Business / Corporate

Japan Display posts higher April-December net loss on hefty revamp costs

Kyodo, jiji

Japan Display Inc. suffered a rough April-December period as sales dropped and restructuring costs took a toll.

In a delayed earnings report, the struggling display maker logged a group net loss of ¥110.89 billion for the nine months that ended Dec. 31, worse than a loss of ¥9.8 billion in the same period a year earlier.

Japan Display said Monday it logged black ink in group operating profit during the October-December quarter due largely to restructuring efforts, including cutting more than 1,200 jobs.

However, the ailing panel manufacturer still faces an uphill battle over the global spread of the coronavirus as it reduces output in domestic and overseas factories while seeing slumping demand for its products.

For April-December, its group operating loss grew to ¥32.62 billion from a loss of ¥7.42 billion a year earlier, as sales sagged 16.7 percent to ¥387.78 billion.

Japan Display had a negative net worth of ¥108.3 billion as of the end of December, up from ¥103.3 billion three months earlier, with its capital adequacy ratio falling to minus 25.9 percent.

But the company said it will post a positive net worth in the full business year that ended March 31 after obtaining shareholder approval last month for its bailout plan.

The smartphone display supplier to Apple Inc. received a capital injection of ¥50.4 billion from private fund Ichigo Asset Management Ltd., while the government-backed fund INCJ Ltd. swapped its loans worth ¥102 billion for preferred shares.

“We have improved our financing to some extent and are determined to turn around our business in the next business year,” Japan Display CEO Minoru Kikuoka said in an online news conference.

The company had initially planned to release its earnings report in mid-February but postponed it due to a prolonged investigation by a third-party panel into suspected improper accounting.

After receiving a report from the panel Monday, Japan Display said some improper accounting measures, including an overvaluation for its inventory, had pushed down its consolidated operating profit by ¥7.7 billion as of the end of the first half of fiscal 2019.

Japan Display said it padded its operating profit by a total of ¥8.2 billion over about six years starting in fiscal 2013, when it was listed on the first section of the Tokyo Stock Exchange. It also inflated its net profit by ¥6.2 billion.

The investigative panel, headed by lawyer Shiro Kuniya, determined that the company had booked some ¥10 billion in fictitious inventory.

A large part of the accounting irregularities was led by the head of the accounting and administrative division at the time, while part of the misconduct was done mainly at the instructions of the chief financial officer. Both are no longer with Japan Display.

The panel concluded that none of the firm’s current executives was involved in the accounting fraud.

Behind the malpractice were the corporate culture of attempting to expand operating profit by any means, management’s desperate hope to achieve earnings goals set by the government-backed investment fund INCJ, which was the top shareholder of Japan Display, and pressure from Chief Executive Officer Mitsuru Honma, who took the post in June 2015, according to the panel.

The company was established in 2012 through a merger of the display operations of Sony Corp., Hitachi Ltd. and Toshiba Corp. with support from INCJ.

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