JAPAN:SHARP POSTS PROFIT DROP

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Sharp posts H1 profit drop, keeps outlook
TOKYO – Japan’s Sharp Corp. said on Wednesday its operating profit fell a worse-than-expected 3 percent in the first half as sliding flash memory chip prices overshadowed strong demand for liquid crystal display TVs, but it stood by its full-year forecast for a 6 percent rise in profit.
As the world’s top maker of LCD televisions, Sharp has been in a prime position to benefit from the rapidly growing market for flat TVs. It has also enjoyed robust sales of solar panels and an uptick in demand for its copiers and high-tech ovens.
But its earnings have been weighed down by tumbling prices of flash memory and image sensor chips, as well as intense competition in the market for small LCD panels used as displays in mobile phones and portable game players.
“We are seeing an upward trend in our financial results since hitting a bottom in the latter half of last year,” Executive Vice President Hiroshi Saji told a news conference.
The Osaka-based firm said group operating profit was 75.07 billion yen ($652.1 million) in the six months ended September, compared with a profit of 77.58 billion yen in the first half last year. Sales rose 6.2 percent to 1.34 trillion yen.
The profit result was below the market consensus of 77.43 billion yen, according four analysts polled by Reuters Estimates.
Despite the first-half setback, Sharp’s earnings will stand out in Japan’s struggling consumer electronics sector. Unable to weather sliding product prices, rivals Sanyo Electric Co., Victor Co. of Japan Ltd. and Pioneer Corp. are all expecting big losses in the first half.
Sharp said it raised output this month at its flagship LCD plant in western Japan to be able to process 51,000 sixth-generation glass substrates per month, up from 45,000 units a month in April, but it was still falling short of demand.
“Demand for large LCD panels was very strong in the first half, and the situation is still tight today,” Sharp President Katsuhiko Machida told a press conference in Osaka. “We are considering ramping up output further but don’t think it will be in time for the second half.”

SEIKO EPSON SLUMPS
Saji said Sharp expected prices for LCD TVs of 32 inches and smaller to be relatively stable, but expected a further price drop for models larger than 40 inches. He said prices overall fell about 20 percent in the first half.
Sharp reiterated its forecast for sales of 4 million LCD TVs and for operating profit to reach 160 billion yen this business year, up 6 percent from 2004/05.
Machida sounded an upbeat note about its small and midsized panels, saying profit margins on those panels had started to rebound since the summer.
In other results, Seiko Epson Corp., the world’s second-largest ink jet printer maker after Hewlett-Packard Co., posted a group net loss of 1.16 billion yen ($10.1 million) for the April-September first half, compared with a profit of 39.47 billion yen a year earlier.
The result came as little surprise since Seiko Epson last week revised its earnings estimates for the first half to a net loss of 1.1 billion yen from its prior forecast for a 2.0 billion yen loss, to reflect cost cuts in its LCD operations.
That followed a sharp downward revision last month when Seiko Epson cut its full-year net profit forecast in half to 22 billion yen due to intense competition in the ink jet printer market and sluggish sales of LCD panels and LCD driver chips.
Underscoring the tough market environment, ink jet printer rival Lexmark International Inc. on Tuesday said its quarterly profit fell by more than half as it suffered a dramatic slump in demand for its ink and toner.
Shares of Sharp rose 1.3 percent during the first half ended last month while shares of Seiko Epson fell 27 percent, compared with a 7.2 percent gain in Japan’s electrical machinery subindex .
Prior to the announcement, Sharp closed down 0.8 percent at 1,592 yen. Seiko Epson closed up 0.4 percent at 2,865 yen, compared with the electrical machinery subindex’s 0.38 percent rise.

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November 7, 2005 at 10:22 AM