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December 4, 2007 |
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SANYO ELECTRIC: Fitch Keeps BB+ Ratings on Negative Watch Fitch Ratings has announced that Sanyo Electric Co., Ltd.'s Long-term foreign currency Issuer Default Rating, Long-term local currency IDR and senior unsecured ratings of 'BB+' remain on Rating Watch Negative. Fitch is holding Sanyo's ratings on RWN given that the investigation by Japan's Securities and Exchange Surveillance Commission into the company's past accounting practices is continuing. Fitch originally placed Sanyo's ratings on RWN on 23 February 2007 after the SESC started the investigation. Fitch says that although the accounting issue relates to evaluation losses in investments on the parent-alone financial statements and does not affect the consolidated accounts, any negative conclusion by the authority could potentially affect Sanyo's credibility and confidence in its financial disclosure. Sanyo will likely complete the necessary amendments to its past financial figures (for the six fiscal periods leading up to and including the fiscal year ended March 2006 (FYE06)) by the end December 2007. Fitch expects the SESC's conclusion on the matter to be made in succession. On November 27, Sanyo announced its consolidated financial results for the first half of the fiscal year ending March 2008 (H108). In addition, the company announced a new three-year 'Mid-term Management Plan', in which the company aims to achieve over JPY100 billion in consolidated operating profit in FYE11 - of which JPY90 billion is considered by the company as a "must accomplish" goal. In H108, its operating performance improved considerably with increased earnings at largely every level. Due to the substantial amount of positive free cash flow generated, the company was able to further reduce its debt and accordingly, its balance sheet has become healthier. Going forward, Fitch expects the main contributor to group earnings will continue to be devices including rechargeable batteries and solar cells, where around 70% of its capital investments for the coming three years will be made. Meanwhile, the company has decided to keep its consumer electronics operations including audio visual and white goods, for which Fitch views their competitiveness against much larger and stronger competitors as uncertain. Sanyo's total debt fell to JPY573.5 billion at H108, JPY105.4 billion lower than H107's amount and compares favorably with JPY1,213.9 billion of debt at the end of FYE05. The company plans to reduce its consolidated debt to JPY530 billion at the end of FYE08. At the end of September 2007, Sanyo had JPY351.1 billion in cash and cash equivalents. As part of its current restructuring plan to further improve its financial profile, Sanyo is also considering the divestment of some divisions including its mobile handset operations. Sanyo is a major Japanese consumer electronics manufacturer, with its business segmented into three groups, namely consumer, commercial and components. For FYE07, the company recorded sales of JPY2,215.4 billion and a net loss of JPY45.4 billion. |
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