Matsushita Electric Industrial Co., Ltd. today reported its consolidated financial results for the second quarter and first half, ended September 30, 2001, and non-consolidated (parent company alone) results for the first fiscal half.
Consolidated Second-quarter Results
Consolidated group sales for the second quarter were down 13% to 1,710.8 billion yen (U.S.$14.38 billion), from 1,964.7 billion yen in the same three-month period a year ago. Of the total, domestic sales decreased 19% to 823.9 billion yen ($6.92 billion), while overseas sales decreased 6% to 886.9 billion yen ($7.45 billion). Excluding the effects of currency translation, overseas sales decreased 14% from a year ago on a local currency basis.
Matsushita attributes these declines primarily to worsening U.S. and worldwide economic conditions and further depressed demand from the global IT industry. In explaining external conditions, the Company said that the Japanese economy experienced continued setbacks due mainly to decreased exports and depressed capital investments, while outside of Japan, the U.S. economy slowed further, with countries in Europe and Asia also showing signs of deepening economic slowdowns.
Matsushita's earnings were severely impacted by sales declines, especially in mobile communications equipment, including cellular phones, and components and devices for the IT industry, as well as intensified price competition. The negative effects caused by these factors could not be offset by companywide efforts to reduce fixed costs and streamline parts and materials costs. As a result, second quarter operating profit declined to a loss of 37.0 billion yen ($311 million), as compared with an operating profit of 78.4 billion yen recorded a year ago. Income before income taxes in the second quarter also sharply decreased to a loss of 66.1 billion yen ($555 million), from a pre-tax profit of 76.5 billion for the same period last year. Accordingly, the Company registered a quarterly net loss of 50.1 billion yen ($421 million), compared with a net income of 42.0 billion in the previous year's second quarter.
This resulted in a net loss per common share of 24.10 yen ($0.20) on a diluted basis in the second quarter, versus a net income per common share of 19.25 yen on the same basis a year ago.
Consolidated First-half Results
Combining the second quarter results with those of the first quarter, consolidated group sales for the first fiscal half decreased 9% to 3,385.6 billion yen ($28.45 billion), compared with 3,737.0 billion yen in the same six-month period a year ago. Domestic sales decreased 12% to 1,648.5 billion yen ($13.85 billion), while overseas sales decreased 6% to 1,737.1 billion yen ($14.60 billion). On a local currency basis, overseas sales were down 13%.
For reasons similar to those given for second quarter results, the Company's operating profit for the first fiscal half declined to a loss of 75.7 billion yen ($636 million), compared with an operating profit of 99.6 billion yen a year ago.
Accordingly, the Company recorded a loss before income taxes of 87.3 billion yen ($733 million) in the first six months, compared with the previous first half's income before income taxes of 105.1 billion yen, and a net loss of 69.5 billion yen ($584 million), compared with a net income of 51.4 billion yen in the first half of the previous year. This resulted in a net loss per common share of 33.41 yen ($0.28) on a diluted basis, versus net income per common share of 23.70 yen in the first half of the previous year.
Consolidated First-half Sales Breakdown by Product Category
The Company's first-half consolidated sales by major product category are summarized as follows:
AVC Networks sales declined 6% to 1,937.2 billion yen ($16.28 billion), compared with 2,060.5 billion yen in the same six-month period a year ago. Within this segment, sales of video and audio equipment edged up 1% due to continued growth in such areas as TVs and DVD players and discs, despite a sales decline in VCR's.
In information and communications equipment, sales grew steadily in such lines as car audiovisual (AV) equipment, CD-R/RW drives, and broadcast- and business-use AV equipment. However, setbacks recorded in mobile communications equipment, including cellular phones, and hard disk drives, resulted in an 11% overall sales decrease within this category.
Sales of Home Appliances fell 5% to 604.2 billion yen ($5.08 billion), compared with 639.2 billion yen in the previous year's first half. Although air conditioners, washing machines and cooking equipment recorded modest sales gains, they were offset by sales declines in refrigerators.
Sales of Industrial Equipment were 146.1 billion yen ($1.23 billion), down 36% from 228.9 billion yen in the same six-month period last year. Sales of factory automation (FA) equipment in both domestic and overseas markets were down sharply compared with a year ago, due to continuing decreases in demand from the IT-related equipment industry.
