April 16, 2014 2:36 am JST

Sales tax hit seen keeping Sharp's profit flat for fiscal 2014

OSAKA -- Sharp Corp.'s operating profit for the year through March 2015 will likely come up flat at around 100 billion yen ($972 million), falling some 10 billion yen short of the target set last May in its medium-term business plan.

     The recovery of core operations such as liquid-crystal-display panels will bolster earnings, but the sales tax hike in Japan and the decline of Asian currencies are expected to weigh down results.

     In fiscal 2013, Sharp likely generated a net profit for the first time in three years, with operating profit reaching nearly 100 billion yen. The earnings reflect a one-time boost of roughly 30 billion yen, including patent-related income received from partner China Electronics Corp.

     Such temporary factors will be gone this fiscal year, but the copier and solar power generation businesses are faring well. The LCD panel business, which previously hemorrhaged red ink, is also picking up. The company will increase shipments of cutting-edge IGZO (indium-gallium-zinc oxide) panels for smartphones to China, and thus raise the profitability of its Kameyama No. 2 facility in Mie Prefecture.

     Meanwhile, the higher sales tax that took effect April 1 is expected to dampen the domestic market for TVs and other appliances. And in Southeast Asia -- the market Sharp sees as the main battleground for white goods -- the weakening of the Indonesian currency is seen undercutting earnings. Sales for this fiscal year are expected to be flat, coming in at just under 3 trillion yen.

     In fiscal 2011-12, Sharp sustained a combined net loss of more than 900 billion yen. The company is working to improve the cost structures of its LCD factories as part of rebuilding efforts.

     Last fall, it raised nearly 140 billion yen by issuing new shares. But its capital ratio as of the end of March stood at just 8% or so. The company needs to accumulate more funds given the LCD business' vulnerability to demand fluctuations.

     Sharp will now likely adjust its operating profit projection for this fiscal year to around 100 billion yen, but is seen keeping fiscal 2015's target unchanged at 150 billion yen.