Panasonic Corp. (PC) Q2 2012 Earnings Call November 2, 2011 10:00 AM ET
Makoto Uenoyama – Managing Director
This presentation contains consolidated financial results for the Second Quarter and the First Six Months ended September 30, 2011 for fiscal year 2012. This slide shows the three main points regarding the financial results for the first six months of fiscal 2012. Firstly, both sales and profit for the first six months decreased from the previous year, due to the sluggish economy in Europe and the U.S. as well as further appreciation of the yen. Secondly, as a result of implementing radical restructuring initiatives in unprofitable businesses such as flat-panel TVs, both pre-tax income and net income attributable to Panasonic Corporation recorded significant losses. Finally, the Company has revised its full-year forecasts downward for fiscal 2012 from its original forecasts due to an expected acceleration and increase of restructuring activities.
This section outlines the consolidated financial results for the second quarter and the first six months of fiscal 2012. Consolidated sales for the first six months totaled 4,005.2 billion yen, down by 8% year-on-year. In real terms excluding the effects of exchange rates consolidated group sales decreased by 6%.
OP totaled 47.6 billion yen. Pre-tax loss totaled 159.3 billion yen while net loss attributable to Panasonic Corporation amounted to 136.2 billion yen. Although OP exceeded the Company’s forecast, both pre-tax income and net income attributable to Panasonic Corporation were significantly lower than its forecast due to the impact of business restructuring.
Next, financial results for the second quarter July to September in fiscal 2012, both sales and profits showed almost the same trend as the six months results. This slide shows sales trend by major product category. Total sales decreased by 362.7 billion yen year-on-year. In real terms, sales decreased by 245 billion yen, excluding the ForEx effect of 117.7 billion yen.
Although sales in B to B such as the car electronics are recovering from the Great East Japan Earthquake, sales in B to C such as flat-panel TVs and mobile phones decreased significantly. SANYO sales also decreased by 133.6 billion yen year-on-year owing to some impacts, including the transfer of its semiconductor business.
By region, sales in white goods remained favorable. For example sales in air-conditioners in China were 1.4 times higher than the previous year. However, sluggish sales in digital AV products contributed to sales decline in all regions. With regard to sales proportion by region, total overseas sales decreased slightly from 50% to 49% as a result of weak sales in North America and Europe.
Sales results are shown here for the BRICs+V and MINTS+B, which are Mexico, Indonesia, Nigeria, Turkey, Saudi Arabia and the Balkans, which are strategic emerging countries in the midterm management plan GT12.
Total sales of consumer and system excluding SANYO in BRICs+V and MINTS+B in the first six months of fiscal 2012 were up by 12% year-on-year. Overall sales increased by 20% in the second quarter. Similar to developed countries, favorable sales in white goods led to the sales increase.
This chart shows the operating profit analysis compared to the previous year. The negative impact of price declines was offset by pursuing a thorough streamlining. However, OP decreased by 121.4 billion yen year-on-year due mainly to sales decrease and the appreciation of yen. In addition, price increase in materials such as non-ferrous and rare earth metals also contributed to the decline.
Next, pre-tax and net income analysis; despite the improving financial income/loss, the non-operating loss further deteriorated by 182.5 billion yen year-on-year. This was mainly due to a business restructuring expense of 184.1 billion yen which include early retirement charges.
Next to inventories; at the end of September 2011, total inventories were 916.1 billion yen, a decrease of 94.6 billion yen from September 2010. The Company also made a reduction in its turnover by 1 day to 41 days.
Owing to company-wide initiatives, even compared with the Company’s original forecast, its inventory level was successfully reduced by 89.6 billion yen and 2 turnover days.
CapEx totaled 131.4 billion yen, a decrease of 69.7 billion yen year-on-year. This was due mainly to decreases in investment in flat-panel TVs as well as energy-related products in SANYO. The Company also reduced its capital investment by 42.6 billion yen compared with the original forecast.
