Matsushita Electric Industrial Co., Ltd. today reported its consolidated financial results for the first quarter, ended June 30, 2001, of the current fiscal year ending March 31, 2002 (fiscal 2002).
First-quarter Sales Results
Consolidated group sales for the first quarter were down 6% to 1,674.8 billion yen (U.S.$13.51 billion), from 1,772.4 billion yen in the same three-month period a year ago. The Company views sharply aggravated global market conditions for IT-related products, especially cellular phones and related equipment and components, and economic slowdowns in Japan and overseas, as the main causes for the sluggish results.
Domestic sales decreased 5% to 824.6 billion yen ($6.65 billion), from 865.3 billion yen in the first quarter of the previous year. Of overall domestic sales, sales in the AVC Networks segment remained above the level of the same quarter of the previous year, while other segments, such as Components and Devices, and Industrial Equipment showed setbacks.
Overseas sales were also slow, decreasing 6% to 850.2 billion yen ($6.86 billion), compared with 907.1 billion yen in the first quarter of the previous year. Overseas, sales of video and audio equipment within the AVC Networks segment and the Home Appliances segment marked increases, while other categories showed sales declines.
Explaining global economic conditions during the first quarter, Matsushita says that Japan appears to have entered a setback phase, as exports slowed and capital investment began to decrease, while overseas, the United States economic slowdown has had an adverse impact on Asian and European economies.
First-quarter Profit and Loss
The Company's profits were severely impacted by setbacks in sales of mobile communications equipment, such as cellular phones, and IT-related components and devices, as well as intensified global price competition. The adverse effects of these factors were not fully offset by the Company's manufacturing cost reductions, and resulted in an operating loss of 38.7 billion yen ($312 million), compared with an operating profit of 21.2 billion yen in the same quarter a year ago.
Accordingly, the Company registered a loss before income taxes of 21.2 billion yen ($171 million) for the first quarter, compared with income before income taxes of 28.6 billion yen in the year-earlier quarterly period, and a net loss of 19.4 billion yen ($156 million), compared with a net income of 9.4 billion yen a year ago. This led to a first-quarter net loss per common share of 9.32 yen ($0.08) on a diluted basis, versus net income per common share of 4.45 yen on the same basis in the first quarter a year ago.
First-quarter Sales Breakdown by Product Category
In response to new business environments and other recent technological developments, Matsushita has reclassified its former Consumer, Industrial and Components segments into four new segments: AVC Networks, Home Appliances, Industrial Equipment, and Components and Devices. The Company's first-quarter consolidated sales by major product categories on a reclassified basis are summarized as follows:
AVC Networks sales declined 2% to 950.0 billion yen ($7.66 billion), compared with 967.3 billion yen in the same three-month period a year ago. Within this category, sales of video and audio equipment increased 3% due to steady sales growth in such product lines as TVs, DVD-related equipment and CD music albums.
In information and communications equipment, CD-R/RW drives, car AV equipment and broadcast- and business-use AV equipment and systems all recorded sales increases over the same period of the previous year. However, setbacks in sales of mobile communications equipment, including cellular phones, as well as facsimile machines and hard disk drives, led to a 5% sales decrease in this category, compared with the first quarter of the previous year.
Sales of Home Appliances slipped 3% to 297.9 billion yen ($2.40 billion), compared with 305.8 billion yen in the previous year's first quarter. Sales of industry-leading products such as the centrifugal force washer/dryer and induction-heating (IH) cooking equipment achieved growth, but refrigerator and vacuum cleaner sales declined.
Sales of Industrial Equipment were 72.0 billion yen ($581 million), down 28% from 99.5 billion yen in the same period last year. In particular, both domestic and overseas sales of factory automation (FA) equipment were negatively affected by drastically reduced demand from the IT-related equipment industry.
Components and Devices
Sales of Components and Devices decreased 11% to 354.9 billion yen ($2.86 billion), compared with 399.8 billion yen in the same quarter a year ago. Although compressors for both air conditioners and refrigerators recorded steady sales increases, reduced sales of semiconductors, general components and motors for the mobile communications industry resulted in largely reduced overall sales in this segment.
Outlook for the Fiscal First Half
In the face of growing uncertainty about the global economic outlook, Matsushita assumes that current severe business conditions will continue through the second quarter of fiscal 2002. Specifically, a trend of decreased demand in the IT sector and reduced capital investment by corporations is expected to persist. Within this severe environment, communications and FA equipment, and components and devices businesses are most likely to be negatively affected. Accordingly, Matsushita revised its earlier sales and earnings forecasts for the fiscal first half ending September 30, 2001.
