Japan's Sharp Corp warns of profit slump

TOKYO: Japan's Sharp Corp warned on Monday it expects annual net profit to drop more than 40 percent, ending a five-year record breaking streak, due to weak sales of mobile telephones.

The profit warning came as a stronger yen and a global economic slowdown darken the outlook for Japanese consumer electronic giants.

Sharp forecast net earnings of 60 billion yen (583 million dollars) for the year to March 2009, down 41 percent from the previous year's 101.92 billion yen. In July it had predicted net profit of 105 billion yen.

"The severe business environment should continue from the third quarter onward, especially for mobile phones and relevant electronics components," a company statement said.

The company cut its operating profit outlook to 130 billion yen, down from 195 billion previously projected. It lowered its sales forecast to 3.42 trillion yen from 3.60 trillion.

Helped by strong demand for its Aquos-brand liquid crystal televisions, Sharp has posted record profits for the past five years.

But the economic slowdown is taking its toll and analysts said the company may even struggle to meet its latest projections.

"I believe there are still doubts as to whether Sharp can achieve the revised targets," said Osamu Hirose, analyst at Tokai Tokyo Research Center, who thinks the group may have to downgrade its operating profit forecast again.

Analysts said, however, that the problems appeared to be mainly confined to the group's mobile telephone manufacturing operations.

"So I do not think other firms, such as Sony and Panasonic, are facing the same situation," said Hirose.

Sharp shares fell 5.4 percent to end at 1,003 yen ahead of the profit warning, as the benchmark Nikkei-225 index dropped 4.25 percent.

The electronics maker is expanding its facilities to try to meet growing demand and improve the efficiency of its production.

It is building a huge new plant to make liquid crystal display panels for large flat screen televisions in the western city of Sakai, along with the world's largest solar cell plant.

"I think there are still high hopes for Sharp's environment-related products, such as solar batteries," said Hirose.