Next, segment analysis; first, Digital AVC Networks; all segment analyses shown in the chart on the left are based on the first six months results. Although sales in blue-ray disc recorders were favorable, overall sales decreased by 14%, affected by weak sales in flat-panel TVs and mobile phones.
Operating loss amounted to 18.1 billion yen, a significant deterioration from a year ago due mainly to sales decrease and price decline. Favorable sales in air conditioners as well as stable sales in washing machines and refrigerators contributed to an overall sales increase of 3% year-on-year. Operating profit increased due mainly to an increase in sales and streamlining efforts for raw materials. The operating profit to sales ratio steadily improved to 8.0%.
For PEW, overall sales increased due to sales growth in housing/building-related and home appliance businesses. However, operating profit declined due mainly to a weak result in devices. For PanaHome, favorable sales of housing construction, mainly for detached housing, led to an overall sales and operating profit increases compared with the previous year, thanks to stable Japanese housing market conditions.
This slide shows the breakdown of PEW’s results by segment, which PEW had announced as a listed company. Operating profit in automation controls in devices declined compared with the previous year, due mainly to weak sales in automobile-related products as well as an increase in material price such as silver. Overall sales increased while its OP decreased.
Due to weak sales in flat-panel TVs, digital cameras and in-car related equipment, sales in semiconductors, general components and batteries declined. As a result, overall sales in Components and Devices declined by 14% year-on-year. Operating loss amounted to 7.4 billion yen due mainly to significantly worsened profit in semiconductors.
In SANYO, although sales of solar PV systems and other products were stable, sales of electronic components and digital cameras were sluggish. The transfer of semiconductor business also contributed to a 19% decline in overall sales year-on-year. This sales decline resulted in operating loss of 26.9 billion yen after incurring expenses such as amortization of intangible assets recorded at the acquisition.
This slide shows the breakdown of SANYO’s results by segment, which SANYO had announced as a listed company. Sales in the major five segments were lower than the previous year due mainly to appreciation of the yen and price decline as a result of ever-intensifying competition. Operating profits in those segments except Commercials were down compared with the previous year.
In other segment, overall sales were slightly lower compared with the previous year as sales in components for group companies in Panasonic declined. However, OP increased due mainly to fixed cost reduction.
Next, the result of the primary domain companies and business. In AVC Networks Company, overall sales decreased by 15% year-on-year mainly to weak sales in digital AV products. Operating loss increased from a year ago, influenced by sales decrease and the appreciation of the yen.
PED sales were down by 14% year-on-year due mainly to weak sales in customized components on the back of the flagging markets in flat-panel TVs and PCs. Operating profit turned into loss, as a result of weak sales as well as a sharp increase in material price such as neodymium.
In the FA business, sales were up by 1% year-on-year, despite the rapid slowing down of the market, which led to delays or freezes in investment by major ODM manufacturers in Taiwan. The operating profit to sales ratio was 14.9%, maintaining high level of profitability.
Finally, revision of full year forecasts for fiscal 2012. The company expects consolidated group sales for fiscal 2012 to be 8,300 billion yen, a decrease of 400 billion yen from its original forecast. The company forecasts all profits to be significantly lower than its original forecasts as follows.
Operating profit, 130 billion yen, pre-tax income/loss minus 430 billion yen, net income loss attributable to Panasonic Corporation, minus 420 billion yen. The company forecasts the exchange rates for the second half to be 76 yen to the dollar and 105 yen to the euro, and for the full year 78 yen to the dollar and 110 yen to the Euro.
This slide shows the breakdown of changes in OP, which is expected to decrease from 270 billion yen to 130 billion yen. The company expects a 96.7 billion yen gain through fixed cost reduction and others. However, operating profit is expected to decrease by 140 billion yen, affected by some negative factors such as sales decrease and material price increase.
This slide shows the changes from the original forecast in pre-tax income for fiscal 2012. Although the business restructuring expenses were originally expected to be 110 billion yen, it is now expected to increase by approximately 400.0 billion yen to 514 billion yen in order to carry out radical reforms in unprofitable businesses such as flat-panel TVs and semiconductors. As a result, pre-tax loss is predicted to be 430 billion yen.
