Despite Sluggish Display Demand, Sharp Returns to Profitability on Structural Reforms

Sharp’s second quarter fiscal 2023 (ending September 30th) financial results show net sales decreased 11.3% YoY to 617 billion yen ($921 million( in Q2 due to sluggish demand in some segments. Operating profit was 1.1 billion yen ($7.3 million), up from a 5 billion yen ($33 million) loss last year, due to cost reductions and improvements in high value-added products. Profits improved significantly from previous quarters with bottom line loss being -0.5 billion yen ($3.3 million) compared to a 17.4 billion yen ($115.1 million) loss last year.

Sales by SegmentQ2 FY2022Q2 FY2023Y on Y Change
Smart Life & Energy139.2 billion yen116.6 billion yen-16.2%
Smart Office151.5 billion yen144.8 billion yen-4.4%
Universal Network86.2 billion yen80.3 billion yen-6.8%
Brand Businesses376.9 billion yen341.8 billion yen-9.3%
Display Device217.1 billion yen179.4 billion yen-17.4%
Electronic Device118.8 billion yen108.1 billion yen-9.0%
Device Businesses336.0 billion yen287.5 billion yen-14.4%
Subtotal712.9 billion yen629.4 billion yen-11.7%
Adjustments-17.1 billion yen-12.4 billion yen
Total695.8 billion yen617.0 billion yen-11.3%

Smart Life & Energy sales decreased 16.2% due to weak demand in Japan. Operating profit fell 26.2% on lower sales. This division handles Sharp’s consumer electronics and home appliances such as refrigerators, washing machines, air conditioners, as well as energy solutions like solar panels. It mainly focuses on the Japanese market.

Smart Office sales declined 4.4% but operating profit rose nearly 395% thanks to structural reforms and growth in high value-added offerings. This division deals with office solutions and commercial displays. Key products include multifunction printers (MFPs), professional projectors, interactive whiteboards, and digital signage. It has a large presence globally. Demand for projectors in North America remained weak and the downturn in the PC market had a big impact on the company’s fortunes. Most of the focus of the company seems to be on improving operating efficiency and strengthening its profit profile.

Universal Network sales dipped 6.8% but operating profit turned positive due to higher selling prices and cost reductions. The main products here are mobile phones, including Sharp’s Aquos-branded smartphones. The division focuses on the Japanese market. The lack of Japanese TV demand hurt Sharp’s sales this quarter, although larger, premium TV sales did grow.

Operating Profit by SegmentQ2 FY2022Q2 FY2023YoY Change
Smart Life & Energy9.9 billion yen7.3 billion yen-26.2%
Smart Office1.3 billion yen6.7 billion yen+394.9%
Universal Network-4.6 billion yen1.2 billion yen
Brand Businesses6.7 billion yen15.4 billion yen+128.3%
Display Device-14.4 billion yen-12.3 billion yen
Electronic Device7.4 billion yen2.5 billion yen-65.6%
Device Businesses-6.9 billion yen-9.7 billion yen
Subtotal-0.2 billion yen5.6 billion yen
Adjustments-4.8 billion yen-4.4 billion yen
Total-5.0 billion yen1.1 billion yen

Display Device sales declined 17.4% on weak demand but improved product mix led to narrower operating losses. his division manufactures LCD panels for TVs, laptops, smartphones, tablets, automotive displays, and more. Sharp uses advanced IGZO technology in its displays. The business segment was hit with a lack of demand in panel sales for smartphones and the PC market. Automotive display sales in North America were also slack but there was improved demand for larger area displays.

Electronic Device sales fell 9.0% but operating profit remained steady as expense reductions offset the sales decline. his division makes small LCDs, sensors, and other electronic components for various electronics manufacturers. Key products are camera modules and LCD drivers. And it was LCD driver sales that faced challenges this quarter as demand for displays remained sluggish.

The full year operating profit forecast is unchanged at 40 billion yen with ales expected to grow 0.5% for the fiscal year. The company says that its strategic focus remains on high value-added products, structural reforms, and cost reductions.