OSAKA – Sharp Corp. said on Monday it could revise downward its profit forecasts for the current business year through March, given the weakening yen and fierce price competition in display panels for TVs and smartphones.
The struggling electronics-maker said in a statement that its consolidated earnings for fiscal 2014 are “expected to fall below our forecasts,” adding that it is “considering revising the forecasts.”
Sources close to the matter said Sharp could post a group net loss for the business year, pushing the ailing firm back into the red. It had forecast a net profit of ¥30 billion.
Given the sluggish earnings, the Sharp labor union is expected to forgo demanding a salary hike at the upcoming annual wage talks, in contrast with the industrywide trend of urging pay increases.
Sharp is also expected to overhaul its medium-term business strategy, which may come along with pressure from its lenders to accelerate restructuring efforts such as job cuts, the sources said.
In the April-December period, for which results will be released Feb. 3, Sharp’s operating profit is likely to have almost halved from ¥81.4 billion a year earlier, they said.
As part of its turnaround efforts, Osaka-based Sharp has expanded sales channels mainly in China for its mainstay liquid crystal display panel business.
At the same time, however, a fierce price war with rivals such as Japan Display Inc. — a company created through the merger of the display units of Sony Corp., Toshiba Corp. and Hitachi Ltd. — has apparently squeezed Sharp’s profitability in the business.
The firm has continued with its restructuring, including the closure of its solar cell business in Europe, but is still seen as struggling to find new ways to return to the black.
The weakening of the yen against the U.S. dollar and other major currencies has also added to the company’s woes, raising raw material costs in producing home appliances.
A possible net loss would force Sharp to revise its medium-term business strategy as early as this spring, the sources said, in a bid to reassure its lenders. The firm will likely draw up a new plan for a period through March 2018.
The current plan covers three years through fiscal 2015. In May, Sharp cut its profit guidance for fiscal 2014, forecasting a net profit of ¥30 billion and operating profit of ¥100 billion.
In fiscal 2013, it logged a net profit of ¥11.5 billion following the two consecutive years of net losses.
As for the wage talks, which will begin later this month, Sharp’s labor union is almost set to act independently from the broader Japanese Electrical Electronic & Information Union for the third straight year, a source familiar with the matter said.
The industrywide union is planning to demand a pay scale hike of at least ¥6,000 per month.
Without making such a request, the Sharp union is likely to demand that its management stick to the current pace of increasing annual wages as well as bonuses.
Sharp carried out salary cuts in fiscal 2012 and 2013.