Finally, revised full year forecasts by segment are shown here. Forecast revisions for Digital AVC Networks, and Components and Devices are mainly affected by flat-panel TVs and semiconductors businesses, respectively. On the other hand, forecasts for Home Appliances, and PEW and PanaHome are unchanged as those segments are expected to remain stable.
The Company aims to complete the restructuring of its unprofitable businesses as soon as possible to achieve growth with profitability. Thank you very much for your continued support.
This presentation outlines Panasonic Groups new organization and growth strategy. First, I would like to mention our initiatives to improve profitability. We will radically reform flat-panel TV business currently under severe earnings situation. We will drastically reform our panel business to optimize its scale and consolidate the LCD and PDP panel factory, so that there is only one factory for each.
We will also utilize LCD panel factory mainly for non-TV products, with our IPS panel specifications. We will focus on high-end and large-size PDP line ups, while we offer full-sized LCD lineup including larger-size purchasing panels from overseas vendors.
This way, we will restructure business to improve profitability. This chart shows our restructuring efforts in the fiscal year. In PDP panel business, we will shutdown production in Amagasaki P5 factory and book its impairment loss. We will also cancel relocation plan for Amagasaki P3 factory to Shanghai and dispose its facility.
As a result, production capability will decrease from 13.8 million to 7.2 million units per year in 42-inch panels. In LCD panel business, we will also shut down production in mobile factory and book impairment loss for Himeji factory. In TV set business, we will consolidate all TV manufacturing sites in Japan into Utsunomiya factory and to transform it to “Innovative Production Center”.
We will downsize workforce fit for our new business scale. We expect restructuring cost of 265 billion yen in fiscal 2012, and restructuring benefit of 81 billion yen in fiscal 2013. We aim to improve profitability in TV business through business model reform and restructuring. In LCD business, we will expand LCD panel usage for non-TV products up to nearly half of total LCD sales at .
Our IPS Alpha LCD panels features in addition to high-quality motion pictures are, one, no color reversal by wide-viewing angle; two, high open aperture ratio contributing to energy saving; three, no ripple during touch-panel operation.
Taking advantage of them, we have been proposing our panels to customers. Meantime in addition to OEM and ODM panels, we will procure panels from overseas vendors. As a result, we will decrease in-house LCD panel usage, which is currently 70% of total procurement. Moreover, we will increase LCD panel production for 40-inch and over from around 10% to 30% or even more. In PDP business, we will develop B2B applications such as digital signage while we narrow down PDP production. We will increase 50-inch and over panel production from 40% to 60% of total production. Through such, we will improve TV business to be high value added with light asset for better profitability eliminating operating loss.
In semiconductor business, we will address reform of System LSI business; one, switch in-house production to outsource and fables; two, partly book impairment loss of certain sophisticated factory; three, integrate and downsize R&D. We will concentrate on growing business such as image censors and power semiconductors.
For example, regarding the gallium nitride for dramatic power saving, we will quadruple its R&D workforce and accelerate industrialization. We will also establish lean management structure by integrating manufacturing sites, focusing on special purposes and downsizing workforces. We expect restructuring cost of 59 billion yen and its benefit of 15 billion yen in fiscal 2013. We target this business turning into black in 2013.
Besides our TV and semiconductor businesses, we will restructure other business, especially business related to SANYO. In addition to semiconductor business of SANYO, we have been transferring motor and home appliance business of SANYO and will transfer more than 10,000 employees to other companies. In each department of SANYO, we will also downsize workforce in operating sites ahead of schedule to achieve optimal benefit.
In addition, we will downsize relevant departments in Panasonic, as well as for new Panasonic. Working on restructuring, we expect 514 billion yen of restructuring costs in fiscal year 2012 and a 146 billion yen of restructuring benefit in fiscal year 2013. We also expect the workforce to be 350,000 employees or less by end of fiscal year 2012, one year ahead of plan.
