Toshiba Forecasts 83% Profit Increase, Beating Estimates

Toshiba Corp. (6502), the world’s second- largest maker of flash memory chips, predicted profit will rise 83 percent as sales recover from a slump caused by the strong yen, falling prices and natural disasters.

Net income may increase to 135 billion yen ($1.7 billion) for the year ending March 31 from 73.7 billion yen for the previous 12 months, the Tokyo-based company said in a statement today. The forecast was higher than the 127.6 billion-yen average of 20 analyst estimates compiled by Bloomberg.

Toshiba’s TV business may remain unprofitable this year, Corporate Executive Vice President Makoto Kubo said today in Tokyo. The company has also said it will focus on flash memory used in smartphones and tablet computers, while reorganizing its less-profitable discrete semiconductors, which are used for single functions such as transistors.

“To beat the expectations, Toshiba needs to show how it will improve its flash memory-chip and TV businesses,” Hideki Yasuda, an analyst at Ace Securities Co. in Tokyo, said before the announcement. He said the company is expected to “improve” revenue and profit this year.

Revenue may rise 4.9 percent to 6.4 trillion yen this fiscal year, Toshiba said, after dropping 4.7 percent last year as the surging yen eroded the value of overseas sales while the March 11 earthquake in Japan and flooding in Thailand disrupted production. Operating income from electronic devices and power and industrial systems is projected to rise, the company said.

Nuclear Reactors

The electronics and industrial group, which makes products from aerospace components and nuclear reactors to notebook computers, will benefit should global semiconductor revenue rise at a faster pace this year as forecast by research company IDC. Toshiba is also expanding its power-systems business and won four orders this year for steam turbines at power plants in countries including India and the U.S.

Operating profit, or sales minus the cost of goods sold and selling, general and administrative expenses, may rise 45 percent to 300 billion yen this fiscal year, Toshiba said.

Toshiba rose 2.9 percent to 317 yen at the close in Tokyo trading before the earnings announcement. The stock has advanced 0.6 percent this year, compared with an 8.6 percent gain in Japan’s benchmark Nikkei 225 Stock Average.

Flash Memory

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.

Semiconductor sales may rise by between 6 percent and 7 percent industrywide this year, IDC said April 30. Global chip revenue rose 3.7 percent to $301 billion in 2011, as demand from wireless-device makers offset declining revenue from personal computer manufacturers, IDC said.

Among acquisitions announced last fiscal year, Toshiba took a 60 percent stake in Swiss electronic-metering company Landis+Gyr AG to boost its energy management sales. The chipmaker plans to close its transaction to buy Western Digital Corp. (WDC)’s 3.5-inch hard-disk drive manufacturing equipment this fiscal year, Toshiba said in March.

Toshiba Tec Corp. (6588), half owned by Toshiba, will acquire International Business Machines Corp. (IBM)’s point-of-sale terminal business for about $850 million, the company said last month.

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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