Japan's Panasonic Corp reaped a near sevenfold gain in quarterly profit after slashing costs, and its new boss looks set to use that extra cash for a new round of layoffs and business restructuring to revive the electronics giant.
Founded in 1918, the struggling maker of Viera TVs posted a record net loss in the last fiscal year, knocked down by fierce competition from overseas rivals such as Samsung Electronics.
After taking over Panasonic in June, Kazuhiro Tsuga vowed to turn the company's focus to white goods such as fridges and washing machines from television sets, and move production to overseas factories.
"It is easier for them to obtain profits than before (after a round of restructuring), but it is too soon to say from one quarter that Panasonic now has a structure to generate profits," said Takashi Oba, senior strategist at Okasan Securities.
Panasonic on Tuesday posted a first-quarter operating profit of 38.6 billion yen ($493.67 million), in line with estimates by analysts.
The company kept its forecast for full-year operating profit to rise to 260 billion yen from 43.7 billion yen, in part because it has stopped selling TV sets at a loss.
The company also eked out 12.81 billion yen in first-quarter net income, following a 772 billion-yen loss in the 12 months to March 31.
The first-quarter results are ahead of the company's expectations, but weak markets such as Europe and the United States as well of a slowdown in emerging economies remain a concern, CFO Hideaki Kawai told reporters after the earnings announcement.
Panasonic expects to sell 15.5 million TV sets this business year, 2 million fewer than a year earlier.
MORE TO DO
The sprawling electronics giant, which cut its workforce by 36,000 people last year, or about 10 percent of its staff, is not out of peril, say investors. Amid a weak global economy and the ongoing sunset of a TV business squeezed by intense competition, Panasonic has to do more to revive its fortunes.
"Their outlook doesn't suggest a solid turnaround is under way. It continues to be tough for them," said Makoto Kikuchi, CEO of Myojo Asset Management in Tokyo, speaking ahead of the earnings release.
Tsuga agrees that action is needed for Panasonic to make it to its centenary. In the past four years, the company's combined losses have mounted to more than $15 billion while its market value has slumped more than 80 percent to less than $16 billion.
At the start of the business year on April 1, Panasonic earmarked 41 billion yen for fresh restructuring this term. Tsuga, in his first sit-down with the foreign press as the company's president on July 12, said that bill may rise, which in turn would erode profits.
Even after last year's job losses, Tsuga inherited a company that remains Japan's largest corporate employer with 330,000 workers.
TURNAROUND PLAN
The former head of Panasonic's audio visual unit has vowed to shutter or sell the parts of Panasonic that are not contributing to the bottom line. Tsuga has said he would deliver the framework of that revival plan to investors at the end of the current quarter.
Panasonic, for a short time at least, may have to accept diminished revenue, Tsuga warned then, as it retools to fill in the earnings gap left by TVs with sales from household appliances, batteries, solar panels and other gadgets.
Tsuga, who burnished his cost-cutting reputation during a three-year stint in charge of automotive components, said earlier this month he would complete his roadmap by February.
He plans to fire the first salvo in his restructuring campaign, however, in October by reducing workers at Panasonic's headquarters to several hundred from 7,000, although many of those people will be dispersed to other business units rather than laid off.
Panasonic's shares, which have fallen nearly 30 percent since the start of the business year compared with a 15 percent decline in the benchmark Topix index, finished the day 4.6 percent higher at 546 yen.
($1 = 78.1900 Japanese yen)
