Japanese Vendors Voice Profit Concerns

By Steve Smith On Nov 6 2006 - 8:00am

Several major Japan-based consumer electronics manufacturers issued their first half financials in recent days, and while sales were generally good there are concerns about eroding profit margins.

Sharp Electronics reported a double-digit increase in worldwide audio/video and communication equipment sales, led by LCD TVs and mobile phones, for its fiscal first half ended Sept. 30.

Sales of audio/video and communication products were $4.92 billion for the first half, up 14.4 percent over last year. Home appliance sales worldwide were $988.4 million, up 6.5 percent, while sales of information equipment worldwide was $1.77 billion, up 2.1 percent over the same time last year.

Sharp reported that it expanded its sales of LCD HDTVs worldwide and began operations at the Kameyama No. 2 plant, which the company claimed is the first LCD production facility to adopt eighth generation glass substrates that enable the production of 40- and 50-inch LCD panels "with high efficiency." The company added that it is stressing "one-of-a-kind products" like large-screen HDTV LCDs and "value-added mobile phones incorporating ... original device technologies."

Pioneer Electronics said it had a 4.9 percent revenue increase and net income of $30.1 million for its fiscal second quarter ended Sept. 30. Pioneer reported a consolidated operating revenue gain to $1.6 billion for the quarter.

Net income was $30.1 million for the quarter vs. a net loss of $446.6 million during last year's fiscal second quarter. Operating income was $39.1 million compared to an operating loss of $65.5 million the previous year. This reflected higher sales, as well as improved gross margin and lower selling and administrative expenses and a weaker yen, as well as Pioneer's business restructuring, the company said.

In-home electronics sales were up 6.8 percent to $739.8 million with plasma display sales increasing due to a strong performance of the Pioneer brand in North America. Plasma display sales accounted for about 46 percent of its home electronics sales.

The operating loss for home electronics during the quarter was $32.6 million for the quarter compared to $111.4 million for the same period last year. The reduced loss was based on increased gross profit margins in plasma displays, the aforementioned business restructuring and improved manufacturing efficiencies, Pioneer said.

In car electronics, sales were up 7 percent to $708.8 million due to increased sales of car navigation systems, despite slightly lower sales of car audio products. Operating income in the category increased 92.9 percent to $47.3 million.

Mitsubishi Electric reported its fiscal first half financial generated $15.2 billion in net sales, up 9 percent over last year, while net income was up 94 percent to $479.8 million.

Mitsubishi reported a flat performance for its home appliance business, but an increase in its information and communications division. For the half Mitsubishi's home appliance sales were $3.95 billion, a 1 percent increase over last year's first half, while operating income was down $9.36 million to $13.1 million for the same period.

The company said that sales were up in home appliances, which includes CE products, due to increases in products such as air conditioners for the overseas market. Operating income was down due to lower prices, Mitsubishi said.

Hitachi reported digital media and consumer products revenue was up 24 percent during the half to $6.43 billion due to sales of plasma and other flat-panel TVs and the merging of Hitachi's air conditioning systems and home and life solutions groups. But the segment reported a loss of $292 million for the half, $154.2 million more than last year's first half. The loss was reflected in increased investments for marketing flat-panel TVs and other products, as well as sluggish sales of DVD recorders, room air conditioners and other factors.

Toshiba posted a 13 percent sales gain in consumer electronics but a loss for its fiscal first half. Consolidated sales for digital products business, where CE and PC products reside, were $11.8 billion, but the unit registered a loss of $64.4 million for the first half.

Sales rose significantly from a year ago largely on increased sales of storage devices and TVs. The PC business saw a sales increase as a result of increased unit sales, primarily in North America and Europe, while the Mobile Phones business saw a sales decline, mostly due to the Japanese market, the company said.