TOKYO (Reuters) - Japan’s Sharp Corp, an Apple Inc supplier, said on Thursday it would not meet its mid-term profit target in the current fiscal year after a shift in focus, and that a U.S.-China trade war is impacting its relationship with clients.
The weak outlook comes as parent Foxconn, the world’s largest contract manufacturer, tries to cut dependence on smartphone maker Apple as handset sales plateau.
Sharp, which makes screens and camera modules for Apple’s iPhones, expects operating profit to rise 19 percent to 100 billion yen (698 million pounds) for the year through March 2020 versus a year earlier. That compared with a 92.5 billion yen average of 10 analyst estimates compiled by Refinitiv.
Two years ago, the Osaka-based firm targeted profit of 150 billion yen by boosting sales of television sets through the business networks of Foxconn, formerly Hon Hai Precision Industry Co Ltd.
However, its premium brand image suffered from the firm’s focus on lower-end markets, particularly in China, while a slow move to organic light emitting diode (OLED) panels from liquid crystal displays (LCD) also hurt. China’s market has also been hit by the impact of tit-for-tat trade tariffs with the United States.
Sharp changed tack, deciding not to pursue sales volume, and as a result is set to miss its three-year profit target.
“U.S.-China trade tension has affected our relationship with clients,” Executive Vice President Katsuaki Nomura said at an earnings briefing, without providing details. “If the friction lasts long, that may also have an impact in the foreign exchange market so hopefully it will be resolved as soon as possible.”
For the three months through March, Sharp posted a 20 percent decline in operating profit versus the same period a year prior, at 15.8 billion yen.
Nomura told reporters the quarterly earnings were affected by demand fluctuation of a major client in addition to the trade tension.
Sharp also said it plans to buy back by the end of June preferred shares worth about 100 billion yen held by Mizuho Bank Ltd and MUFG Bank Ltd, and the plan is not yet finalised.
Reporting by Takashi Umekawa; Editing by Sonali Paul and Christopher Cushing