Matsushita 2Q profit drops on recalls

A massive cell-phone battery recall helped drive down the profit of Matsushita, maker of Panasonic brand products, by 17 percent in the second quarter.

Matsushita Electric Industrial Co. said Tuesday it earned 65.81 billion yen ($573.8 million) in the July-September period, down from 79.29 billion yen a year earlier.

Quarterly sales edged up 1 percent to 2.286 trillion yen ($19.93 billion), a quarterly record for the company, from 2.253 trillion yen a year earlier on brisk global demand for flat-panel TVs, semiconductors, digital cameras and air conditioners.

But weighing on profit for the Osaka-based manufacturer were expenses for recalling lithium-ion batteries in some 46 million cell phones by Nokia Corp., the world's largest mobile phone maker.

Matsushita has said the defective cell phone batteries in the recall may overheat while recharging.

Last month, a fire broke out in a Matsushita plant in Osaka that makes lithium-ion batteries. The company is investigating the cause of the fire. The fire resulted in damages estimated at 2 billion yen ($17.4 million), and the plant will resume part of its operations Nov. 1, Matsushita said.

Matsushita also recently replaced faulty parts in driers, massage chairs, microwaves, refrigerators and other products, adding to such extra expenses, it said. Those problem products were almost all sold in Japan, according to Matsushita.

The quality problems cost the company about 20 billion yen ($174.4 million) for the first fiscal half, while early retirement packages added another 15.8 billion yen ($137.8 million) to the bill for the period, it said.

The company's strategy of focusing on high-profit-margin "V-products," such as plasma display panel TVs, helped lift results, Matsushita said.

Cost reductions also helped in fighting rising raw material prices and intensifying global competition, it said in a statement.

The results were being compared with earnings a year ago that included a gain from the sale of investments in cable broadcasting.

Matsushita reaffirmed its forecast for the fiscal year through March 2008 for a profit of 246 billion yen ($2.14 billion) on sales of 8.780 trillion yen ($76.55 billion).

Matsushita shares rose 1.4 percent to 2,110 yen ($18) in Tokyo.

Other Japanese electronics makers had mixed results so far.

Sony Corp.'s profit for the July-to-September quarter jumped more than 40-fold amid a recovery in electronics sales. But Toshiba Corp. reported a 28 percent drop in its second quarter profit, partly because of one-time expenses for property value calculations that offset solid sales in computers and chips.