November 22, 2012 - 13:38 AMT
PanARMENIAN.Net - Ratings agency Fitch cut the debt ratings of Japanese consumer electronics makers Sony Corp and Panasonic Corp to "junk" status, citing weakness in their businesses, Reuters reported.
The downgrades deal a further blow to the floundering Japanese tech giants which have been facing weak demand and fierce competition from Apple Inc and Samsung Electronics.
A strong yen and bumps in China, where growth has slowed and Japanese goods have been targeted in sometimes violent protests recently, have also weighed on their earnings.
The credit rating agency on Thursday, Nov 22, downgraded Sony by three notches to BB-minus from BBB minus, saying meaningful recovery will be slow.
"Fitch believes that continuing weakness in the home entertainment and sound and mobile products and communications segments will offset the relatively stable music and pictures segments and improvement in the devices segment which makes semiconductors and components," it said in statement.
In a separate statement, Fitch cut Panasonic to BB from BBB-minus, a two-notch downgrade, citing weakened competitiveness in its TVs and display panels as well as weak cash generation from its operations.
Last month, Panasonic cut its forecast and warned it will lose close to $10 billion in the year to March, as it writes off billions of yen in tax-deferred assets and goodwill related to its mobile phone, solar panel and small lithium battery businesses.
Ahead of its earnings revision, Panasonic won $7.6 billion in loan commitments in October from banks including Sumitomo Mitsui Financial Group and Mitsubishi UFJ Financial Group, a funding backstop it says will help it avoid having to seek capital from credit markets.
Rival Sony made a small operating profit in the July-September quarter, helped by the sale of a non-core chemicals business, and kept its forecast for a full-year profit of $1.63 billion.
But the two companies, along with Sharp Corp, racked up combined losses of $20 billion last year, leading them to have to axe jobs, sell assets and close facilities.