* Posts first operating profit in five quarters
* Sticks with full-year operating profit forecast
* Rebound may help Sharp convince lenders it remains viable
By Reiji Murai and Tim Kelly
TOKYO, Feb 1 (Reuters) – Sharp Corp eked out a
quarterly operating profit on Friday, improving the bailed-out
consumer electronics maker’s chances of convincing lenders and
shareholders that it remains a viable company.
Sharp stuck to its forecast for a 13.8 billion yen ($151
million) operating profit in the second half, after losing 168.9
billion yen in the first half as the maker of goods from
airconditioners to televisions was savaged by lower-cost rivals.
“The results gave a sense of relief to investors as it was
able to keep promises with its banks to turn around its
business,” said Makoto Kikuchi, chief executive of Myojo Asset
Management.
“The next focus is whether the company can be profitable on
a net basis for the next fiscal year,” he added, warning that it
faced potential restructuring costs.
Sharp reported a third-quarter operating profit of 2.6
billion yen ($28.5 million), compared with a loss of 24.4
billion yen a year ago and beating market forecasts for a small
loss.
Its earnings were bolstered by robust sales of home
appliances and mobile phones, along with a weaker Japanese yen
that helped it compete overseas.
The group said it made money from its TV business in the
third quarter but forecast deeper annual losses from LCD panels
due to softer demand for small and medium sized panels for
smartphones.
The turnaround will allow Sharp’s banks to justify a bailout
that last year kept the maker of Aquos TVs in business. It would
also unlock further investment from Qualcom Inc that
would make the U.S. chipmaker its biggest shareholder.
However, Sharp’s future remains in the balance, say
investors. It faces tough competition in TVs and LCD screens,
and with few assets to fall back on, its cash position is
tenuous.
“Sharp has a very small breathing space,” said Yuuki
Sakurai, CEO at Fukoku Capital Management in Tokyo. “I don’t
think people are very confident about the future of Sharp at the
moment.”
Sharp is not as sensitive to foreign exchange movements as
more export-reliant competitors, but a one yen change in the
dollar/yen rate adds $7.7 million to operating profit. The
Japanese currency eased by about 9 yen against the dollar over
the course of the quarter.
CASH STRAPPED
Sharp won a $4.4 billion bailout from banks including Mizuho
Financial Group and Mitsubishi Financial Group
last October when it faced the repayment of commercial paper
debt it didn’t have enough money to pay.
The firm had to mortgage its offices and factories in Japan,
including one that makes screens for Apple Inc’s iPad
and latest iPhone, leaving it with only a few overseas plants it
could sell to raise more cash.
It warned in November that it may not be able to survive on
its own and doubled its full-year net loss forecast to $5.6
billion.
“It could be that the company and some part could be
absorbed by an American company or some part by the Taiwanese,”
said Fukoku Capital’s Sakurai.
Sharp may sell its Chinese TV assembly plant to Lenovo Group
, sources told Reuters this month. It is also in talks
to sell a Mexico factory to Hon Hai Precision industry
, which earlier bought a stake in Sharp’s advanced TV
panel plant in western Japan.
Hon Hai balked at an earlier agreement to invest in Sharp
directly as the Japanese company resisted giving any significant
management control to its Taiwanese partner.
Sharp in December turned to Qualcomm, which agreed to invest
as much as $120 million in the Japanese company. Qualcomm has
made an initial investment and payment of the rest depends on
Sharp returning to profit in the six months ending March 31.
Since the start of the year Sharp’s shares — which slumped
55 percent in 2012 — have risen 5.9 percent compared with a 7.5
percent gain in the benchmark Nikkei 225. Its shares rose 2.9
percent on Thursday, while the benchmark added 0.4 percent.
