Haier

Panasonic consolidated financial results for the three-month ended June 30, 2020

Panasonic Corporation reported its consolidated financial results for the three months ended June 30, 2020, of the current fiscal year ending March 31, 2021 (fiscal 2021). Panasonic also announced its annual forecasts for fiscal 2021.

During the three months ended June 30, 2020, the global economy saw a significant slowdown on the back of the worldwide downturn in consumption and investment, caused by the impact of the novel coronavirus disease (COVID-19). There were also great uncertainties over the politics and financial circumstances in each country, as well as widespread protectionism. Japan appears to be affected to no small extent, by these impacts. Furthermore, the possibility of another spread of COVID-19 infections cannot be denied. Therefore, it is difficult to forecast the economic outlook surrounding the management environment in fiscal 2021.

Under such a condition, the Company continues to execute portfolio management and enhance its management structure, based on the Mid-term strategy started from the fiscal 2020, while monitoring the risks and impact on its businesses, as well as deliberating the necessary countermeasures.

For the three months ended June 30, 2020, in the automotive prismatic battery business, Prime Planet Energy & Solutions, Inc. which is a joint venture with Toyota Motor Corporation, has started its operation since April 1, 2020. The joint venture is working to develop highly competitive batteries that have excellent quality, performance and cost- effectiveness, and to provide a stable supply of batteries. The Company resolved to make a strategic equity investment obtaining 20% of the voting rights in Blue Yonder, specialized in supply chain software. The investment was concluded in July, 2020. The aim of investment is to enhance the Company’s solution capability and to accelerate its business model transformation through acquiring innovative solution and business model that Blue Yonder provides globally.

For the three months ended June 30, 2020, the Company’s consolidated group sales decreased by 26% to 1,391.9 billion yen from a year ago. Domestic sales decreased due

mainly to the impact of the spread of COVID- 19 as well as the impact of the deconsolidation of housing related businesses, despite increased sales in products such as air purifiers. Overseas sales decreased due largely to the impact of the spread of COVID- 19, despite increased sales including mounting machines at Process Automation and electrical materials.

Operating profit decreased by 93% to 3.8 billion yen from a year ago. This is due largely to the impact of decreased sales, despite reductions in fixed costs in line with the enhancement of management structure as well as the effect from profitability improvement efforts in automotive business. Profit before income taxes decreased by 95% to 3.1 billion yen from a year ago and net profit attributable to Panasonic Corporation stockholders decreased to a loss of 9.8 billion yen, compared with a profit of 49.8 billion yen a year ago.

B. Breakdown by Reportable Segment
Appliances                                                                                                                                                               Yen (billions)

 

Sales

Operating profit

Fiscal 2021 First quarter Fiscal 2020 First quarter Percentage 2021/2020
554.7 688.4 81%
15.2 30.0 51%

Sales decreased by 19% to 554.7 billion yen from a year ago due largely to the impact of deteriorating market conditions, while some regions such as China and Japan as well as certain products have shown signs of recovery in their business trends. Operating profit decreased to 15.2 billion yen from a year ago. This is due largely to the impact of decreased sales, despite the effect of reducing fixed cost and sales promotion expenses.

Life Solutions
                                                                                                                                                                                    Yen (billions)

 

Sales

Operating profit

Fiscal 2021 First quarter Fiscal 2020 First quarter Percentage 2021/2020
325.1 462.7 70%
5.6 12.7 44%

Sales decreased by 30% to 325.1 billion yen from a year ago. This is due mainly to the impact of the deconsolidation of housing related businesses in addition to the impact of deteriorating market conditions. Operating profit decreased to 5.6 billion yen from a year ago due largely to decreased sales despite the effect of fixed cost reduction efforts.

Connected Solutions
                                                                                                                                                                                     Yen (billions)

 

Sales

Operating profit (loss)

Fiscal 2021 First quarter Fiscal 2020 First quarter Percentage 2021/2020
185.3 255.2 73%
(16.0) 13.7

Sales decreased by 27% to 185.3 billion yen from a year ago. This is due largely to decreased sales at Avionics, which was impacted by held back investments of airline companies, despite favorable sales in mounting machines for servers and base stations in China. Operating profit decreased to a loss of 16.0 billion yen from a year ago, due largely to decreased sales.

Automotive
                                                                                                                                                                                         Yen (billions)

 

Sales

Operating profit (loss)

Fiscal 2021 First quarter Fiscal 2020 First quarter Percentage 2021/2020
210.8 377.4 56%
(9.5) (10.0)

Sales decreased by 44% to 210.8 billion yen from a year ago. This is due to a sharp drop in demand following the temporary closure of customers’ factories. Operating profit was a loss of 9.5 billion yen, which is the same level as the same period of the previous year. This is due largely to the impact of decreased sales, despite fixed cost reductions and gains from the establishment of a joint venture in the automotive prismatic battery business.

Industrial Solutions
Sales decreased by 12% to 288.6 billion yen from a year ago. This is due largely to deteriorating market conditions for products such as automotive relays, despite sales growth in information- and communication-infrastructure related products such as power storage systems, capacitors and circuit board materials. Operating profit increased to 9.2 billion yen from a year ago. This is due mainly to increased sales in products such as power storage systems, in addition to fixed cost reduction efforts, despite the impact of decreased sales.

