Panasonic’s first-quarter earnings shrink 39% as China lockdowns, higher material costs bite

Panasonic Holdings Corp (6752) on Thursday reported a 39% slump in its fiscal first-quarter profit, as results were heavily affected by COVID-19-related lockdowns in China and surging costs of materials, all of which disrupted production.

The company’s operating profit dropped to JPY 63.7 billion ($471 million) during the three months to June 30th, while falling short of market consensus of JPY 73.3 billion.

A two-month lockdown in Shanghai earlier this year led to reduced output at factories in addition to shortages of components.

Meanwhile, surging material costs as a result of Russia’s incursion into Ukraine have reduced profits.

According to Panasonic’s Chief Financial Officer Hirokazu Umeda, the quarterly figures “look weak,” but still, “we judged that it is not necessary to make a change to our outlook.”

Panasonic confirmed its full-year operating profit forecast of JPY 360 billion for the year to March 31st, as it bet it could increase earnings through higher prices on some products and cost reduction.

The Japanese conglomerate said it did not currently have plans to raise the price of the auto batteries it supplies Tesla Inc with, no matter that it is paying more for cobalt and other materials used in battery production.

The shares of Panasonic Corp closed lower for the seventh time in the past ten trading sessions in Tokyo on Friday. It has also been the steepest single-session loss since July 12th. The stock went down 2.37% (JPY 26.5) to JPY 1,094.0, after touching an intraday low at JPY 1,090.5. The latter has been a price level not seen since July 7th (JPY 1,087.5).

The shares of Japan’s Panasonic Corp have retreated 13.52% so far in 2022, following a 6.26% gain in 2021.