Second, I will talk about our new business organization. We have announced that we are restructuring Panasonic, PEW and SANYO to become one new business organization in customer’s prospectus starting as of January 2012. We aim to achieve more than 3 trillion yen in each field sales.
We have decided all the names of nine domain companies and one marketing sector in our new group organization. In this new organization, each domain company will have more responsibility for its management and we will strengthen comprehensive solution business across all domain companies.
Next, I would like to explain each business. You will find more details in our releases. In consumer business field, we will have AVC Networks Company, Appliance Company, and global consumer marketing sector. We will work together across those domain companies and sector and strengthen marketing to provide products meeting customer’s needs in each region in the world.
In components and device business field, we will have Automotive Systems Company, Industrial Devices Company, and Energy Company. We will work together both in R&D and marketing to provide products meeting customer needs.
In solution business field, we will have systems and communications company, eco-solutions company, healthcare company, manufacturing solutions company.
We will pursue new business models to meet our customer needs and improve profitability through a whole supply chain. We will restructure three head offices to strengthen its corporate strategic function across those domain companies. We will have global and group head office; consist of one global head office and five regional headquarters as of January 2012. Each regional headquarter has a function of governance under its local representative acting over a President.
We will strengthen local group strategic functions such as sales, external affairs, lobbying, developing new market, and new business to expand B2B and B2G business. We will minimize workforce in new G&G head office, which will be in less than the workforce in current Panasonic head office.
Then I would like to talk about our growth strategy regarding the following. One emerging market, two environmental energy related business and three, comprehensive solution business.
For the emerging markets we will establish global consumer marketing sector working across domain companies to strengthen frontline of global marketing. We will especially strengthen lifestyle research and also rationalize logistic cost, sharing marketing expertise across the regions to reduce product cost for high volume segments in emerging markets. New G&G head office will also strengthen local support by production related functions and encourage investment to develop local markets by each regional headquarter.
We planned to relocate our head office function for procurement and logistics to Singapore in fiscal year 2013. Through such, we will strengthen locally oriented manufacturing strategy. We will accelerate business growth in emerging markets especially investing our resources to rapidly growing market such as India, with targeting annual growth rate of 80% and Brazil with 40%
We currently have Group-wide projects in India and in Brazil. In 2012 we plan to newly establish and operate some factories mainly for home appliances, increasing product lineups and strengthening sales channels.
In China we will expand our business in growing inland area with annual growth rate of 20% in consumer product sales. Through such, we will accelerate business growth in those emerging markets even in such a struggling global economy.
Next, we would like to talk about environmental energy-related business. In Solar business, we will strengthen Group-wide business under Energy Company and Eco Solutions Company. We dramatically increased sales of high-efficient HIT through all Panasonic sales channels in Japan.
In future, we will accelerate expansion of its business, focusing on each region in an applications perspective. Furthermore, we will strengthen product competitiveness and production capacity of HIT working across the companies, and increase product lineups outsourcing standard models.
We will also strengthen unique solution businesses, proposing based on 'solar system for cooperation with energy storage battery'. We will target No. 1 market position in Japan, 750 Megawatt globally in fiscal year 2013.
In consumer use lithium-ion battery business, we will strengthen our competitiveness under new Energy Company. We will increase production capacity of wide prismatic type and pouch type to 1.5 times and 2.5 times respectively, focusing on promising products, and to improve our supply and profitability.
We will increase production of pouch type battery and start mass production in the first half of fiscal year 2013 in Suzhou factory in China earlier than our original plan. Meantime, in Japan, we will establish optimal production structure to consolidate Wakayama factory to Suminoe factory and re-evaluate second phase construction in Suminoe.
We aim to get back to global No. 1 market position as soon as possible, based on integrated production in China to surpass Korean competitors. We now see new demand of consumer-use cylinder type battery for in-car use picking up.
We have contracted with Tesla Motors to supply our cylinder type battery for more than 80,000 cars in next four years. We are confident that they highly evaluate our products with high capacity, light weight and high durability.
