TOKYO, Sept 10: Moody’s on Monday cut its credit rating on Japanese consumer electronics giant Panasonic, citing the struggling firm’s weak profitability and high debt.The global agency said it lowered the rating on Panasonic by two notches to Baa1 from A2, while keeping its outlook stable. Panasonic swung back into the black for the April-June quarter as it cut costs to restructure its business while battling the negative effects of a strong yen.

But the company, like rivals Sony and Sharp, had been swimming in red ink largely tied to its television business while its debt soared owing to the purchase of smaller rival Sanyo. Panasonic’s debt stood at 950 billion yen ($12 billion) in late June, against 120 billion yen in late March 2010, Moody’s said.

“The rating actions reflect Panasonic’s low level of profitability and elevated leverage,” the agency said in a statement on Monday.

“Moody’s expects them to improve but only slowly, given the weak demand and intense competition in many of its end-markets,” it added.

Panasonic logged a net profit of 12.8 billion yen in the April-June quarter, reversing a shortfall of 30.4 billion yen a year earlier.

But in the previous fiscal year it suffered a record 772.2 billion yen net loss, one of the worst-ever losses for a non-financial Japanese firm.

Japan’s electronics sector has been badly hit by the appreciation of the yen, which makes exporters’ products less competitive overseas, while falling prices and slow demand at home have also eaten into profits. Competitors including South Korea’s Samsung and the US giant Apple are offering stiff competition, with high-resolution display technology a key battleground as demand intensifies for smartphones, tablet computers and other gadgets.

Panasonic has already announced a major restructuring of its liquid crystal display manufacturing division, and is reportedly considering shifting all of its mobile phone handset production overseas because of high costs at home.—AFP

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