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 Sharp, which supplies panels for Apple Inc's iPhone, said increased
demand from major customers led it to earn an operating profit of
2.1 billion yen (12 million pounds) in its LCD panel business after
posting a 9.5 billion yen loss on the unit in the same quarter last
year.
A big part of that recovery was due to demand from rising stars in
China's smartphone market. Sharp's president, Kozo Takahashi, said
the company expected revenue from Chinese handset makers to swell to
100 billion yen in the first half of the business year to Sept. 30.
"We've been so surprised by the increase in business we will have to
review our forecasts, but will do so based on negotiations going
forward," Takahashi said.
Sharp issued guidance earlier this year for 1 trillion yen in sales
from LCD panels for the year to March 2015.
Demand for its LCD panels has been a boon for Sharp as it
restructures to recover from a massive 545.4 billion yen net loss in
the year to March 2013, with the panel division now accounting for
46 percent of operating profit and a third of sales.
Driving profitability is a shift away from larger panels for TVs and
toward the more lucrative small panels used in smartphones and
tablets that account for 65 percent of sales and all of the profit
in the LCD unit.
Sharp increased the proportion of small and mid-size panels for
smartphones and tablets at its Kameyama No.2 plant to 35 percent in
the three months between April-June from 28 percent in the previous
quarter, the company said.
"On a unit basis, I think we can soon get to 50 percent. Going over
that would require more investment," Takahashi said.
Takahashi added that investment would run to several billion yen for
new equipment, but that Sharp would not need to extend the factory
building itself.
Sources with knowledge of the matter say that Sharp uses the
Kameyama No.2 factory to make panels for Chinese smartphone maker
Xiaomi's RedMi phone and its RedMi 5.5 inch phablet. Xiaomi has
grown rapidly to become the world's fifth-largest smartphone vendor,
according to market research firm Strategy Analytics.
Sharp is said to have also started making panels for the 4.7-inch
iPhone 6 at its Kameyama No.1 factory with the new model scheduled
for release around September.
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SOLAR POWER DIMS
Sharp posted an overall operating profit of 4.67 billion yen,
falling short of expectations of 5.21 billion yen, which was the
average of seven analyst estimates according to Thomson Reuters
Starmine, but beating its own guidance to just break even.
Its net loss was slightly deeper than expected, although it narrowed
to 1.79 billion yen from 17.9 billion yen in the same quarter last
year.
The company said its equity ratio, a measure of financial health,
had risen to 9.4 percent at the end of June from 8.9 percent at the
end of March, although that was still short of the 20 percent
considered ideal.
Solar panels were a dim spot, with a drop in demand for residential
applications in Japan where the panels became popular after the
Fukushima nuclear plant disaster in 2011. Operating profit in the
energy solutions unit shrank 97.3 percent to 100 million yen in the
first quarter.
Sharp said last month it would post a 14.3 billion yen loss this
year from exiting solar cell production and solar power generation
in Europe, but it did not change its full-year net profit forecast
as it also expected a boost from asset sales.
Sharp's share price dropped 0.6 percent ahead of the earnings
release, in line with the same percentage fall in the benchmark
Nikkei index.
(Editing by Matt Driskill)
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