Sharp forecasts drop in profit amid turmoil

PUBLISHED : Saturday, 26 September, 1998, 12:00am
UPDATED : Saturday, 26 September, 1998, 12:00am

Sharp Corp is the latest of Japan's electronic giants to announce it has been badly hurt by the country's economic downturn.

Sharp's share price fell 5.8 per cent yesterday after it said its consolidated profits for the half-year to September would fall 88 per cent to 2.5 billion yen (about HK$143.06 million).

The company now expects its profit for the year to March will fall 60 per cent from the previous year to 10 billion yen.

'We have been hurt by a drop in housing sales and consumption in Japan,' the company said. It said it expected a severe operating environment in coming months because a 'simultaneous world-wide recession' had begun with the Asian downturn and the Russian financial crisis.

The drop in housing sales had hurt all of Japan's electronics companies because new home-owners typically bought electric goods like air-conditioners, refrigerators and stereos, analysts said.

As a result, domestic sales of Sharp's audio-visual products were expected to fall by more than 10 per cent, a Sharp spokesman said.

Severe price competition for the company's flagship product - liquid-crystal display panels - meant that this year, for the first time, the division producing them would lose money, the spokesman said.

Even more intense price competition turned semiconductors into another loss-making division, teh spokesman said.

Profits were still being made by Sharp's mini-disc division as sales of mini-disc players had taken off overseas, especially in North America, she said.

Sharp has extensive holdings in the shares of Fuji Bank, its main bank, as well as in Daiwa Bank. The prices of both banks' shares have fallen to a fraction of what they were a year ago.

In response to the sharp drop in profits, the company had decided to link employee pay with performance, the spokesman said.

As a first step, automatic pay rises with seniority would be abolished for managers.

The economic crisis in Japan has prompted many firms to stop the practice of raising pay on promotion regardless of performance.

Japan's top camera manufacturer, Nikon Corp, yesterday warned it would incur a heavy loss this year, blaming the microchip market slump.

The company forecast a group loss before tax of 10 billion yen, a reversal from its earlier estimate of three billion yen in profit.

A net loss of 12 billion yen was projected despite the firm's earlier expectation to post one billion yen in profit.

'Our sales forecast is expected to come short of an earlier estimate and profitability is seen deteriorating as prolonged microchip market slump resulted in reduced microchip-related capital investment,' it said.