Panasonic Posts Losses But Boosts Sales Overseas

Demand for consumer electronics remains weak, but the expansion of Panasonic's appliance business abroad is a definite bright spot

By Kenji Hall

Like many of Japan's tech giants, Panasonic (PC) is taking its lumps. The latest evidence came on Aug. 3, when the electronics company reported it had posted back-to-back quarterly losses. Panasonic blamed the usual suspects for its April-June performance: the strong yen, anemic global demand for consumer electronics, and the falling prices of TVs, digital cameras, and other gadgets.

But the news wasn't all grim. One bright spot: household appliances. Panasonic, based in the western Japanese city of Osaka, is best known for its Viera brand of flat-screen TVs and Lumix line of digital cameras. But along with TVs, cameras, chips, and factory equipment, the sprawling tech conglomerate is also a major manufacturer of air conditioners and washing machines.

The appliance business accounted for just over 18% of Panasonic's sales in the quarter, but it was the only sector where the company made money. That suggests a strategy of expansion abroad is working despite the downturn. With Japan's graying population weighing on the country's growth prospects, Panasonic has been looking to boost overseas sales. The company began selling its refrigerators and washing machines in Europe in March, and officials say early results have surpassed expectations.

The sales growth overseas and drastic cutbacks were enough to help Panasonic post better-than-expected quarterly results. For the April-June period, the company reported an operating loss of $213 million, vs. a $1.16 billion profit in the same quarter a year ago. Sales fell 26%, to $16.8 billion, for the April-June quarter. The loss was smaller than analysts' projections. Perhaps more important: Panasonic raised its first-half forecasts, saying it now expects to post an operating loss of $210 million, instead of the $1.11 billion loss it had expected. It predicted April-September sales would be $34.7 billion, up from the earlier forecast of $34.3 billion.

Targeting Emerging Markets

An improving global economy will be key to hitting those new targets. Panasonic President Fumio Ohtsubo told shareholders in June that he's gunning for double-digit growth overseas this fiscal year. His plan: marketing products to the growing middle class in Brazil, India, China, Russia, and Vietnam. Last fiscal year the company's sales to those emerging markets grew despite an overall drop in sales. Panasonic is also looking to launch more products in what its executives are calling the MINTs—Mexico, Indonesia, Nigeria, and Turkey—as well as the Balkan countries. "We won't make money by sticking to Japanese standards for high quality and high costs," Panasonic Chief Financial Officer Makoto Uenoyama told reporters today. "Basically we are attempting to do everything locally—product planning, design, development, production, and parts procurement—in those markets."

Business Exchange

Track and share business topics across the Web.