Japanese TV maker Sharp Corp is anticipating a massive full-year net loss of $5.6 billion and warned that it could not survive for long if left on its own. The company’s share price fell by 3 percent following the announcement.
On the other hand, Sony’s shares increased 3.5 percent after posting a positive operating profit for the July-September quarter, while keeping its full-year profit target the same last Thursday.
Sharp was previously trading at 164 yen but after in-hours trading last Thursday, the Aquos TV maker warned that the company is expecting a “serious negative operating cash flow”.
The company almost doubled its estimated full-year loss to $5.62 billion after it took a $1.1 billion restructuring charge during third quarter. It forecasts an operating level loss of 155 billion yen.
“Sharp expects major earnings improvement in the second half as it posted greater inventory and capital write-downs in the first half than planned, and plans to cut personnel and other fixed costs,” said Goldman Sachs in a report.
“However, sales guidance for small/midsize LCDs and solar cells looks optimistic, and we think second half guidance looks difficult,” it added.
Sony’s fortune has changed after selling off its non-core chemicals division, prompting it to keep its full-year operating profit of 130 billion yen. However, the PlayStation gaming console maker said it anticipates lower sales figure for its portable Vita and PSP consoles. The same is true for sales of its compact digital cameras and TV sets although its PlayStation and smartphone sales figures remained unchanged.
Overall, Japan’s consumer electronics producers are reporting troubled times ahead. Panasonic Corp was the first to report a deteriorating situation last Wednesday by predicting that it will lose 765 billion yen this year amidst ongoing plans for restructuring.
Sharp’s declaration of possible bankruptcy is the first time for 100-year old firm.
Japanese firms including Sharp are paying massive investments on semiconductors, capital-intensive products, and flat-panel televisions. They are burning cash to build massive manufacturing plants at home to keep pace with South Korea’s Samsung Electronics Co and other rivals in the region.
Sharp’s focus right now is to raise the company’s stock price so that it can attract investors and raise more cash. The company’s shares have fallen down 75% this year.
Sharp announced last August of its planned workforce reduction by cutting 5000 jobs around the world. The layoff will be the first time since the 1950s. The company has already sold assets, cut salaries, and minimized on investments. As part of raising cash and to deal with overcapacity at its manufacturing plants, Sharp sold a 38% stake in its LCD-panel plant at home last July.
Sales of LCD TVs has fallen dramatically mainly due to decreased consumption in Japan and China caused by unstable Japan-China relations.
Both countries are wrangling over ownership of an island chain in East China Sea, sparking Chinese consumers anger. Customers in China are reportedly boycotting Japanese products over the dispute.
Another reason for the losses of big Japanese electronics maker is the appreciation of yen against the dollar. A stronger yen makes Japanese products more expensive overseas and lowered the value of company’s repatriated income from abroad.