Sharp expects loss as TV, smartphone businesses slump

Japan's electronics giant Sharp president Kozo Takahashi is surrounded by reporters after he announced the third quarter financial result in Tokyo yesterday. Photo: AFP

Japanese consumer electronics giant Sharp on Tuesday reversed its fiscal year profit forecast, warning that it would instead lose about $256 million, as a slump in its television and smartphone screens businesses dented growth.

The maker of Aquos brand electronics said it now expects to book a 30 billion yen shortfall in the year to March, after earlier predicting a profit of the same amount, while sales would come in at 2.9 trillion yen.

Osaka-based Sharp -- which lost 7.2 billion yen in the nine months to December -- had warned earlier that its full-year earnings would miss previous forecasts owing to a "deterioration" in sales at home and fierce competition in the liquid crystal display business.

The disappointing reversal comes as local media, including the leading Nikkei business daily, said Sharp's top executives would take pay cuts of as much as 55 percent over the losses -- a common act of atonement in Japan's business world.

"We revised the previously announced forecast as we anticipate worsening profits," Sharp said in a statement on Tuesday. It also pointed to "greater-than-expected changes in (the) business environment, such as rapid fluctuations in exchange rates and a price decline in small- and medium-size LCD business".

Sharp -- a key Apple supplier that is a leader in screens for smartphones and tablets -- also pointed to weakness in its energy unit, where sales tumbled because of slumping demand for solar cells.

In response, "we will take drastic cost-cutting measures, undertake a review of unprofitable businesses, and further streamline head office", Sharp said.

The company had swung back to profit in the fiscal year to March 2014 after two years of huge losses, thanks to stronger sales and cost-cutting.

Sharp, along with Sony and Panasonic, has been undergoing a painful restructuring to move past years of losses that were largely tied to huge losses in its TV unit as lower-cost rivals overseas pose a heavy challenge.

However, a sharply weaker yen has partly offset the decline as it inflates the value of repatriated overseas income.

In the nine months to December, Sharp said operating income tumbled 37.1 percent while sales slipped 3.1 percent from a year earlier.

"Despite the weak yen, Sharp is still struggling, especially in the smartphone sector," said Mito Securities analyst Keita Wakabayashi.

"It's wrestling with severe price competition from Chinese and South Korean competitors so it has to cut costs even more to survive. The company is a still in a critical period."

By contrast, Panasonic said Tuesday it was still on track to book a 140 billion yen annual profit, as it moves away from the struggling television business.

Rival Sony -- which is expecting a huge 240 billion yen full-year loss -- is to publish partial results on Wednesday. The company earlier announced it would delay the release of its full quarterly earnings report after a cyberattack damaged the computer network at its Hollywood film unit.

The firm said its Sony Pictures Entertainment would not have time to put together financial statements after the attack, which was linked to its controversial North Korea satire "The Interview" and has been widely blamed on Pyongyang.