In lithium-ion battery for Eco car businesses, we will expand business in all-around strategy. We have been proposing to leading car-manufacturers and already contracted with some of them, based on our built-in customer base.
We have been also standardizing cell size with our technology and expertise, so that we could apply any types of car in our all-around strategy, connecting our competitive advantage with cost-competitiveness. We expect demand to pick up in fiscal 2013, therefore, we plan to increase sales five times in fiscal 2013 compared with 2012, three times in 2016 compared with 2013.
We will improve production structure to increase production capacity in existing factories to catch up customers' orders and evaluate new production lines in factories as needed. We will establish new production systems to meet our customers' needs, produce locally, sell locally for eco cars with improved technology, quality and cost structure.
In Energy Storage System business, we expect not only global market expansion, but also market demand increase, preparing for blackouts and electricity savings in Japan. We launched portable type in July and AC charging type for stores and facilities in August. We will expand our product lineup by introducing solar charging type, which supports self-sustained operation and energy management type charging with AC and solar.
We will develop new markets with our battery components, battery controlling technology and our vast sales channels of electric components, building materials, systems, products and appliances. In Europe and the U.S., we will expand solution business, centering storage battery sales to meet the demand of in-house power generation and stabilize power grid operation.
In our LED lighting business, we will expand business with our energy saving and interior decorating technologies under the new Eco Solution Company. We will maintain our top market position with our vast product lineups in the fast-growing Japanese market. We will also expand lamp business in the world, especially lighting equipment in China and Asia and lighting devices in Europe and the U.S.
We will standardize on package devices to establish platform and increase product lineups. Through such, we target sales of a 120 billion yen, 42% year-on-year increase in fiscal 2013 and 200 billion yen in 2016.
We will focus on Mobile and Eco Device Business in our new Industrial Devices Company to work together in marketing and R&D of electronic materials, semiconductors and other electronic components.
We will develop 'Look-ahead' marketing, foreseeing customers' perspective and propose package solutions. Through such, we aim to target sales of 200 billion yen, which will be 40% increase year-on-year in 2013, creating new market-oriented business related to mobile, eco-cars, and environmental infrastructure.
In Comprehensive Solutions Business we aim to establish business model of making profit in three phases, one, offer competitive single products such as solar, storage battery and LED lightings. Two, combine and link them. Three, offer maintenance and service for those products.
Please take a look these examples on energy saving solutions for convenience stores. We first offer attractive product line with single product such as lightings, air conditioners and cold chain, and further, we make proposals of linking control connecting those products.
Moreover, we will expand our solution from maintenance to monitoring services of electricity consumption and consultation for improvement. We are confident that consumers will highly evaluate our expertise, which will lead not only to increase of sales, but also establish our strong relationships with customers and generate more profit in the future.
We estimate sales of 500 billion yen related to this business and it will be more when we sum up businesses for supermarkets. We have been offering this business in Japan, China and Thailand and have already started consulting service through alliances. We target to promote 100 projects, which are shown in the arrow, in our Comprehensive Solution business. The scale of each product is from single to double-digit billion yen. We have charted metrics for each market and region to develop concrete plans with not only energy related products but also security and healthcare related products.
So far we have projected around 30 arrows out of 100. We have also promoted Smart City projects selecting a couple dozen out of many projects around the world. We have started to discuss into details for Fujisawa project and other 10 projects. We will expand our Smart City projects furthermore to achieve 100 arrows. We will strengthen group-wide coordinating function and invest resources to expand Comprehensive Solutions business under group Comprehensive Solution business promotion in Eco Solution Company. We will also set up committee to promote Group Comprehensive Solution business under an executive in charge of Solutions business.
We plan to establish solution business sales companies in the U.S., Europe, China and Asia as of April as part of the global expansion. We plan to invest 10 billion yen in fiscal year 2013 on this business and have M&As in our eyes for maintenance and service overseas. We target sales of 300 billion yen or more in fiscal year 2016.
