• Kyodo, Bloomberg


Struggling electronics maker Sharp Corp. expects a group operating loss in the first half of fiscal 2015 as weak smartphone sales in China took their toll, company sources said Friday, a downgrade of its May projection for a ¥10 billion operating profit.

In a statement, the supplier of displays to Apple Inc. said it is now expecting its earnings to “sink below the initial projection due to a persistent harsh (business) environment, including a slowdown in the market for medium- and small-size liquid crystal display panels.”

The expected loss could be in the tens of billions of yen, some observers say. And the company is increasingly unlikely to log the ¥80 billion in net operating profit it has projected for the year ending in March.

Sharp’s share price slumped as much as 10 percent to ¥139, the lowest since their listing in 1974. It closed at ¥146, down 5.8 percent from Thursday.

The Osaka-based company has already decided on restructuring plans, including selling off its head office building and cutting jobs by soliciting voluntary retirement, but creditor banks have called for more fundamental reforms as the company’s fiscal health has not been restored.

The company is currently in talks with Taiwan’s Hon Hai Precision Industry Co. and the public-private partnership Innovation Network Corporation of Japan, owner of Japan Display Inc., over sales of its core LCD business.

The declining outlook for earnings at Sharp this year has added urgency to the talks and increased the odds of a deal with Hon Hai, a person with knowledge of discussions within the companies said. The Taiwan-based company would not face the antitrust hurdle Japan Display will have to clear as a rival supplier of LCDs to Apple.

Sharp reported a group net loss of ¥222.35 billion for fiscal 2014 and remained in the red in the following April to June quarter.

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