Sharp Corp. (6753), the maker of Aquos televisions, may sell stock holdings and offer workers buyouts after slumping sales prompted the company to widen its full-year loss forecast by eight times.
Sharp may sell its cross-shareholdings and account receivables if Taiwan’s Foxconn Technology Group (2354) invests less money than it said in March, Miyuki Nakayama, a spokeswoman for Sharp, said in an e-mail today. Pioneer Corp. (6773) and Sekisui House Ltd. (1928) are among the companies Sharp has stakes in, according to data compiled by Bloomberg.
Sharp is cutting 5,000 jobs and may sell off factories after increasing its annual loss forecast to 250 billion yen ($3.2 billion) amid lower TV demand and a strong yen, which is eroding overseas earnings at Japanese consumer-electronics makers, including Sony Corp. and Panasonic Corp. (6752) The workforce reduction, Sharp’s first since 1950, is part of a plan to reduce fixed costs by 100 billion yen, it said Aug. 2.
“It’s still unclear whether the company can generate profit even after carrying out restructuring,” said Hidetoshi Ohashi, who runs Japan Credit Advisory Co. in Tokyo. “There may be further credit-rating cuts for Sharp in the future.”
Sharp will offer buyouts to about 3,000 of the workers as early as next month, the Nikkei newspaper said earlier today, without saying where it got the information. The Osaka-based company will announce details of the buyouts once a decision is made, Nakayama said.
Sharp rose 0.6 percent to close at 180 yen in Tokyo trading today, trimming its loss to 73 percent this year. The shares, the worst-performing this year in Japan’s benchmark Nikkei 225 (NKY) Stock Average, fell to a 38-year low on Aug. 15 after Deutsche Bank AG cut its rating on the stock, citing concerns Sharp’s cash flow won’t cover funding needs.
The job cuts come after Sharp unveiled a plan to spin off its TV panel unit and turned to Foxconn and founder Terry Gou in March for 133 billion yen in funding after forecasting its second straight annual loss.
Part of the agreement has been completed as Gou invested 66 billion yen into a display venture, while the remaining 67 billion-yen investment is pending approval.
Foxconn said earlier this month it plans to renegotiate the price of its proposed investment from the 550 yen a share it agreed to. Negotiations between the two companies are continuing, Nakayama said.
China, Mexico Plants
Sharp will begin talks with its labor union shortly as it prepares to offer buyouts, the Nikkei newspaper reported today. It will reduce the number of workers at its headquarters to 1,000 from 1,500, the report said.
In addition to the 5,000 job cuts announced Aug. 2, Sharp may shed more than 3,000 positions by selling plants in China and Mexico to Foxconn’s flagship Hon Hai Precision Industry Co., the Yomiuri newspaper said yesterday, without citing anyone.
Sharp has offered to sell its TV plants in the two countries to Foxconn, the Taiwanese company said Aug. 17. Sharp hasn’t decided on selling the factories, Nakayama said yesterday.
Sharp has hired consulting firms as it considers selling divisions including the copier and air-conditioning units, the Nikkei reported Aug. 16. The Nikkei said Sharp may spin off its display plant in central Japan, and the Yomiuri newspaper reported the same day that Sharp is in talks with overseas makers about selling its solar-battery plant in western Japan.
Nakayama has denied those reports.
“There have been reports that Sharp will sell businesses, which gave an impression that the company may be selling everything it can to raise funds in the short run,” said Nobuo Kurahashi, an analyst at Mizuho Financial Group Inc. (8411) in Tokyo. “Investors are concerned the company may be taken apart rather than being revived.”
Standard & Poor’s cut its long-term credit rating on Sharp by one level on Aug. 3 to BBB, the second-lowest investment grade, citing “huge first quarter operating losses and net losses.” S&P said it may cut the rating further.
Fitch Ratings said the same day Sharp may be reduced to junk grade within six to 12 months. Fitch now rates Sharp’s long-term credit BBB-, the lowest investment grade.
Japan’s Rating and Investment Information cut the company’s short-term rating to a-2 from a-1 earlier this week and said it may reduce it further. R&I also lowered Sharp’s long-term rating.
The downgrades add to pressure on Sharp as it faces redemptions of short-term debt due within a year. The company had 362 billion yen in commercial paper and 337 billion yen in short-term borrowing as of June 30, according to its quarterly financial statement.
Sharp also had 190 billion yen in corporate bonds and 124 billion yen in long-term borrowing, according to the statement.
Sharp’s cash and near cash totaled 218 billion yen as of June 30, according to the statement.
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