Hitachi Cuts Forecast as PDP Slumps
Hitachi Ltd has lowered its consolidated earnings estimates for fiscal 2007 (April 2007 to March 2008).
Although reiterating the previous sales estimate of ¥10.8 trillion (US$111.8 billion, a 5.4% year-on-year rise) and the operating income estimate of ¥300 billion (64.4% year-on-year growth), the company lowered the previous net income estimate of ¥10 billion to a loss of ¥70 billion.
The key factor behind the loss estimate is the flat panel TV business in slump. Sales of both older LCD and plasma TV models that were released more than a year ago were more sluggish than expected, resulting in both decreased unit sales and the lowering of average selling prices.
"Amid the shift of new mainstream products to full HD models, older models, some of which don't support full HD resolution, seem less attractive," said a spokesperson from the Hitachi PR department.
Partly because unit sales of 50-inch and larger plasma TVs fell below the company's expectation, the "Digital Media & Consumer Products" segment including these flat panel TVs is likely to log an operating loss of ¥112 billion for the full-term. As Hitachi Group, however, favorable results in other segments such as the Electronic Devices and the Information & Telecommunication Systems are expected to compensate for the stagnant sales and the operating loss of flat panel TVs.
Hitachi will log a structural reform cost of about ¥56 billion related to the flat panel TV business as a non-operating loss. This figure includes a ¥15.1 billion impairment loss on PDP production facilities at the second plant of Fujitsu Hitachi Plasma Display Ltd's (FHP) Miyazaki Works, a ¥35 billion impairment loss on the same operation's third plant, and about ¥6 billion costs for inventory disposals and some other factors accompanied with the company's withdrawal from the flat panel TV sales business in Australia.
The second plant stopped production at the end of October 2007 (See related article). And operating efficiency remains low and profitability is degrading at the third plant due to the unit sales of plasma TVs, which fell below the initial forecast.