Business  » Corporate

Standard & Poor's downgraded the rating of Japan's Panasonic Wednesday, blaming its deteriorating finances weeks after the electronics giant warned it would suffer a record loss for this fiscal year.

The agency cut Panasonic's long-term corporate credit and debt ratings to A- from A, while its short-term corporate credit rating was lowered to A-2 from A-1.

The move follows a similar decision by Moody's, which downgraded the company in January by a notch from A1 to A2.

Earlier this month Panasonic warned it would see its worst-ever net loss, of 780 billion yen ($9.7 billion), for the year to March due to the strong yen, flooding in Thailand hitting output, and costs to purchase smaller rival Sanyo.

The loss will be one of the worst ever recorded by any non-financial Japanese company.

"The downgrade reflects our view that an early restoration of the company's financial soundness to levels commensurate with the previous ratings has become highly unlikely due to a huge expected loss in fiscal 2011," the agency said.

Japan's electronics sector has been badly hit by the high yen, which makes exporters' products less competitive overseas, while falling prices and slow demand at home have also eaten into profits.

Osaka-based Panasonic has long suffered major losses in its television business, which Standard & Poor's said was "a particular key focus of our concern" as South Korean and Chinese rivals intensify competition.

The rating outlook was negative as pressure on Panasonic's earnings will remain, Standard & Poor's said.

However the agency added that much of Panasonic's expected loss was due to one-time factors, and the company has a record of rigorous cost controls.

"We could revise the rating outlook to stable if Panasonic demonstrates solid progress in stabilising its earnings and cash flow through a massive restructuring of its business," it said.