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Sanyo Widens Loss Forecast
Nov 18, 2005
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Japan's Sanyo Electric Co. Ltd. said it fell deep into the red in the first half and widened its full-year loss forecast by two-thirds as it writes down the value of inventory and other assets, and provisions for bad loans. "We know we really have our backs against the wall. I would consider it the ultimate sin to let things get any worse than they are," Sanyo President Toshimasa Iue told. "This is our last chance." Japan's third-largest consumer electronics maker said it planned to raise up to 300 billion yen (approx. U.S. $2.5 billion) by issuing new shares to Goldman Sachs and other firms, while downsizing its ailing chip and home appliance divisions. The struggling electronics maker also said it was in talks with several firms to sell a stake in its finance unit, was considering a sale of its organic light-emitting diode (OLED) business and that it may stop selling TVs in Japan.

Following a management reshuffle in June, the company embarked on a 3-year restructuring plan in which it aims to cut 14,000 employees, close or sell the equivalent of 20 percent of its factory floor space in Japan and halve its 1.2 trillion yen (approx. $10.1 billion) debt. Sparking the overhaul was an earthquake in Japan last year that ripped through one of its semiconductor factories, ruining equipment and leading to a loss in potential sales. But the company has also been losing money on home appliances and suffering from sluggish sales of digital cameras and mobile phones.

Sanyo said it would transform itself from an electronics conglomerate into a company that focuses on products related to the environment and energy. Among Sanyo's pockets of strength are lithium-ion rechargeable batteries and solar cells. Sanyo said it would revive its TV division by forming alliances and concentrating production in China. Sanyo's Iue said he would pull out of the Japanese TV market if that business was in the red. He did not say whether it was profitable now. "I want to make it clear that we will not do things that do not make a profit," Iue, grandson of Sanyo's late founder, said.

The company said it would revamp its appliances division by forming alliances and focusing on high-end and commercial-use products such as showcase refrigerators. Sanyo has a tie-up with China's Haier but that relationship has yielded little. The company also unveiled earnings for the April to September first half and announced a medium-term business plan, predicting that net profit would reach 29.5 billion yen (approx. $248 million) in 2006 and 2007 on sales of 2.49 trillion yen (approx. 21 billion), up 2 percent from its estimate this year.

For the first half, Sanyo posted a group net loss of 142.53 billion yen (approx. $1.2 billion), compared with a net profit of 3.4 billion yen (approx. $28.6 million) in the same period last year. It widened its net loss forecast for the year to March to 233 billion yen (approx. $2 billion), roughly in line with newspaper reports. Sanyo has a tie-up with U.S.-based Eastman Kodak in OLED screens, which are seen as a promising next-generation display because they produce bright images and do not require a backlight as do LCD panels. They also boost a faster response time and consume less power. (Reuters)

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