Headwinds persist for Panasonic Malaysia
KUCHING: Despite the allowance to resume of operations at full capacity, electronics maker Panasonic Manufacturing Malaysia Bhd (Panasonic Malaysia) continues to face headwinds in the form of supply and manpower constraints.
Analysts with Hong Leong Investment Bank Bhd (HLIB Research) expect Panasonic Malaysia to face margin squeeze on the back of elevated raw material prices.
“With the shortage of labour, we view that Panasonic Malaysia would face additional cost from the increase in allowances for temporary and outsourced workers in order to mitigate this impact,” it said in its analysis.
“Despite the uncertainties, we reckon Panasonic Malaysia can weather through this storm supported by its balance sheet strength.”
Management shared that production has resumed operation in August with 100 per cent workforce after the easing of restrictions. However, the operations still face supply and manpower constraints.
Currently, parts manufacturing are running at 85 per cent utilisation rate based on 24 hours production. Assembly on the other hand, is running on single shift.
“We gather that Panasonic Malaysia’s subsidiary – whose principal activities are the sales and marketing of Panasonic products in Malaysia – are facing product supply constraint.
“We understand that sales in August to October 2021 were affected by the limited supply of products from local and overseas suppliers,” HLIB Research added. “Despite the further relaxation of being allowed to resume business, dealers especially those located in shopping malls are still facing hurdles with muted footfall.
“Note that 1QFY22 associate contribution plunged to losses of RM500,000 against RM13.3 million in 4QFY21 as sales were confined to only online channel.”
Meanwhile, Panasonic Malaysia main raw materials which include copper, aluminium and steel have recorded an upward increase of 42 to 70 per cent as compared to Oct 2020.
To mitigate the impact, the group have taken several measures of accelerate cost reduction activity; continue to trim fixed cost expenses; and increase in-house production for injection moulding. Note that raw materials consist of about 65 per cent of the group’s costs of goods sold.
“Additionally, we understand that Panasonic Malaysia have started to increase the price of its products by five to 10 per cent in line with the market trend.
“We expect Panasonic Malaysia to face margin squeeze on the back of elevated raw material prices. Additionally, with the shortage of labour due to restriction on the recruitment of foreign workers, we view that Panasonic Malaysia would face additional cost from the increase in allowances for temporary and outsourced workers to mitigate this impact.”