Panasonic Corp, Japan’s second-largest TV maker, had its credit rating downgraded two levels by Standard & Poor’s (S&P) after forecasting a loss 30 times bigger than analyst forecasts because of restructuring costs and falling demand.
The firm’s long-term debt was rated “BBB,” down from “A-,” S&P said in a statement yesterday, citing “huge” losses and the outlook for a slow recovery at the Osaka-based maker of consumer electronics, solar panels and home appliances. It’s the second-lowest investment grade. The rating was assigned with a stable outlook.
Panasonic’s net loss may be ￥765 billion (US$9.5 billion) in the year ending March 31, the Osaka-based company said in a statement on Wednesday, scrapping its May projection of ￥50 billion in net income. The forecast for the second-highest loss in its history prompted Panasonic to say it won’t pay a dividend for the first time since 1950 because of an “urgent need” to improve its financial position.
“Such huge losses for the second year in a row weaken the company’s financial profile and could further slow its recovery,” S&P said in yesterday’s statement. “The company’s profitability and cash flows should be stable, benefiting in the next one to two years from the company’s recent restructuring efforts and its diverse business portfolio.”
The bulk of Panasonic’s projected loss will come from ￥440 billion of restructuring expenses, which includes write-downs of goodwill on solar cells, lithium-ion batteries and at its mobile phone operations, the company said in its earnings statement.
Panasonic is also taking ￥412.5 billion in charges to write down deferred tax assets, it said.
Panasonic has “a severe outlook for the second half,” chief financial officer Hideaki Kawai said on Wednesday, citing worse-than-expected demand for TVs, cameras, Blu-ray disc players and PCs.
Panasonic shares fell 2.2 percent to ￥405 at 2:45pm yesterday in Tokyo trading.
The stock declined by the daily limit on Thursday, plunging 19 percent to its lowest level since February 1975, following the previous day’s earnings announcement.
In related news, Fitch Ratings dealt another blow to Japan’s Sharp Corp yesterday, saying it had cut the embattled electronics giant’s credit rating to junk, several months after a similar move by rival S&P.
Fitch said it had slashed its view on Osaka-based Sharp by six notches to a “B-” rating from an investment grade “BBB-” rating, after Sharp said it would post a US$5.6 billion annual loss and warned it had doubts about its ability to carry on as a viable company.