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Sharp Drops ‘Material Doubt’ From English Earnings Statement

Sharp Drops ‘Material Doubt’ From English Earnings Statement
Japan’s largest maker of liquid-crystal-display panels on Nov. 1 forecast a record net loss of 450 billion yen ($5.6 billion) for the year ending March 31. Photographer: Tomohiro Ohsumi/Bloomberg

Sharp Corp., the world’s worst-performing major stock, revised the English version of its quarterly earnings statement to remove the words “material doubt” in describing its status as an assumed going concern.

“There exist conditions which might raise uncertainties about Sharp being an assumed going concern,” the Osaka, Japan-based company said in an e-mailed statement today, altering its translation of the financial statement for the quarter ended Sept. 30. Sharp is trying to describe its status “more precisely,” it said in today’s statement.

Japan’s largest maker of liquid-crystal-display panels on Nov. 1 forecast a record net loss of 450 billion yen ($5.6 billion) for the year ending March 31, scrapping its earlier projection for a 250 billion-yen loss. The original English version released that day said: “Sharp is in circumstances in which material doubt about its assumed going concern is found.”

The Japanese version of the earnings statement wasn’t changed, Atsushi Yoshida, a Sharp spokesman, said by phone today.

Sharp, hit by falling prices of LCDs, hemorrhaged 103 billion yen in cash from operations in the first half of the year as Japan’s electronics industry struggles with dwindling demand and competition from Samsung Electronics Co. Panasonic Corp. and Sony Corp. are also cutting jobs and closing down factories in an attempt to return to profitability.

Sharp fell as much as 5.5 percent to 156 yen in Tokyo trading, extending this year’s decline to 77 percent, the worst performer among more than 1,600 companies in the MSCI World Index of developed nations.

Default Risk

The bond risk for the maker of Aquos TVs is signaling a 94.9 percent chance of default in five years. The cost of insuring 1 billion yen of Sharp’s debt for five years rose by 125 million yen in the past month to 680 million yen in advance and 10 million yen annually, according to data provider CMA.

The 94.9 percent chance of default is based on the assumption that investors would recover 27 percent of the bonds’ value if the company fails to adhere to its debt commitments, an expectation that CMA lowered from 30 percent a month ago.

Fitch Ratings cut the company’s credit rating to junk on Nov. 2, lowering it by six levels to B-, as it cited growing liquidity risks.

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