Near-dead Sharp logs its first profit in 3 years

Sharp forecast its first annual profit in three years as Japan’s largest maker of liquid-crystal displays expects orders to recover after signing a deal with Samsung Electronics.

Net income may be 5 billion yen ($49 million) in the year started April 1 compared with a loss of 545 billion yen a year earlier, the Osaka-based company said in a statement yesterday. The projection beat the 2.1 billion-yen average of 13 analyst estimates compiled by Bloomberg.

Japan’s third-largest maker of televisions, with 5.4 percent of the global market, expects its LCD unit to make money this year after cutting jobs and selling stakes to Samsung and Qualcomm.

Sharp, which lost 921.4 billion yen in the past two years, turned its biggest display plant into a venture with Taiwanese billionaire Terry Gou to boost sales through his Foxconn Technology Group, the world’s biggest contract manufacturer of electronics.

“The Foxconn venture and the tie-up with Samsung are bringing in more display orders,” Kota Ezawa, an analyst at Citigroup in Tokyo, said before the announcement. The weakening yen is “also positive,” he said.

Sharp rose 4.9 percent to close at 531 yen in Tokyo trading before the announcement, extending its gain this year to 75 percent. The shares plunged 55 percent in 2012.

The company, which announced its mid-term plan yesterday, said it has an “informal agreement” with lenders Mizuho Financial Group and Mitsubishi UFJ Financial Group to continue 360 billion yen of loans due June 30. The company will get a 150 billion-yen loan from lenders to redeem convertible bonds, Tetsuo Onishi, Sharp’s senior executive managing officer in charge of accounting, said in Tokyo.

Operating profit will be 80 billion yen this fiscal year, while revenue is expected to rise to 2.7 trillion yen, the company said.

The company’s share of revenue in the global flat-panel TV market dropped to 5.4 percent last year from 6.6 percent in 2011, according to Santa Clara, California-based DisplaySearch.

Samsung boosted its share to 27.7 percent while LG Electronics expanded its share to 15 percent, according to the researcher.

Sharp expects TV sales this year of 8 million, compared with 8.03 million a year earlier.

In July, Sharp sold a stake in its largest LCD factory to Gou. Output at the plant, which had dropped to about 30 percent of capacity before the transaction, has recovered and stabilized, Sharp said in February.

The 100-year-old inventor of mechanical pencils has been seeking ways to boost capital after losses eroded the company’s equity to 10 percent of total assets from 30 percent.

Talks with Foxconn over a planned 67 billion-yen investment for a 9.9 percent stake in Sharp ended in March without a deal. Foxconn initially agreed in March 2012 to pay 550 yen a share for the stake.

In December, Sharp agreed with San Diego-based Qualcomm, the biggest maker of mobile-phone chips, on a 9.9 billion-yen share sale in two steps. Sharp raised 4.9 billion yen from the San Diego-based chipmaker, it said Dec. 27.

The Japanese company also raised 10.4 billion yen in March by selling shares to Samsung. The investment will secure a supply of LCDs from Sharp, Samsung said March 6.

Samsung accounted for about 1.7 percent of Sharp’s sales last year, according to data compiled by Bloomberg. Bloomberg