UPDATE 4-Sharp sees record net loss as TV woes spur LCD cuts

Wed Feb 1, 2012 6:07am EST

* Forecasts $3.8 bln net loss for year to March

* To cut production in half at west Japan LCD plant

* Falls into operating, net loss in Oct-Dec quarter

* Japan TV makers struggle with weak demand, S.Korea rivals

* Sharp shares fall 4.3 pct on Thursday vs flat benchmark

By James Topham

TOKYO, Feb 1 (Reuters) - Sharp Corp forecast a record 290 billion yen ($3.8 billion) net loss for the year to March after posting surprise quarterly losses as a slump in TV sales forced it to halve output at a western Japan LCD plant.

The Japanese electronics maker said it was confronting a slump in both its LCD business, where it trimmed its full-year forecast for LCD TV sales to 12.8 million from 13.5 million, and in solar cells, which are also showing widening losses.

"There had already been reports that it would slip into a loss, but the amount seems to be bigger than had been expected," said Takashi Hiroki, chief strategist at Monex Inc, adding there would be a strong negative impact on the stock after a market consensus for a net loss of about 15 billion yen.

"Japan's manufacturing sector is facing a period of transition, so if Sharp goes ahead with structural reform of its operations, we can hold some hope of improvement in its results next year and beyond," added Hiroki.

Sharp had been expected to fare better than its bigger Japanese rivals Sony Corp and Panasonic Corp, which report earnings later this week, by focusing on premium big-screen TVs that have proved popular in the U.S. market.

But the company said its Sakai LCD plant would halve output for the January-March quarter, with the reduction likely to remain in place for the first half of the next financial year.

Japanese electronics makers are languishing in a TV market they once dominated as they confront sluggish demand and fierce competition from South Korean manufacturers that benefit from favourable exchange rates and aggressive investments.

In their home market, the Japanese have struggled with a stagnant economy, losing the boost they once got from a transition to terrestrial digital broadcasting and from subsidies for purchases of energy-efficient goods.

Sales of LCD TVs nearly halved in the October-December quarter, Sharp said, although sales of TV models with screens 60 inches or bigger in the United States continued to stay robust.

Sharp's Sakai facility in Osaka, capable of making the equivalent of 1.3 million panels a month for 40-inch TVs, was idled for about a month from April 2011.

The Nikkei business daily reported on Wednesday that the facility would cut output in half due to building inventories, spurring a slump in Sharp's share price.

Shares of the maker of Aquos LCD TVs ended Wednesday trade down 4.3 percent at 628 yen, compared with a flat benchmark Nikkei average. Since the start of last year, Sharp's shares have fallen 25 percent, compared with a 14 percent drop in the Nikkei.

For the full financial year to March, Sharp cut its operating profit forecast to zero from 85 billion yen. That compares with the 68.6 billion yen consensus forecast of 23 analysts polled by Thomson Reuters I/B/E/S.

The manufacturer of a slew of electronics products and their components also reported quarterly sales of solar cells fell by a third from a year ago, amid price declines, slowing demand and increased competition from Chinese makers adding to its woes.

"The problems we faced this financial year from lower demand, as the euro debt crisis slowed growth in the global economy, and the strong yen, are expected to make for a bad January-March quarter," Sharp President Mikio Katayama said at a results briefing.

For the October-December quarter, Sharp posted an operating loss of 24.45 billion yen, compared with a 23.03 billion yen operating profit in the year-ago period.

Rival Toshiba Corp booked a 72 percent fall in quarterly operating profit on Tuesday and cut its annual television sales forecast.

Sony said last month it had extricated itself from its LCD panel-making venture with Samsung Electronics, allowing it to source cheaper panels from the open market to try to keep pace with falling TV prices.

Panasonic is also in the process of consolidating five TV panel plants into two locations.

Sharp is aiming to turn its LCD panel business profitable in its next business year starting April, Katayama told reporters, by promoting its small- and medium-sized screens.

The firm has been switching most production at its Kameyama LCD panel plant in western Japan to smaller panels used in popular devices such as Apple's iPad as part of a plan aimed at tapping the booming tablet and smartphone market.

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