Moody's chops Panasonic's credit rating

Moody's chops Panasonic's credit rating

TOKYO - Moody's on Tuesday cut Panasonic's credit rating to just above junk status, the latest blow to Japan's struggling electronics industry which has been mired in losses and ratings downgrades.

The global agency said it lowered its rating on Panasonic by two notches to Baa3 from Baa1 with a negative outlook, meaning another downgrade may follow and throw Panasonic's rating into the non-investment grade category.

"Structural challenges in the consumer electronics industry, in particular digital AV products, mobile phones, devices, and batteries, as well as adverse economic conditions, will continue to pressure the earnings and cash flow of Panasonic and other Japanese consumer electronics companies," Moody's said.

Panasonic has warned it would book a loss of 765 billion yen ($9.5 billion) in the year to March mainly on restructuring and tax charges, close to its record loss last year and a reversal of its previous profit forecast.

Like rivals Sharp and Sony, Panasonic has suffered in its television business because of falling prices and stiff overseas competition, while a strong yen and the global slowdown have also hit manufacturers.

The trio have been undergoing massive corporate overhauls including selling off divisions and cutting thousands of staff to shore up their hard-hit balance sheets.

"An expected decline in sales - because of mature key products, weak consumer sentiment, continued price declines, and decreasing market share - will largely offset the effects of restructuring over the past year," said Moody's, which also cut Panasonic's rating in September.

A territorial row between Tokyo and Beijing over an East China Sea island chain sparked a consumer boycott of Japanese products, including cars and electronics, and further worries for Panasonic, Moody's said.

"The boycott of Japanese products by some Chinese consumers due to the recent diplomatic row between China and Japan further increases the uncertainty over Panasonic's ability to restore earnings," it said.

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