On a consolidated group basis, the Company now expects six-month sales to decrease 10% from the same period last year, to approximately 3,380 billion yen, replacing its earlier forecast on April 27, 2001 of 3,540 billion yen. Consolidated income before income taxes is anticipated to decrease sharply to a pretax loss of approximately 65 billion yen, compared to the previous forecast for pre-tax income of 18 billion yen. Net income for the six-month period is also expected to show a large decrease, resulting in an estimated net loss of approximately 45 billion yen. The previous forecast for net income was 9 billion yen.
On a non-consolidated, parent company-alone basis, the Company now expects first-half sales to decrease 16% from the same period last year, to about 1,990 billion yen, instead of the earlier forecast of 2,150 billion yen. Parent-alone recurring profit for the first half is projected to decline 96% to approximately 2 billion yen, replacing the earlier forecast of 10 billion yen, with no change in the forecast of net income, which will be about 9 billion yen for the first six months.
Matsushita has indicated that it may revise its previously-announced annual sales and earnings forecasts for fiscal 2002 at a later date, pending further review and monitoring of developments in external and business conditions.
New Initiatives for Fiscal 2002 to Counter Adverse Environment
Acting on this severe outlook for the current fiscal year, and to accelerate its mid-term "Value Creation 21" plan, Matsushita will implement several new initiatives in addition to its current-year business plans. Through these initiatives, the Company will further promote restructuring of its current cost structure, along with enhancement of product competitiveness and growth potential. Such initiatives include an acceleration of the restructuring of the current employment system, cost reduction of parts and materials for production, and acceleration of new product introductions and corporate-wide campaigns for substantial sales increases.
Regarding employment restructuring, the Company encourages employees to diversify their job skills, in order to match the requirements of the new era. Within this fiscal year, employees choosing early retirement will be provided with a special retirement allowance, in addition to normal retirement benefits, together with necessary supports related to their career development. The Company also aims to achieve a parts and materials cost reduction target of 300 billion yen for this fiscal year, through various efforts including implementation of a centralized purchasing policy, as well as measures such as standardization and common use of parts and materials throughout the Company.
With regard to new product introductions and sales increases, this summer the Company is launching new strategic products including DVD video recorders and 42-inch BS-Digital TVs with plasma displays (PDP TVs) at competitive prices. Furthermore, in the latter half of this fiscal year, the Company intends to expand sales by launching products such as digital still cameras in cooperation with Leica Camera AG, and a combination DVD player/game console developed through an alliance with Nintendo Company, Ltd.
Disclaimer Regarding Forward-Looking Statements
This release contains forward-looking statements in the meaning of the U.S. Private Securities Litigation Reform Act of 1995 about the future performance of Matsushita and its group companies (the Matsushita Group). To the extent that statements in this release do not relate strictly to historical or current facts, they may constitute forward-looking statements. These forward-looking statements are based upon the Company's current assumptions and beliefs in light of the information currently available to it, and involve known and unknown risks and uncertainties. The Company's actual actions or results may differ materially from those discussed in the forward-looking statements. The Company undertakes no obligation to publicly update any forward-looking statements after the date of this release, but investors are advised to consult any further disclosures by the Company in its subsequent filings pursuant to the Securities Exchange Act of 1934.
Specific risks and uncertainties include, but are not limited to, economic conditions, particularly consumer spending and corporate capital expenditures in the United States, Europe, Japan 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; currency rate fluctuations, notably between the yen, the U.S. dollar, the euro, Asian currencies and other currencies in which the Matsushita Group operates businesses, or in which assets and liabilities of the Matsushita Group are denominated; the ability of the Matsushita Group 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 ability of the Matsushita Group to maintain competitive strength in many product and geographical areas; expenses incurred in relation to its business restructuring; any changes in the Matsushita Group's financial and operational positions or business environment due to its business restructuring; current and potential, direct and indirect trade restrictions imposed by other countries; and fluctuations in market prices of securities and other assets in which the Company has holdings.
Matsushita Electric Industrial Co., Ltd. is one of the world's leading producers of electronic and electric products for consumer, business and industrial use, which it markets around the world under the "Panasonic," "National," "Technics" and "Quasar" brand names. Matsushita's shares are listed on the Tokyo, Osaka, Nagoya, Fukuoka, Sapporo, Amsterdam, Dusseldorf, Frankfurt, New York, Pacific and Paris stock exchanges. For more information, visit the Matsushita web site at the following URL: http://panasonic.co.jp/global/
(Financial Tables Attached)