Tokyo: Sharp Corp. said Thursday it would book a $5.6 billion annual net loss as it undergoes a painful restructuring, underscoring the increasingly bleak outlook for Japan’s hard-hit electronics sector.
Sharp’s whopping loss forecast, nearly double earlier expectations, came a day after rival Panasonic warned it would post a whopping $9.6 billion loss in the year to March, reversing a previous vow to squeeze out a profit.
Only PlayStation maker Sony offered a glimmer of hope, saying Thursday that it shrunk its first-half net loss while keeping its pledge to return to profitability this year, after four years in the red.
The trio, which have announced massive corporate overhauls that included tens of thousands of jobs cuts, have seen their credit ratings downgraded and share prices plunge as they struggle to turn profitable.
A key challenge is the once-stable television businesses which has seen South Korean and Taiwanese rivals jump into the fight for global domination, with falling prices and razor-thin profit margins hurting results.
Japanese firms have been unable to keep pace with competition from the likes of Apple and South Korea’s Samsung Electronics, which have set the pace in the lucrative global smartphone market.
Samsung recently posted a record third-quarter profit of nearly $6.0 billion, powered by strong sales of its Galaxy smartphones and display panels.
Last year’s quake-tsunami disaster have added to the woes of companies facing a progressively worsening situation in recent years, while weak demand in Europe, a key market for everything from Japanese televisions and mobile phones to vehicles and electronics parts, has also dented balance sheets.
On Thursday, Sharp pointed to another unwanted problem unique to Japan’s manufacturers, from carmakers to TV suppliers: a diplomatic spat with China over a disputed East China Sea island chain.
The row sparked a tumble in demand among Chinese consumers for Japan-branded exports as Tokyo nationalised the archipelago in mid-September, enraging Beijing.
“Our business environment continued to be severe, due to drastic price drops of products and devices, production delay of new small- and medium-size (liquid crystal displays)… and a worse-than-expected drop in sales of LCD TVs in Japan and China,” Sharp said.
“Sales of LCD TVs fell drastically… This was due mainly to decreased demand in Japan and a drop in sales in China caused by deteriorating Japan-China relations,” it said in a statement.
Adding to the pain, Japanese manufacturers have been pounded by the strong yen, which makes their products pricier overseas and shrinks the value of firms’ repatriated foreign income.
Sharp said Thursday it would lose 450 billion yen in the fiscal year to March, dwarfing its previous prediction of a 250 billion yen shortfall.
It also cut its sales forecast to 2.46 trillion yen from 2.50 trillion yen, while saying it lost 387.58 billion in the first half of the current fiscal year to March, from a year-earlier loss of 39.82 billion yen.
Sharp is undergoing a painful restructuring in its efforts to return to profitability, promising thousands of job cuts while cutting wages for employees — from the factory floor to the executive boardroom — and selling real-estate to shore up its bleeding balance sheet.