Panasonic Pops After Tesla Business Helps Boost Earnings

(Bloomberg) -- Panasonic Corp. shares surged after operating income beat analyst estimates, as the division that supplies Tesla Inc. with batteries turned a profit.

The Japanese company’s stock climbed as much as 8.8%, the most intraday since March. Operating income rose 11% to 93 billion yen ($900 million), exceeding the highest analyst estimate. The automotive business that supplies the American maker of electric vehicles made an operating profit of 5.1 billion yen.

“Our car-use cylindrical battery business, which is mainly for Tesla, turned profitable and that contributed a lot to the segment’s result,” Panasonic’s Chief Financial Officer Hirokazu Umeda said in a call after results.

The relationship between Panasonic and its high-flying customer has been contentious over the years. The two companies jointly operate a massive battery plant in the U.S., where Panasonic makes the cells, and Tesla strings thousands of them into battery packs for each car. But Elon Musk has sought additional suppliers to reduce Tesla’s dependence, while Panasonic has said it can’t supply the automaker on its own.

Last month, at Tesla’s Battery Day, Musk unveiled a push to lower the cost of batteries and signaled it will eventually produce its own cells. The news hammered shares of suppliers, including Panasonic, LG Chem Ltd. and Contemporary Amperex Technology Co.

Panasonic’s CFO said it will continue working with Tesla in developing the 4680 battery cell, which Tesla mentioned last month will be more cost-efficient. Panasonic also aims to improve profit margins from its Tesla business to around 5% over the next several years.

Key takeaways:

• Second quarter net sales fell 15% to 1.67 trillion yen
• Operating income forecast for the fiscal year remains 150.0 billion yen, compared with an estimate of 144.73 billion yen
• Net sales forecast for the fiscal year remains 6.5 trillion yen, in line with the estimate of 6.51 trillion yen

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