Panasonic seen ending fiscal 2014 effectively debt-free
OSAKA -- Panasonic's cash on hand is expected to exceed interest-bearing debt at the end of this fiscal year for the first time since fiscal 2008, thanks to narrower losses in underperforming businesses and cuts to working capital.
The Japanese company is seen with about 100 billion yen ($974 million) in cash on hand after deducting interest-bearing debt, an improvement over last fiscal year's minus 47.6 billion yen.
Cash on hand plunged in 2011 after Panasonic bought Sanyo Electric and the former Panasonic Electric Works. Combined with a massive investment in flat panels followed by a sharp earnings downturn, interest-bearing debt exceeded cash on hand by 1.08 trillion yen at the end of the first half of fiscal 2012. Standard & Poor's cut the company's credit rating to BBB.
Panasonic is expected to narrow the total operating loss for seven designated problem businesses, including TVs and chips, to 10 billion yen this fiscal year from slightly more than 100 billion yen in fiscal 2013. In addition, digital camera, air conditioner and cell phone businesses will likely turn a profit.
The company also intends to reduce working capital. It is targeting a 50 billion yen cut in inventory by fiscal 2015, calculating optimal inventory targets for each business to encourage adjustments. Furthermore, it plans to sell idle real estate and noncore businesses and use the proceeds to reduce interest-bearing debt.
Panasonic aims to parlay its stronger fiscal footing into a credit rating of A. It hopes to boost its capital ratio to around 35% in the near future from 29.7% as of the end of fiscal 2013.
"We'll return our finances to a state where we can make strategic investments" such as overseas acquisitions, said Chief Financial Officer Hideaki Kawai.
The company plans to reduce its dependence on banks for funds, instead using cash generated by business activities for growth investments.