Sharp facing ¥200 billion loss, may close plants


Sharp Corp. is expected to post a group net loss of about ¥200 billion this fiscal year and is considering additional restructuring, including the closure of four factories in Hiroshima Prefecture, sources close to the matter said Tuesday.

The struggling electronics-maker at the same time aims to strengthen its financial condition by requesting aid from two main creditor banks to increase its capital by around ¥175 billion through measures such as a debt-for-equity swap, the sources said.

The expected loss will be far bigger than the ¥30 billion loss that the company currently expects for the fiscal year ending this month and will represent a plunge from a profit of ¥11.6 billion it posted in the last fiscal year that ended in March 2014.

In a bid to restore its battered operations, Sharp is considering closing its Mihara plant, which mainly produces light-emitting diodes, and its Fukuyama No. 1 to No. 3 plants for sensor-related products such as touch panels, the sources said.

The Osaka-based company also plans to pull out of production and sales of its unprofitable solar panel business, as the yen’s rapid depreciation has driven up the cost of imported components, they said.

Sharp will seek financial support of ¥75 billion each from Mizuho Bank and the Bank of Tokyo-Mitsubishi UFJ through a debt-for-equity swap, while it is looking to raise ¥25 billion via a third-party allocation of shares with domestic and overseas companies, the sources said.

The electronics-maker managed to return to profitability for the first time in three years in the last fiscal year, as it shifted its focus to small-to-medium display panels for smartphones and its efforts to revamp its flagging TV and liquid crystal display panel businesses also paid off.

But the company is now facing intensifying competition with Chinese and South Korean rivals that are attracting customers away from it with their lower-cost display panels.

Sharp posted a group net loss of ¥545.3 billion in the fiscal year ended March 2013 that followed a net loss of ¥376.1 billion in the previous year.

The company said later Tuesday in a statement that it is considering a variety of restructuring measures and will outline its new mid-term business plan in May.

  • GBR48

    Bluntly, if you run a konbini franchise, you made more money than Sharp in the last few years.

    An expensive MBA would never encourage the use of basic maths, but from the figures given above, if you tot up the annual profit or loss, Sharp hasn’t been operating as a going concern for some time, but as a charity funded by banks. This is possible up to a point anywhere in the world due to the unhealthy nature of our economic system, but can probably be maintained for much longer in Japan given the (entirely legal) interconnectedness of banks, government and large corporates.

    This has consequences. It beggars the overall economic system, discourages competitiveness and development within large corporates, rewards failure and allows artificially maintained large businesses to compete unfairly against smaller, more competent businesses, that might actually be operating in a way that makes a profit.

    Sony has attempted a bit of Googleisation recently, but keeping large, unprofitable businesses on ‘life support’ like this damages the entire economy, including future business development.

    Purchasing foreign, profitable businesses is one solution, unless the same mechanism is passed on, like a virus, to them.

    The credit crunch in Europe led to some well known chains vanishing from the high street, as they had been run (badly) on debt for some time. That was a healthy thing, as if you aren’t making a profit, then you are not really a business. Internet start-ups can lose venture capital, but at some point they must offer a revenue stream. Extant companies can dip into the red in an odd year, but repeatedly losing money indicates the need for extensive and sweeping changes, not just a bit of tweaking.

    If business, government and finance were separated in Japan, although the outcome might be shocking, the result would be healthy. As this will not happen, you fear for the consequences upon the future development of the national economy.

    It is notable that relatively few major global Internet companies began in Japan, despite the country being a world leader in technology. This should have thrown up a big red flag that something was wrong. It is natural for new companies (Google, Facebook) to appear and surpass established ones. The economic system, as it is in Japan, almost seems designed to prevent this, rather than foster it. This is not healthy for the future, as large companies innovate badly, and if maintained intravenously by banks, fossilise.