Sharp Says Expects Significant Profit Improvement

By Reuters
October 19,2016
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Logos of Sharp Corp are pictured at CEATEC (Combined Exhibition of Advanced Technologies) JAPAN 2016 at the Makuhari Messe in Chiba, Japan, October 3, 2016. REUTERS/Toru Hanai

TOKYO (Reuters) - Japan's Sharp on Wednesday said it expects significant improvement in annual profit due to restructuring and synergies with new owner Foxconn, sending shares in the display maker soaring more than 10%.

The statement came after the Nikkei business daily reported that Sharp forecasts operating profit of about 40 billion yen ($385 million) for the business year through March. That would compare with the 6.6 billion yen average of 11 analyst estimates in a Thomson Reuters I/B/E/S poll.

Meeting the forecast would mark the first operating profit in three years for Sharp, which is rebuilding under Taiwan's Foxconn. The world's biggest contract electronics manufacturer, formally known as Hon Hai Precision Industry, bought two-thirds of Sharp for 388.8 billion yen in August.

Sharp cut about 6,000 jobs to 43,500 in the last financial year through early retirement and an operations overhaul including withdrawal from its money-losing North American TV set business.

On Wednesday, Sharp said it expected profit to improve but revenue to fall. Its shares subsequently jumped nearly 11 percent to their highest price in about six months, far outperforming the benchmark Nikkei average share price index.

"Sharp stopped the bleeding by cutting fixed costs, but that's only a stopgap measure," said analyst Hideki Yasuda at Ace Research Institute. "It's still unclear how the company can attain its topline growth. It needs to find a new growth driver."

The prospects of Sharp's mainstay display panel business - the root cause of its decline - remain dim.

The global panel market is on the cusp of improvement as a production cutback resolved a supply glut and new product launches including Apple Inc's latest iPhone temporarily boost demand.

But Sharp still has to find ways to compete with Chinese peers rapidly expanding capacity, and with South Korean makers far ahead in next-generation technology. Apple is widely expected to adopt that technology - organic light-emitting diode (OLED) - for future versions of its iPhone, analysts said.

Sharp said it would provide a full-year earnings forecast on Nov. 1, when it announces its second-quarter results.

($1 = 103.8200 yen)

(Reporting by Chang-Ran Kim, Taiga Uranaka and Makiko Yamazaki; Editing by Edwina Gibbs and Christopher Cushing)