April 8, 2014 12:05 am JST

Waiting for Panasonic's next act

TERUAKI HIRASAWA, Nikkei staff writer

OSAKA -- Panasonic's stock more than doubled last year on the strength of moves to overhaul money-losing businesses, yet now the company faces the daunting task of following up the first act with a viable path to growth.

     The Japanese electronics giant suffered net losses of more than 750 billion yen ($7.15 billion) for two consecutive years through fiscal 2012. Scrambling to rebuild its operations, the company withdrew from plasma televisions as well as smartphones for domestic retail customers. It also unloaded chip production bases and other facilities.

     Investors welcomed the bold restructuring measures with thunderous applause. The stock climbed from the 300 yen range in November 2012 to 522 yen at the end of that year, before surging to 1,224 yen at 2013's end. With Panasonic widely expected to swing to a net profit in the year ended March 31, investors chased up the price of the shares in anticipation.

Unplanned interlude?

But the stock has lost steam this year. Panasonic closed at 1,219 yen on Friday, little changed from the end of last year. Fellow electronics maker Sony has surged 9%, even amid the Nikkei Stock Average's nearly 8% drop over the same period. Sony has unveiled restructuring plans, including the sale of its old headquarters building, changes in materials procurement and an executive reshuffle.

     Meanwhile, Panasonic's streamlining steps have peaked and the stock seems to be struggling amid a dearth of incentives, explains an official at a domestic brokerage.

     Panasonic, however, continues to work on drumming up interest in its coming growth initiatives. As a follow-up to a March 27 briefing about its fiscal 2014 business strategy, the company held a special event for analysts in Tokyo last Wednesday. Panasonic went out of its way to provide detailed information to analysts, inviting them in small groups to attend three separate sessions.

     Executive Officer Mototsugu Sato, head of business planning, touched on a number of topics in detail. He explained that only the chip and TV/panel segments were expected to incur operating losses for the year ending March 2015 and that their combined red ink was on track to shrink to 20 billion yen from fiscal 2013's 100 billion yen. Capital spending will be kept within the sum of depreciation expenses and the company's top priority will be to raise its credit rating, Sato also said.

     But the stock market's reaction has been tepid. The stock was up just 2% as of Friday from the 1,191 yen close on the day of the business strategy announcement.

The second act beckons

The company has vowed to nurture housing-related and automotive sectors into its next big earnings generators. But specific figures are still hard to come by, making it difficult for the stock price to factor in additional growth scenarios.

     The stock has thus proven sluggish since touching a high of 1,408 yen in January. The current share price appears to factor in the 350 billion yen operating profit target for fiscal 2015, the last year of its medium-term business plan.

     Panasonic is likely to draw quarterly scrutiny from analysts about its progress in fleshing out growth strategies and implementing them. It needs to provide specific information about plans for the housing- and automotive-related areas, and do everything possible to achieve growth. Only then will Panasonic have a shot at ensuring that the curtain does not close prematurely.