Components and Devices
Sales of Components and Devices decreased 14% to 698.1 billion yen ($5.87 billion), compared with 808.4 billion yen in the first half of last year. While compressors for air conditioners and other uses showed steady sales increases, the fall-off in demand from the mobile communications and other IT-related equipment industries resulted in significant sales declines for semiconductors, general components and electric motors.
Non-Consolidated (Parent Company Alone) First Half Results
First-half parent-alone sales decreased 17% to 1,962.6 billion yen, from 2,373.5 billion yen in the same six-month period a year ago. This decrease is mainly attributable to lower domestic sales and reduced exports, especially in mobile communications equipment, components and devices for information and communications equipment, and FA equipment.
Regarding parent-alone earnings, the favorable effects of a weaker yen and companywide cost reduction efforts were not sufficient to offset lower sales and fierce competition in domestic and overseas markets, resulting in a parent-alone operating loss of 29.9 billion yen, compared with an operating profit of 31.0 billion yen a year ago. Recurring profit decreased 95% to 2.5 billion yen, from 51.5 billion yen in the previous first half. Parent-alone net income also decreased 93% to 2.9 billion yen, compared with 39.8 billion yen in the first half of last year.
The Matsushita Board of Directors voted today to distribute an interim cash dividend of 6.25 yen per common share, payable December 10, 2001, to parent-company shareholders of record on September 30, 2001. This dividend rate is unchanged from last year.
Outlook for the Full Fiscal Year 2002, ending March 31, 2002
Matsushita announced today a revision of its forecast made on April 27, 2001 for consolidated and non-consolidated sales and earnings for the current fiscal year, ending March 31, 2002 (fiscal 2002). Taking into account slowdowns in the U.S. and worldwide economies, combined with the negative economic effects caused by the terrorist attacks of September 11, the Company foresees a worsening overall business environment, and the possibility of a global simultaneous recession. The Company currently expects this severe environment, affecting the AVC Networks and Components and Devices segments in particular, to continue through the current fiscal year. To counter this severe environment, and increase profitability, efficiency and corporate value, Matsushita intends to accelerate the implementation of its mid-term Value Creation 21 plan, which started at the beginning of this fiscal year. In addition to its ongoing business restructuring programs, the Company plans to enhance employment restructuring initiatives, including the introduction of a Special Life Plan Assistance Program (effective only for the current fiscal year) to provide an additional retirement allowance and other support to employees opting for early retirement with new careers outside of Matsushita.
On a consolidated group basis, the Company now expects annual sales for the current fiscal year to decrease 11% from the previous fiscal year, to approximately 6,800 billion yen, compared with the original forecast of 7,550 billion yen. Consolidated income before income taxes is anticipated to decrease to a pre-tax loss of approximately 370 billion yen, compared to the previous forecast for pre-tax income of 133 billion yen. The pre-tax loss forecast includes one-time non-operating expenses of an estimated 200 billion yen related to the above-mentioned Special Life Assistance Program, the closure or integration of several manufacturing locations and other restructuring programs. Net income for the fiscal year is also forecasted to decrease sharply, resulting in an estimated net loss of approximately 265 billion yen, as compared with the original forecast for net income of 57 billion yen.
On a non-consolidated, parent company-alone basis, the Company now expects sales for the full fiscal year to decrease 17% from the previous fiscal year, to about 4,030 billion yen, instead of the earlier forecast of 4,680 billion yen. Parent-alone recurring profit is projected to decline, resulting in a recurring loss of 20 billion yen, replacing the earlier forecast of a recurring profit of 81 billion yen. A non-recurring loss of approximately 124 billion yen related to implementation of the Special Life Assistance Program and other restructuring programs will also be incurred. Accordingly, parent-alone annual net income is now seen to fall to a net loss of 68 billion yen, replacing the previous forecast of a net income of 38 billion yen.
Matsushita expects the above-mentioned restructuring programs, taking place in the current fiscal year, to accelerate its Value Creation 21 plan, resulting in sizeable reductions of fixed costs in subsequent years. Based on such positive effects from the restructuring programs and the anticipated recovery in sales, management today indicated its confidence in a turnaround in earnings beginning in the next fiscal year, ending March 31, 2003.
Disclaimer Regarding Forward-Looking Statements
This release contains forward-looking statements in the context 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, upon which assumptions of any business restructuring are based; 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)