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Sharp is latest Japanese company to suffer severe decline

BusinessNews
by Oluseun Alufa
, 02 Nov 2012News
Sharp is latest Japanese company to suffer severe decline

Japanese electronics company Sharp has admitted it may not be able survive on its own, having reported a quarterly loss of $3.12 billion (£1.94 billion). The company has further predicted a second straight year of record losses as it is facing difficulties in securing short-term financing.

“Our corporate group has booked massive second-quarter net and operating losses... and now see a serious negative operating cash flow. This raises serious doubts about our ability to continue as a going concern,” said the company in a statement.

Fitch Ratings, the global credit classification agency, has added to Sharp’s misery by downgrading the company’s credit score by six places to a B-minus. This follows previously administered demotions by Moody's Investors Service and Standard & Poor's late last summer.

Sharp has managed to secure $4.5 billion (£2.8 billion) in loans from the Bank of Tokyo-Mitsubishi UFJ and Mizuho Corporate Bank. This cash injection is expected to tide the company over until March 2014.

Sharp’s woes seem to stem from investments on capital-intensive products such as flat panel televisions and semi-conductors not paying out. A similar policy has also led fellow Japanese manufacturers Sony and Panasonic to fall to similar misfortune, as they reportedly overextended themselves financially in a bid to keep pace with Asian rival Samsung.

Sony recently slashed its sales estimates for the forthcoming quarter across most of its product lines. Its range of under-performing handhelds (PSP and PSVita) are headlining the forecasted sales disappointment as they are expected to garner sales of 10 million units this year, two million less than its original prediction. 

Panasonic is also expected to report an annual loss of $10 billion (£6.24 billion), after a hefty restructuring process prompted the cutting of 36,000 jobs throughout the company.

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