C. Consolidated Financial Condition
Net cash used in operating activities for the first quarter ended June 30, 2020, amounted to 98.3 billion yen, compared with an inflow of 104.9 billion yen a year ago. This is due mainly to a decrease in quarterly net profit and deterioration of working capital. Net cash provided by investing activities amounted to 44.1 billion yen, compared with an outflow of 63.7 billion yen from a year ago. This is due mainly to capital investment controls and proceeds from the establishment of a joint venture in the automotive prismatic battery business. Accordingly, free cash flow (net cash provided by operating activities and investment activities) decreased by 95.4 billion yen from a year ago to an outflow of 54.2 billion yen. Net cash provided by financial activities amounted to 104.5 billion yen, compared with an outflow of 99.3 billion yen a year ago. This is due mainly to an increased balance in short-term bonds. Taking factors such as exchange fluctuations into consideration, cash and cash equivalents totaled 1,060.8 billion yen as of June 30, 2020, increased by 44.3 billion yen, compared with March 31, 2020.

The Company’s consolidated total assets as of June 30, 2020 were 6,209.2 billion yen, decreased by 9.3 billion yen from March 31, 2020. This is due mainly to decreased assets, resulting from the establishment of a joint venture in the automotive prismatic battery business, despite increases in inventories and financial assets.

The Company’s consolidated total liabilities were 4,041.4 billion yen, a decrease of

21.3 billion yen from March 31, 2020. This is due mainly to a decrease in trade payables and decreased liabilities resulting from the establishment of a joint venture in the automotive prismatic battery business, despite an increased balance in short-term bonds.

Panasonic Corporation stockholders’ equity increased by 21.3 billion yen to 2,019.6 billion yen, compared to March 31, 2020. This is due mainly to an increase in financial assets measured at fair value through other comprehensive income, as a result of rise on share price. With non-controlling interests added to Panasonic Corporation stockholders’ equity, total equity was 2,167.8 billion yen.

2. Forecasts for fiscal 2021
In the announcement of consolidated financial results for fiscal 2020 released on May 18, 2020, the Company did not disclose the consolidated financial forecast for fiscal year ending March 31, 2021, due to the great uncertainty caused by the impact of the spread of COVID-19 to Panasonic Group. At this time, the Company announced the consolidated financial forecast for fiscal 2021, reflecting recent conditions as well as business trends.

As for the outlook of the impact of COVID-19, it is expected to improve gradually from the second quarter of fiscal 2021 onward. However, the Company assumes, in particular, the impacts to aviation, housing-related and automobile industries are expected to remain in the second half of fiscal 2021. In terms of profit, the Company assumes the negative impact will start to decrease from the second quarter and the second half of fiscal 2021.

Disclaimer Regarding Forward-Looking Statements
This press release includes forward-looking statements about Panasonic and its Group companies (the Panasonic Group). To the extent that statements in this press release do not relate to historical or current facts, they constitute forward-looking statements. These forward-looking statements are based on the current assumptions and beliefs of the Panasonic Group in light of the information currently available to it, and involve known and unknown risks, uncertainties and other factors. Such risks, uncertainties and other factors may cause the Panasonic Group’s actual results, performance, achievements or financial position to be materially different from any future results, performance, achievements or financial position expressed or implied by these forward-looking statements. Panasonic undertakes no obligation to publicly update any forward-looking statements after the date of this press release. Investors are advised to consult any further disclosures by Panasonic in its subsequent filings under the Financial Instrument and Exchange Act of Japan (the FIEA) and other publicly disclosed documents.

The risks, uncertainties and other factors referred to above include, but are not limited to, economic conditions, particularly consumer spending and corporate capital expenditures in the Americas, Europe, Japan, China and other Asian countries; volatility in demand for electronic equipment and components from business and industrial customers, as well as consumers in many product and geographical markets; the possibility that the spread of the novel coronavirus infections may adversely affect business activities of the Panasonic Group; the possibility that excessive currency rate fluctuations of the U.S. dollar, the euro, the Chinese yuan and other currencies against the yen may adversely affect costs and prices of Panasonic’s products and services and certain other transactions that are denominated in these foreign currencies; the possibility of the Panasonic Group incurring additional costs of raising funds, because of changes in the fund raising environment; the possibility of the Panasonic Group not being able to respond to rapid technological changes and changing consumer preferences with timely and cost-effective introductions of new products in markets that are highly competitive in terms of both price and technology; the possibility of not achieving expected results or incurring unexpected losses in connection with the alliances or mergers and acquisitions; the possibility of not being able to achieve its business objectives through joint ventures and other collaborative agreements with other companies, including due to the pressure of price reduction exceeding that which can be achieved by its effort and decrease in demand for products from business partners which Panasonic highly depends on in BtoB business areas; the possibility of the Panasonic Group not being able to maintain competitive strength in many product and geographical areas; the possibility of incurring expenses resulting from any defects in products or services of the Panasonic Group; the possibility that the Panasonic Group may face intellectual property infringement claims by third parties; current and potential, direct and indirect restrictions imposed by other countries over trade, manufacturing, labor and operations; restrictions, costs or legal liability relating to laws and regulations or failures in internal controls; fluctuations in market prices of securities and other financial assets in which the Panasonic Group has holdings or changes in valuation of non-financial assets, including property, plant and equipment, goodwill and deferred tax assets; future changes or revisions to accounting policies or accounting rules; the possibility of incurring expenses resulting from a leakage of customers’ or confidential information from Panasonic Group systems due to unauthorized access or a detection of vulnerability of network-connected products of the Panasonic Group; as well as natural disasters including earthquakes, prevalence of infectious diseases throughout the world, disruption of supply chain and other events that may negatively impact business activities of the Panasonic Group. The factors listed above are not all-inclusive and further information is contained in the most recent English translated version of Panasonic’s securities reports under the FIEA and any other documents which are disclosed on its website.

 

-TVJ Bureau

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