Business | Technology
Weak TV demand sends Sharp profits hurtling down
World's No 3 LCD TV maker sees return to profit this year as orders recover despite market forecast of another year in the red.
- Reuters
- Published: 23:16 April 27, 2009
Tokyo/Osaka: Japan's Sharp Corp reported its second straight quarterly loss, hit by weak TV demand, price falls and restructuring costs, but it forecast a return to profitability despite market expectations of another year of red ink.
Sharp, the world's No 3 LCD TV maker behind Samsung and Sony is pinning its hopes on a gradual pickup in orders from July after being hit by a slump in sales of flat TVs and mobile phones as consumers tightened their purse strings amid the global financial crisis.
"The operating environment is likely to remain tough in the first quarter (to June 30). But we have implemented turnaround measures, and there are signs of an order recovery now that inventory adjustments in the market have run their course," Sharp President Mikio Katayama told a news conference.
"We are expecting earnings to recover gradually from the second quarter on."
Sharp said in February it planned to cut 1,500 non-regular workers and reduce costs by 200 billion yen to fight the global downturn that has sent the top three Japanese consumer electronics makers - Sony, Panasonic and Sharp - deep into the red on an annual basis.
Sharp, which makes Aquos-brand LCD TVs, forecast an operating profit of 50 billion yen for the year to March 2010, up from a 55.5 billion yen loss a year earlier and compared with a consensus of a 34.4 billion yen loss in a poll of 23 analysts by Thomson Reuters.
It said its net profit was likely to come to 3 billion yen this financial year, in a reversal from a loss of 125.8 billion yen last year.
Sharp is counting on the start-up in October of its latest LCD panel plant, the world's first factory to process so-called 10th-generation glass substrates, to boost the competitiveness of its panel and TV operations.
Larger substrates can yield more panels than smaller, earlier-generation ones, helping Sharp offer more competitively priced display panels and LCD TVs.
"Following the start of the new plant, we will be launching thinner, lighter large-screen TVs that come with finer resolution and cost competitiveness,"
Sharp Executive Vice President Toshishige Hamano said.
The Osaka-based company said its LCD TV business was likely to stay in the red this year, although its losses may be substantially reduced.
Investors should wait to see if the company can rely more on solar panels than on its LCD TV business before buying its shares, said SMBC Friend Securities' senior strategist Toshihiko Matsuno.
"We should also be watching how big the Chinese market is (for Sharp) ... whether consumers will be willing to buy Sharp's high-end models when there are much cheaper local models available."
Sharp expects its solar panel business to turn profitable this year as demand for renewable energy grows and subsidies for installing solar systems are being introduced in Japan.
For LCD TVs, it plans to focus resources in China as well as Japan.
Its operating loss was 90.4 billion yen in January-March, down from a 52.65 billion yen profit a year earlier.
For the full year that ended on March 31, it posted an operating loss of 55.48 billion yen, its first ever annual operating loss. It had a profit of 183.7 billion yen the previous year.
Annual sales declined 16.7 per cent to 2.85 trillion yen.
Prior to the announcement, shares in Sharp closed down 0.6 per cent at 1,106 yen, underperforming the Tokyo stock market's electrical machinery index, which rose 0.6 per cent.
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