Pioneer cuts earning targets for 2005-06
By Reuters
Nov 18, 2004, 10:39
Japan's Pioneer cut its earnings targets for the next business year on Wednesday, three weeks after it slashed its current year outlook due to sliding DVD recorder prices and weak margins in DVD drives.
Pioneer also said that it would create a project team in 2005 to consider boosting output for plasma display (PDP) televisions, but denied a newspaper report that said it might invest about $250 million to construct a new PDP line next year.
"There will not be any big investments in the next business year," Pioneer president Kaneo Ito told a briefing. "We will limit spending and focus on boosting the efficiency of our existing lines to expand production volume."
Pioneer shocked investors last month when it said its group operating profit fell 16 per cent in the latest quarter and cut its full-year profit forecast by 46 per cent to 27 billion yen, representing a drop of 38 per cent year-on-year.
To set the stage for higher profits in 2005-06, Ito vowed to reduce inventories by 22 per cent by March 31 and take other steps such as integrating the production processs for DVD recorders from basic parts to finished products in China to lower costs.
Pioneer is also pulling out of the overseas set-top box business, requiring it to reallocate personnel. Ito said he was not planning on job cuts as part of its revival plan.
"We expect this business year to be tough as we reduce inventories and lower production costs. But we are working towards a recovery next year," Ito said.
Pioneer nevertheless lowered its sales target for the 2005-06 business year to 900 billion yen from its prior forecast of above one trillion yen. The company is forecasting sales to rise 14 per cent to 800 billion yen in the current financial year.
It will now shoot for an operating margin of seven per cent in 2005-06, translating into a profit of about 63 billion yen. In June Pioneer had said it was aiming for a 75 billion yen profit.
PDP PRODUCTION
Pioneer completed an acquisition of NEC's plasma business for about 37 billion yen on September 30, lifting its annual capacity to 1.1 million sets, including a production line that became operational last month.
Pioneer, which competes with the likes of Matsushita Electric Industrial and Samsung Electronics in the PDP TV market, said it expected capacity to rise only slightly to about 1.2 million units by the year ended March 2007.
The company is hoping to secure a 15 to 20 per cent share of the global market over the long term. It estimates the market will reach 6.3 million units by 2006-07 and 8.2 million in 2007-08, compared with about 2.4 million this year.
"Looking at the size of the market, we should have enough capacity to last us through the end of 2006 because our production efficiency will improve," Ito said.
Pioneer said it would raise efficiency by consolidating production of different panel sizes into three exclusive lines -- one line for 61-inch panels, one for 50-inch panels, and one for 42-inch panels -- by the 2006-07 business year.
At present, production is spread across six different lines.
It will need to boost efficiency as it expects PDP prices to fall by 20 per cent each year over the next few years.
Pioneer also said it plans to increase sales by expanding sales of panels to other TV set makers.
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