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Weaker yen and job cuts a tonic for Panasonic

Shares in Panasonic soared after it posted an unexpected profit because of a weaker yen, asset sales and job cuts.

One of Asia's major electronics companies has shown remarkable powers of survival after being on the critical list for much of the past year.

Panasonic, Japan's biggest television maker after Sony, yesterday soared after it posted an unexpected profit because of a weaker yen, asset sales and job cuts.

Shares rose the most in more than 38 years in Tokyo trading as Panasonic surged by its top daily limit of 100, or 17 per cent, the biggest gain since at least September 1974, to 692 at the close. Net income was 61 billion (Dh2.41bn) in the three months that ended on December 31, the company said. Analysts expected a 17bn loss, based on the average of three estimates compiled by Bloomberg.

The TV maker and Sharp both reported improved results in the quarter as the yen's plunge boosted the value of overseas sales. Panasonic has also eliminated more than 38,000 jobs since April to cut costs amid a projected second straight annual loss, slower TV demand and competition from Samsung Electronics.

"Panasonic seems to have turned a corner," said Masamitsu Ohki, a fund manager at Stats Investment Management, a Tokyo hedge fund. "That is easing investor concerns about its survival."

Japanese exporters led gains in Tokyo trading after the yen weakened to the lowest level since 2010 versus the dollar and euro.

Sony, scheduled to report earnings on Thursday, surged 7.5 per cent to 1,457, the highest close since April 12. The company will announce a new PlayStation 4 game console at an event on February 20, according to Michael Pachter, an analyst with Wedbush Securities in Los Angeles.

Sharp, Japan's third-biggest television maker, gained 5.5 per cent to 347, the highest close since July 11. The company reported its first operating profit in five quarters on Friday.

Panasonic is scheduled to announce a new medium-term plan by the end of next month. The TV maker has already announced plans to cut 8,000 jobs in the six months ending on March 31. Its workforce shrank to 321,896 as of September 30, from about 385,000 two years earlier. Other measures include ending smartphone sales in Europe, closing domestic plants and suspending investment for solar-cell facilities in Malaysia.

Panasonic's results beat the consensus, "thanks to a bigger than expected impact from cost-cutting", Shunsuke Tsuchiya, an analyst in Tokyo at Credit Suisse Group, wrote in a report.

"There is a limit to what can be achieved by cost-cutting alone. We look forward to seeing measures to combat the sales decline."

Shutting divisions is a "worst-case" scenario, and the company would try to safeguard jobs whether units are sold, restructured or closed, it said last month. It did not elaborate on which operations may close. In October, the company said it would generate 110bn in cash from selling assets by March 31.

Meanwhile, Japan Airlines (JAL), the nation's second-largest carrier, yesterday raised its full-year profit forecast 16 per cent as demand for travel to Europe and the United States outweighed the impact from the grounding of its Boeing 787s.

The grounding will cut sales by 1.1bn through to the end of March, JAL said yesterday. The airline, whose seven Dreamliners make up about 3 per cent of its fleet, forecast a net income of 163bn in the year ending on March 31, compared with an earlier prediction of 140bn, the carrier said yesterday. That beat the 156.7bn average estimate of 11 analysts compiled by Bloomberg. JAL boosted sales forecast 1.1 per cent to 1.23 trillion, matching analysts' estimates. The carrier, All Nippon Airways (ANA), the world's biggest operator of 787s, and six other airlines have halted Dreamliner flights following a lithium-ion battery fire and an emergency landing by an ANA plane January 16.

"The impact on JAL is relatively small," said Nicholas Cunningham, an analyst at Macquarie Capital Securities (Japan).

"At this point it's slightly negative, but it's potentially possible it will be offset through other measures."

* with Bloomberg News

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