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Sharp Drops in Tokyo Trading as JPMorgan Cuts Profit Estimate

Sharp Corp., Japan’s largest liquid-crystal-display maker, fell the most in three weeks in Tokyo trading after JPMorgan Chase & Co. cut its estimate for profit on costs related to panel factories.

Sharp dropped as much as 3 percent, the biggest intraday decline since May 16, to 716 yen, before trading 1.5 percent lower at 727 yen at the 11 a.m. break on the Tokyo Stock Exchange. The Nikkei 225 Stock Average fell 0.8 percent.

The Osaka, Japan-based company on June 3 forecast an 87 percent gain in operating profit this year to 32 billion yen ($399 million) for its LCD business as it shifts some output to smaller panels to meet demand for smartphones and tablet computers. Sharp’s estimate doesn’t include utilization losses related to suspending operations at two plants in Japan as it reallocates production, Yoshiharu Izumi, an analyst at JPMorgan, wrote in a note to clients today.

“We revise our forecast because we count utilization losses as an operating expense, since overseas LCD companies do not record utilization losses as extraordinary losses,” Izumi wrote in the report. He cut his estimate for operating profit for the year started April 1 to 11 billion yen from an earlier prediction of 42 billion yen. The company has a forecast of 97 billion yen.

Izumi also reduced his six-month price estimate for Sharp shares by 8 percent to 690 yen. He estimated utilization losses would be 27 billion yen at the Sakai plant and 15 billion yen at the Kameyama facility, as the company temporarily halts output to shift to smaller panels.

Sharp on June 3 forecast a 69 percent drop in net income to 6 billion yen this fiscal year.

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