Finally, I would like to talk about our profitability in fiscal year 2013. The left chart shows operating loss in TV and semiconductor businesses and the right chart profit in new three business fields expect for those two unprofitable businesses in fiscal year 2012.
We will strive to complete structural reform to eliminate operating loss in TV and semiconductor business in 2013. Meantime, we will increase sales of new business under our growth strategy, centering emerging countries, Eco, and Energy, and Comprehensive Solutions to increase profitability in fiscal year 2013. We are also confident that strengthen profitability in appliance business will boost profitability. Through such, we will be able to establish new structure, well-balanced among three new business fields to improve profitability. We appreciate your co-operation.
What would be the FPD volume sales OP target post the revision?
Total TV set assumption had recently been 25 million units and that has been revised down to approximately 19 million. The breakdown will be LCD to be less than 10 million; plasma to be less than 5 million and other external panels will be less than 5 million units, totaling 19 million. On profitability, this is, as mentioned earlier, in red, but for next year we are targeting this to blacken. To be more specific, for the 30-inch we would like to procure panels more from overseas or shift more towards outsourcing.
For the LCDs, we would like to focus on in-house production mainly for the 40-inch, 50-inch, and above to improve profitability. For PDPs we have already cut back on HD production and shipment, however going forward we would further like to do so accordingly. For plasmas, we would not only like to focus on B2C, but also focus on B2B usage. As for domestic assembly as noted earlier, we plan to streamline the factories into one. Basic stance on assembly going forward will be more focused towards overseas.
You have announced a dramatic restructuring plan excluding TV and semiconductor, which are on page 12 to 14, which will be the area that manufacturing has to be focused internally, which can be outsourced going forward including sales of manufacturing facility?
The PDP semiconductor write-down will be the message that we cannot focus as part of the vertical integration on standalone Japan production. We probably have to reconsider lightening our assets for FPDs or OLEDs going forward. However realistically speaking, I believe, developing and manufacturing will continuously be correlated.
For cellular storage battery, auto-related batteries, core development will continue to be in Japan. However, discounting the current ForEx and electricity shortage situation in Japan, domestic production would not be a must.
Moreover, overseas production focus will start from the white goods arena. It will be more local focused business model and that is the reason behind the white goods facility setup in India and Brazil.
On the 514 billion yen restructuring costs, ex-semiconductor and TV is 190 billion yen, which will be ex-SANYO and how much will be cash out. Would that mean, there will be no DTA reversal or further SANYO related goodwill write-down, if there needs to be such, will equity finance be a possibility?
315 billion yen will be from tangible fixed asset, 200 billion yen will be from personnel reduction and facility rationalization. Going more into details, less than 90 billion yen will be from SANYO, then comes PEW.
Most of the rationalization will be from the subsidiary, thus there will be no DTA effect on the parent base. Goodwill, in relation to SANYO will not reduce further cash flow and as of July, our auditor has confirmed the impairment test and cleared accordingly.
For the new Panasonic post January, how can we technically check the impairment test, when SANYO will be fully integrated then?
We will need to reevaluate the impairment situation then under the new structure.
In relation to the rationalization, can you segment the headcount reduction accordingly to each division? Recent headcount is approximately 360k and you are targeting headcount numbers to be below 350k. Do you feel this level is adequate?
It will be involving all domains. Unfortunately, we cannot disclose divisional details. I believe it is unavoidable to further slim down in Japan, but on the other hand and upon confirming 2012 results, we would like to reevaluate the situation?
On device for example, turnover per head is not high at the current moment. Are you expecting dramatic top line growth, both for domestic and overseas going forward?
Characteristics for each divisions including overseas production ratio, marginal profits are very different. So apple-to-apple comparison might not be relevant.
On page 25, you mentioned, you have 30 projects running and second and third profit-making phases obviously should not be easy. How much clarity do you have on these businesses? How do you plan to trend this into profitability?
For example, system communications are already involved in security related, including POS system and call center functions. Besides just small, however compared to the standalone product distribution, profitability is stable and relatively high for the second and third phases. We already have track records on this.
