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Struggles to digest Sanyo, cope with rising yen

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Panasonic Corporation is now expecting to make a loss in its fiscal year 2012, after slurping Sanyo while dealing with falling consumer demand combined with a soaring yen to take its toll on the company.

The Japanese firm says it now thinks pre-tax loss will be 430 billion yen (£3.44bn) instead of a pre-tax profit of 100 billion yen (£799m) for its financial year, which ends on March 31, 2012, "due mainly to the sales decline".

"Regarding the annual forecast for fiscal 2012, the company revised its previous sales forecast of 8,700 billion yen downward to 8,300 billion yen due primarily to the sluggish overseas sales affected by ever-intensified price competition for digital products and the appreciation of the yen," the company's financial results said.

"In addition, there will be negative factors such as the appreciation of the yen and rising prices in raw materials, which will not be able to be offset by fixed cost reduction."

Panasonic's merger with Sanyo has been a lengthy affair that is pulling down the company's profits as Sanyo continues to make losses. In the three months to the end of September, Sanyo, which finally became a wholly-owned subsidiary in April this year, made a loss of 26.9 billion yen (£215m).

"Although sales of solar photovoltaic systems, cold-chain equipments and commercial air conditioners were stable, sales of electronic components, digital cameras, TVs and in-car-related equipments were sluggish," the Japanese company said of its unit.

The 'digital AVC networks' segment of its business, which includes flat-panel TVs and mobile phones, is also hurting the company's bottom line this quarter, with a loss of 18.1 billion yen (£145m).

"Despite favourable sales of Blu-ray Disc recorders, this result was due mainly to sales decline in flat-panel TVs and mobile phones," Panasonic said.

Electronics companies with a focus on big ticket items like tellies and white goods are finding the slowdown in the spending culture of the US and Europe tough to take. Japanese firms are in an even more difficult position as the yen strengthens, making it harder for them to compete with Chinese and Korean firms.

Panasonic's response to the global economic downturn has been to attempt a company-wide re-organisation aimed at spurring profits and turning it into the "No 1 green innovation company in the electronics industry" by 2018.

The company announced in April this year that it would be laying off 17,000 employees over two years as part of the restructuring. ®

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