Sharp Revenue Gaining as Capital-Raising Measures Considered
Sharp Corp. (6753), Japan’s worst-performing major stock last year, said higher demand for liquid-crystal- display TVs and home appliances, coupled with a weaker yen, are improving earnings as it considers ways to boost capital.
Revenue in September, October, November and December each surpassed year-earlier results, President Takashi Okuda said today. Sharp, which lost 55 percent of its market value in 2012, will disclose its strategy for increasing capital in a medium- term plan by March 31, he said. Okuda declined to say whether the company is in talks with any parties to sell new shares.
“LCD TV demand has been recovering,” Okuda said in Osaka, where the company is based. Sales of appliances are “robust,” and the weakened Japanese currency is a tailwind for the company, Okuda said.
The maker of Aquos TVs warned in November about its ability to survive after hemorrhaging 103 billion yen ($1.2 billion) in cash from operations in the fiscal first half amid falling demand and competition from Samsung Electronics Co. In December, Sharp turned to Qualcomm Inc. (QCOM), the biggest maker of mobile-phone chips, for as much as 9.9 billion yen in new capital after failing to secure a planned investment from Foxconn Technology Group.
“If demand for large-sized TVs is recovering, Sharp would benefit significantly,” Keita Wakabayashi, an analyst at Mito Securities Co. in Tokyo, said by phone today. “There are signs that the TV market may be bottoming out. Panel prices have rebounded on lower supply, while the global economy doesn’t appear to be worsening much further.”
Global TV shipments will probably remain unchanged this year after falling 6 percent in 2012 because of economic conditions, researcher DisplaySearch said Jan. 4.
Sales of home appliances under a rural stimulus program in China, the world’s second-biggest economy and Sharp’s largest overseas market, rose 18.8 percent last year, the Ministry of Commerce said in a statement on its website today.
Operating income, or sales minus the cost of goods sold and administrative expenses, has been beating the company’s plan since October, Okuda said, without elaborating.
“We aim to sustain the momentum in the January-to-March quarter so that we can meet our operating profit target,” he said.
Sharp, which posted an operating loss of 168.9 billion yen in the six months ended Sept. 30, is projecting an operating profit of about 13.8 billion yen for the fiscal second half ending March 31, the company said in a statement today.
Concern about a second-half operating loss is expected to increase as earnings from panels known as IGZO will probably deteriorate, Kota Ezawa, an analyst at Citigroup Inc. in Tokyo, said in a Jan. 4 report.
“Further debt expansion at the end of December is also a big concern,” Ezawa said in the report.
Sharp’s interest-bearing debt totaled 1.2 trillion yen as of Sept. 30, its highest level ever, while the net asset ratio fell to 10.3 percent, less than half of what it was six months earlier, the company said in November.
The electronics maker raised 4.9 billion yen from San Diego-based Qualcomm as part of a two-step transaction, Sharp said Dec. 27. The second share sale is based on certain conditions, including Sharp posting an operating profit in the six months to March 2013 and holding 125 billion yen in cash and 100 billion yen in net assets as of March 31.
The capital partnership will help the two companies team up for development of smartphone displays, they said in December.
In March, Sharp signed an agreement to sell a 9.9 percent stake through a new-share offering to Foxconn at 550 yen apiece, for a total investment of 67 billion yen. The TV maker has failed to close the deal as its shares plunged amid widening loss forecasts, prompting renegotiation of the terms.
Sharp sent a letter to Foxconn asking for a progress report on the Taiwanese company’s possible investment, Okuda said. The companies are continuing discussions, though Okuda said he hasn’t met directly with Foxconn Chairman Terry Gou since October.
“A public share offering is among many ways to boost capital,” Okuda said. “There is the problem of dilution. We are looking for the best option for us.”
Sharp is forecasting a record full-year net loss of 450 billion yen for the 12 months ending March 31 because of falling prices of LCD panels and sluggish demand for solar panels. The 100-year-old inventor of mechanical pencils is selling assets and cutting jobs to revive profit after posting a record 376 billion-yen loss last fiscal year.
Sharp is counting on its IGZO display technology, which consumes less power than conventional panels, to recover. The company has lined up customers for the displays, a senior executive said in November, after saying earlier last year it was struggling to find buyers.
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