Toshiba Cuts Annual Profit Forecast 54% on Stronger Yen, Thailand Floods

Toshiba Corp. (6502), the world’s second- largest maker of flash memory chips, cut its profit forecast 54 percent, citing a stronger yen, floods in Thailand and slowing demand brought about by the debt crisis in Europe.

Net income may total 65 billion yen ($853 million) for the year ending March 31, compared with Toshiba’s earlier estimate of 140 billion yen, the Tokyo-based company said in a statement today. That lagged behind the average 119 billion-yen profit estimate of 21 analysts tracked by Bloomberg. Toshiba also cut its sales forecast to 6.2 trillion yen from 7 trillion yen.

The maker of Regza televisions, aerospace components, nuclear reactors and notebook computers cut production of single-function chips last quarter because of the weakening economies in the U.S. and Europe. Toshiba and other Japanese exporters have been hurt as the yen strengthens against the dollar and euro, reducing the value of repatriated revenue.

“The current severe situation may last a while,” said Mitsushige Akino, who oversees $600 million at Ichiyoshi Investment Management Co. in Tokyo. “It may take until July to see a recovery for the flash memory market, if the U.S. economy picks up and emerging countries maintain the current growth.”

Toshiba fell 1.8 percent to 323 yen in Tokyo trading before the earnings announcement.

Thai Factories

A stronger yen and the impact from Thailand’s worst floods in almost 70 years contributed 40 billion yen each to lowering the forecast operating profit, Makoto Kubo, executive vice president at the company, told reporters in Tokyo. Toshiba reduced its operating profit forecast 33 percent to 200 billion yen for the year ending March, the company said.

Toshiba halted production at its 10 factories in Thailand because of the floods. The company has so far reopened four plants including one that makes washing machines so far, Keisuke Ohmori, a spokesman, said today.

Honda Motor Co. (7267), Japan’s third-largest carmaker, also lowered its full-year profit forecast after the Thailand disaster idled Southeast Asian output. The floods also disrupted production for Toyota Motor Corp.

Toshiba based its earnings forecast on exchange rates of 77 yen against the dollar and 99 yen to the euro, revising them from 85 yen and 115 yen, respectively.

TV Operating Loss

The company is reorganizing production of less-profitable discrete semiconductors, which are used for single functions such as transistors. The company will shut three factories that make discrete chips in Japan and transfer about 1,700 workers by the end of September, it said in November.

Toshiba had a loss of 10.6 billion yen in the three months ended Dec. 31, compared with a profit of 12.4 billion yen, the company said in a statement today.

Shipments of flat-panel televisions in Japan fell 59 percent last month, after the government subsidies expired, Japan Electronics and Information Technology Industries Association said on Jan. 25. Toshiba estimates an operating loss of about 45 billion yen from its televisions business for the full-year period, he said.

Worldwide PC shipments declined 1.4 percent to 92.2 million units in the three months ended Dec. 31, Gartner Inc. said earlier this month, citing sluggish consumer demand. Prices for 32-gigabit NAND (DRFL32ML) flash dropped about 47 percent during the past year, according to data from Taipei-based Dramexchange Technology Inc.

To contact the reporter on this story: Naoko Fujimura in Tokyo at nfujimura@bloomberg.net

To contact the editor responsible for this story: Michael Tighe at mtighe4@bloomberg.net

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