Tim Kelly

TOKYO (Reuters) – Japan’s Panasonic Corp posted a higher-than-expected 44% decline in its third quarter operating profit on Wednesday. The drop was caused by increasing costs of raw materials and component shortages, as well as a decrease in domestic sales.

Panasonic has attempted to lessen its dependence on appliances and consumer electronics with low prices. Instead, it is shifting its focus towards automotive batteries for Tesla (NASDAQ) Inc., manufacturing machinery, components, and most recently supply chain management.

The majority of revenues still come from home appliances and consumers, who benefited greatly from the stay-at-home boom that occurred during coronavirus lockdowns.

The operating profit in the three months ended Dec. 31, fell to 73 billion Japanese yen (636 million), which is far below the Refinitiv consensus estimate at 107 billion.

According to the industrial conglomerate, the rise in iron and other costs has reduced the margin of the unit that houses the consumer and home appliance businesses.

Its other divisions had to adjust to increases in material prices, component shortages and the automotive business. This business makes sensors for automobiles and its energy company, which recently saw a surge in Tesla’s battery sales.

Since last year, the profit from its decade-old partnership is being realized thanks to electric vehicle sales. Panasonic plans to supply the U.S. automaker a new battery generation that can lower EV manufacturing costs, and potentially extend its range.

Profit for the third quarter was also affected by a revaluation in assets and debt following Blue Yonder’s purchase of it last year, worth $7.1 million. Blue Yonder is a U.S. startup that employs machine learning to link factories with warehouses and retailers. The exact amount of the revaluation was not disclosed.

Panasonic’s stake in Tesla was sold for approximately 400 billion Japanese yen. This money will be used to finance that purchase.

Panasonic maintained its full year forecast of annual profits at 370 billion Japanese yen, which is in line with analyst forecasts.

($1 = 114.7400 yen)