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AUGUST 2008 BEACON Matsushita Exec Warns of Possible Profit Problems <August 7, 2008><Nikkei-OSAKA>In an interview with the Nikkei in Japan today, Matsushita Electric Industrial Co. Director Makoto Uenoyama spoke directly about the successes and challenges the company faces in the current difficult economic environment.
The company recently announced a new record for group net profit in the first fiscal quarter – the first such record in 23 years. Yet the slow U.S. economy and escalating materials costs represent real challenges for manufacturers…and Matsushita is not immune.
Highlights from the interview:
Q: Matsushita reported solid business results for the April-June period.
A: We relied totally on videocassette recorders 23 years ago, since we earned more than 50% of profit from that one product.
In the late 1990’s, we were still largely dependent on a single product because cellular phone handsets and related parts brought in more than half of our profits.
Today, our business foundation is solid, with our profit sources spread among a [sic] various businesses in a balanced manner.
We appreciate that investors view us as a stable company, but that may be a reason our stock price has not climbed sharply.
In the white goods business, we reaped the fruits of cost cutting efforts for refrigerators and other products with low profit margins. But high materials prices will likely hit us. Prices of iron for the July-September quarter have gone up. We are still negotiating prices for the second half, but they may go up further.
Q: Matsushita has decided to boost investment in the lithium ion battery business. Competition will likely intensify among the manufacturers, won’t it?
A: Supply shortages are still continuing. We also see more applications emerging for lithium ion batteries.
The three major Japanese manufacturers control slightly more than 60% of the market. Compared with other products, recovering investment will likely be easier with lithium ion batteries.
We have decided to absorb our lithium ion battery unit in October to beef up the business.
Q: Matsushita remains cautious about the full-year earnings projections.
A: We expect a bigger negative impact from high material prices in July and beyond.
With digital consumer electronics, we cannot avoid price declines if inventory levels are high when we start launching new products for the year-end sales season. We already see signs of digital camera inventories rising in Europe. |
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