Sharp Forecasts Record $3.8 Billion Loss on Slumping TV Prices, Write-Off

Sharp Corp. (6753) forecast its worst annual loss since it was founded a century ago, on slumping prices for its Aquos televisions, an economic slowdown and a tax charge.

The net loss in the year ending March 31 may be 290 billion yen ($3.8 billion), the Japanese electronics maker said in a statement today, reversing an earlier forecast for a profit of 6 billion yen. That compares with the average 16.2 billion-yen loss from 24 analysts’ estimates compiled by Bloomberg. Sharp (6753) cut its revenue forecast by 8.9 percent and said operating profit will be zero.

Japan’s largest maker of LCD panels booked charges as it cut deferred tax assets by 119.8 billion yen in the quarter ended Dec. 31. The Osaka-based company and local rivals Sony Corp. (6758) and Panasonic Corp. (6752) are also forecasting losses because of weakening demand for TVs, while a stronger yen damps the repatriated value of their overseas sales of LCDs (6753), mobile phones and solar cells.

“It was a surprise Sharp announced such a big downward revision,” said Tsunenori Ohmaki, analyst at Tachibana Securities Co. “I’m not sure whether the production cuts announced by the company until summer will be enough.”

Tax credits can’t be claimed when a company isn’t expected to post a profit in the future. Companies need to reduce deferred assets and take appropriate charges when they forecast a loss.

Sharp fell 4.3 percent, the biggest drop since Sept. 26, to close at 628 yen in Tokyo trading before the announcement. The stock fell 20 percent last year. A loss this year will be the first in three years, according to data compiled by Bloomberg.

Cutting TV Output

Sharp, founded in 1912, said it will halve the output at its largest TV panel factory in Sakai city, Osaka prefecture.

In April, Sharp reduced production of TV panels at its two biggest LCD plants. The company’s so-called 10th-generation factory in Sakai, has a production capacity of 72,000 panels a month, while the eighth-generation LCD plant in Kameyama, Mie, is capable of making 100,000 panels.

In December, Fitch Ratings downgraded Sharp’s credit rating to “BBB-,” citing increasing competition and weakness in the TV market. Sony had its rating cut by Moody’s Investors Service last month and Fitch in December, both citing the difficulty to turn around the unprofitable TV business as the reason.

Sony, Panasonic

Sony, the world’s third-largest TV maker, is forecasting a loss from selling TVs for an eighth consecutive year. The Tokyo- based company may report tomorrow a 43 billion yen loss in the third quarter, according to the average of four analysts’ estimates compiled by Bloomberg. Panasonic reports Feb. 3.

Global liquid-crystal display TV shipments probably gained 8 percent to 206 million units last year, falling short of an earlier projection of 211 million units, according to an October forecast by DisplaySearch. The shipments rose 13 percent in the quarter ended Dec. 31 from a year earlier, according to the researcher, which estimates annual shipments to rise 10 percent in 2012.

“TV and LCD panel inventory may further pressure earnings in the fourth-quarter,” Takashi Watanabe, a Tokyo-based analyst for Goldman Sachs Group Inc. said before the announcement. Losses related to inventory correction as well as Sharp’s declining market share in the smartphone market may also hurt the company’s earnings, said the analyst, who has a “neutral” rating on the stock.

Still, Sharp may be winning new business. Apple Inc. (AAPL), the world’s most-valuable technology company, is shifting production of iPhone and iPad displays to Sharp and may introduce televisions with screens from the Japanese company as early as mid-2012, Jefferies & Co. said in a note in November.

Apple is moving its business to Sharp in Japan largely at the expense of Samsung Electronics Co. (005930), a growing rival in smartphones and tablets, according to Peter Misek, a New York- based analyst at Jefferies. He wrote the research note based on a visit to Japan and conversations with manufacturing officials.

To contact the reporter on this story: Mariko Yasu in Tokyo at myasu@bloomberg.net

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

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