billion ye profit.

Matsushita's bleak quarter and outlook are a reflection o the deceleration in demand for information technology, which i chipping away at sales of consumer electronics, mobile phones an electronic devices. Forecasts of the operating loss had bee clustered around 20-30 billion yen.

"We feel that this is a critical period and we hope to g forward with restructuring," said Tetsuya Kawakami, director i charge of accounting, "Given the weak outlook for the informatio technology sector, we have decided to lower our targets."

Matsushita unveiled several steps to cut the number of it workers, slash procurement costs and reduce capital investment.

An early retirement scheme that had been limited to thos aged over 45 will be expanded to include all workers under 5 with 10 years' experience.

Matsushita said on Tuesday it aimed to save 300 billion ye on parts and materials in the year to March 2002. Capita investment will be slashed by 100 billion yen to 320 billion yen.

SECOND HALF RECOVERY?

"It's worse than I had anticipated," said Tsubasa Securitie analyst Yukihiro Yoshida.

It was the electronic giant's first quarterly loss since i started announcing earnings on a quarterly basis in 1971. Th numbers are reported under U.S. accounting rules.

In the April-June period a year ago, Matsushita posted a operating profit of 21.20 billion yen and a net profit of 9.4 billion yen.

While Matsushita kept its outlook for for the year intact with net profit of 57 billion yen expected on sales of 7.5 trillion yen, analysts said this would be hard to achieve.

"Since it's hard to imagine any V-shaped earnings recovery i the year's second half, we must take into account the risk tha the company will fall into the red for the full year," sai Yoshida at Tsubasa Securities.

Investors have punished shares in Matsushita along with othe Japanese electronics groups over the past several weeks ami signs that a global info-tech chill may linger until the end o the year.

Shares in Matsushita ended the day up 3.88 percent at 1,74 yen, but are still down 38 percent from this year's high of 2,80 yen on January 5. This compares with the benchmark Nikkei 22 share average's 36 percent slide in the same period.

Takashi Miyazaki, senior strategist at UFJ Partners Asse Management, which manages about three trillion yen of investmen funds, said he did not expect Matsushita's earnings to have major impact on the market. He said a dismal first quarter had b now been largely built into the price.

Matsushita's announcement, which came after the Tokyo stoc market had closed, followed similarly gloomy earnings reporte last week by other high-tech firms such as Sony, NEC and Fujitsu.

BOLD STEPS?

Much of Matsushita's second-half cost-cutting will depend o how many employees step forward for early retirement. Directo Kawakami declined to give any projections of the number o retirees but said it would number in the thousands.

Analysts said they hoped the first-ever quarterly loss woul be a wake-up call for the electronics giant and its labour unio to carry out sweeping payroll cuts by broadening its voluntar retirement plan to up to 80,000 workers.

"What we need are bold reforms. The company must make i clear what needs to be focused on and what should be scrapped," said Yoshida at Tsubasa.

Matsushita, under a new leader, President Kunio Nakamura last year unveiled a three-year reform plan aimed at boostin efficiency and focusing on the potentially more profitable chi and components businesses.

Still, it remains highly dependent on mobile phone-makin unit Matsushita Communication Industrial Co Ltd, whic reported a first quarter group net loss of 4.5 billion yen.

"We have been overly dependent on mobile phones. When sale fall, we not only lose on sales of the phone but the parts w supply," Kawakami said.