Sharp Widens Loss Forecast to $4.7 Billion as TV Sales Slump

Sharp (6753) Corp., the Japanese TV maker that’s turning to Foxconn Technology Group (FOXCGZ) and founder Terry Gou for a $1.6 billion investment, widened its record loss forecast to 380 billion yen ($4.7 billion).

The net loss in the year ended March 31 is projected to be 31 percent higher than the company’s February forecast for a 290 billion-yen loss. That reversed an earlier forecast for a profit of 6 billion yen. The prediction is for the worst annual loss since the company was founded a century ago.

The Osaka-based company and domestic competitors Sony Corp. (6758) and Panasonic Corp. (6752) are all forecasting losses as they lose ground to Samsung Electronics Co. and LG Electronics Inc. in TVs and as a stronger yen damps the repatriated value of their overseas sales. Foxconn, the assembler of Apple Inc. (AAPL) iPads, and Gou last month agreed to invest 133 billion yen in Sharp (6753) and its display unit.

Sharp fell 4.3 percent to 530 yen in Tokyo trading today before the announcement. The Nikkei newspaper reported earlier today, without attribution, that the company was expected to report a loss of 390 billion yen.

Tax Charge

Sharp in February predicted a loss on slumping prices for its Aquos televisions, an economic slowdown and a tax charge. 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.

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, founded in 1912 and the maker of Japan’s first commercial TVs, said in February 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.

Foxconn, including Taipei-listed flagship Hon Hai Precision Industry Co. (2317), will buy 9.9 percent of Sharp for 66.9 billion yen in a new-share sale. Foxconn Chairman Gou and related investment companies will buy 46.5 percent of Sharp Display Products Corp., a venture with Sony Corp., for 66 billion yen.

The deal, the largest Japanese investment by a Taiwanese buyer, includes an agreement to purchase as much as 50 percent of Sharp Display’s LCD panels.

Sharp will begin shipping displays using IGZO technology for the new iPad, joining major supplier Samsung and LG Display Co., Englewood, Colorado-based IHS said in a March 14 statement.

Rating & Investment Information Inc. cut Sharp’s credit rating by two levels to A-, the fourth-lowest investment grade, from A+ on March 8 because “it will likely take time for the company to improve earnings capacity,” the Tokyo-based ratings company said earlier this month.

To contact the reporters on this story: Mariko Yasu in Tokyo at myasu@bloomberg.net; Masatsugu Horie in Osaka at mhorie3@bloomberg.net

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

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