Sharp Increases Full-Year Operating Loss Forecast

on Nov 1, 2012

On 1 November 2012, Sharp Corp (TYO:6753, PINK:SHCAY) released its second quarter results for the financial year ending March 31, 2013, posting operating losses and revising its full-year outlook, almost doubling its net loss forecast.

**Sharp Reports Operating Losses**
The Japanese Sharp Corp reported a ¥168.9 billion (£1.31 billion) operating loss for the six months ended September 30. Net loss was ¥387.5 billion, whereas net sales dropped by 16 percent relative to the same period in the previous financial year. In its press release, Sharp noted that sales of solar cells in particular were down 15.8 percent, mostly on account of shrinking demand in Europe since sales of mega-solar power generation projects increased in Japan.

The company noted that the overall economic conditions remained “extremely severe” because of the yen’s exchange rate appreciation and ongoing deflation.
Reuters reports that Sharp’s shares have plunged more than 75 percent since the start of 2012, and lost 1.7 percent ahead of the release of the Q2 financial statement.
Negative Full-Year Outlook Casts “Material Doubt” on Survival

!m[The Japanese Company Might Not Be Able To Survive On Its Own](/uploads/story/701/thumbs/pic1_inline.png)The highlight of Sharp’s Q2 results was the full-year outlook revision, with the company forecasting a ¥155 billion operating loss, up from a previous ¥100 billion forecast. At a net level, the full-year forecast was almost doubled from ¥250 billion to ¥450 billion, reflecting the huge operating and net loss for the six months ended September 30, as well as negative cash flows from operating activities. “Therefore, Sharp is in circumstances in which material doubt about its assumed going concern is found,” the Japanese company said in its press release. “To overcome these circumstances, we will restructure the business further.”

The company said in its statement that it was planning to restructure its business further and generate cash flows by selling assets and reducing capital investments as well as by decreasing personnel expenses, including by calling for voluntary retirement and cutting salaries.
Bloomberg reports that Sharp is also considering alliances with other companies such as Hon Hai Precision Industry (TPE:2317) and Foxconn Technology (TPE:2354).

**Consumer Electronics Downtrend**
Sharp’s quarterly results are in line with Japanese peers such as Panasonic Corp (TYO:6752, NYSE:PC) which said that it expected a ¥765 billion full-year net loss. “Consumer needs have been changing and for too long Japanese electronics firms, like Sharp, with their size and heavy reliance on past successes, have been too slow to adapt,” noted Yuuki Sakurai, CEO of Fukoku Capital Management, as quoted by Reuters.
Bloomberg reports that global TV demand for instance is likely to remain little changed in 2013, with shipments of all types of TV declining by more than four percent in 2012.


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