* Sharp logs first profit in three years
* Solar cell orders expected to slump
* Division to fall into red in FY 2014/15
(Adds president quotes, details of LCD and solar business
earnings, smartphone panel production)
By Sophie Knight and Reiji Murai
TOKYO, May 12 Japanese display maker Sharp Corp
expects its operating profit to fall this year as the
benefits of a weaker yen recede, taking some of the shine off
its recent return to profit following a painful restructuring.
Asian rivals are keeping up competitive pressure in
flat-panel TVs and TV screens, but Sharp said it expected to end
this year in the black thanks to the prolonged turnaround drive
and strong demand from Chinese smartphone makers.
Shares in the supplier of screens for Apple Inc's
iPhone have fallen 22 percent this year, compared with a 13
percent drop in Tokyo's benchmark Nikkei average.
The company acknowledged it still had far to go to turn
around its fortunes, after racking up more than $9 billion in
combined losses over two years before climbing back into the
black for the year just ended on March 31.
"We are still resetting and starting from zero," said
President Kozo Takahashi. "I think we still need to make a
company structure that can withstand changes in the market and
Sharp projected an operating profit of 100 billion yen this
year, in line with the 98.7 billion yen average forecast of 15
analysts according to Thomson Reuters I/B/E/S but down 8 percent
from the prior year.
Net profit was seen rising to 30 billion yen from last
year's 11.6 billion yen, as it shed last year's heavy burden of
Its equity ratio, a closely watched indicator of its
financial health, shrank markedly in the January-to-March
quarter from the prior three months as it provided for
retirement obligations, but a senior executive said its profit
situation was sound enough that it would not have to tap wary
markets for more funds.
"The drop in our equity ratio below 10 percent at the end of
the (2013-14 financial) year was within expectations," said
representative director in charge of finance Tetsuo Onishi at an
The company's equity ratio was at 8.9 percent on March 31,
down from 13.9 percent at the end of December and below the 20
percent considered healthy.
"We will raise the equity ratio through retained earnings.
We have no plans regarding equity," said Onishi.
A Japanese media report last month that Japan's largest
display maker would tap the equity markets to raise 200 billion
yen and bolster its balance sheet sent its shares tumbling to
their lowest in more than a year.
The company's solar cell business is expected to shrink 33.9
percent this fiscal year, dragging the segment to a 5 billion
yen operating loss.
By contrast, Sharp forecast profit from its LCD panels would
rise 32 percent this year to 55 billion yen ($540.75 million) as
it boosts the proportion of its production capacity devoted to
making higher-margin smartphone screens, away from more
commoditised TV screens.
The company fell short of its target to boost the share of
small-screen output at its Kameyama 2 factory to 39 percent in
the January-March quarter, reaching only 28 percent, but
Takahashi was confident it could still reach at 50 percent
target within the six months to Sept. 30.
"Looking at orders, we should be at 35 percent for May and
so I think we can make it to 50 percent for the first half," he
told reporters after the earnings briefing.
He added that Sharp would cope with falling smartphone panel
prices by cutting costs and improving automation technology.
($1 = 101.71 Japanese yen)
(Editing by Edmund Klamann and Tom Pfeiffer)