On rationalization, I would like to confirm for TV you are looking at flat volume next year, in case it drops 10% to 20%, do you still feel confident in generating profit? Similarly, do you have any breakdown target for semiconductor? Lastly, 90 billion will be spent for SANYO’s rationalization, how much effect are you assuming for next fiscal year? For the second half you are planning 40 billion in red, how much will that be improving next year?
For panels unfortunately we cannot disclose the details, but as far as the fixed cost is concerned this is approximately half. So as a result even with some fluctuation on the top line we should be able to meet our target. Also on the 90 million SANYO rationalization the effect will be approximately 25 billion.
What about the break-even for semiconductors?
We are already assuming a top line decrease for both this year and next year and since the red is not a large number, the 15 billion positive affect for next year should be accomplishable, thus, blackening would not be difficult.
CapEx is 40 billion below the first half assumption, but you haven't changed the full year forecast. What will be added in the second half? And also if you can let us know next year’s forecast?
The CapEx of 320 billion has not been changed and we have not implemented any CapEx cutbacks as of yet, but anyway we see CapEx has already been reduced for example Shanghai investment has been canceled. As a result the full year should be below 320 billion. For next fiscal year, I would like to aim for a range between let’s say 200 billion yen to 250 billion yen. Depreciation is 300 billion, so even compared to that we would like to focus on only the necessary investments.
Since your involvement as the AVC President, you had been investing hugely on plasma, referring to the great business potential. Similarly, in the semiconductor, you had commented on the huge potential of the vertical integration using system LSI UniPhier. The total amount invested during these times and the total write-downs for these would probably be reaching over one trillion yen. Furthermore, when plasma faced a hurdle you then focused on LCD, further implementing write-down on a newly built factory. As the CEO, can you give us your comments on how you plan to recover from the past? Secondly I do not hear any Panasonic only products anymore, I only hear the non-Panasonic products whether that be SANYO or others. How do you plan to focus on such?
The past investment was not 1 trillion to 2 trillion. Perhaps you are including personnel cost. When we started FPDs that was back in 2000, for us to get involved in FPDs it was unimaginable back then, not to be involved in the panel business. We believed it was worth getting involved, and have no regrets; and as a result, we were generating profit on the TV business until 2007. But post 2008 the competitive environment especially with the Korean manufacturer had stiffened and I do regret of not having implemented an earlier rationalization. As a starting point of the TV business I do not believe our decisions were wrong and have no intention of exiting from the TV business.
As earlier talks going forward we have no intention of chasing after the share nor top line but to focus ourselves on maximizing profitability including focusing more on the non-TV business. As for the unique Panasonic product lunches, we have to digest that reality. But there are products that are currently being developed and launched. We have to further focus on such new product launches especially in relation to the next January’s new corporate structure including future investment allocations. I hope you can look forward to our introductions going forward.
I would like to confirm the write-downs on plasma and on TV. You’re currently chasing after three different panels, plasma, LCD, OLEDs, how should we digest this fact?
It doesn’t mean we will be chasing after three products. As mentioned earlier, we would like to improve profitability for plasma and LCD. For LCD, we would like to increase non-TV rate from next year. For OLED TV, we are focusing on industrial usage as well.
Through the 500 billion rationalization, you are assuming P&L improvement of 150 billion next year. Do you have an OP target? Perhaps you can target 10% ROE. Where are you focusing your target for next year?
A 146 billion rationalization effect will be there, and by 2012, we expect to generate 60 billion yen worth of synergy from the full consolidation on PWM SANYO. If you can imagine the numbers from these, that perhaps would be the base for next year. However, ForEx and Thailand effect will be a potential concern for next fiscal year.
How much do you need to further internally change, whether that be on a corporate culture basis or structural basis in order to be globally competitive?
The key focus we have will be the full integration of these three corporates, such as global consumer marketing sector. We will gather designers from different divisions to create competitive products. Full integration will include personal integration.
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