The chips are down for earthquake-hit Sanyo

scotsman.com ^ | Mon 31 Jan 2005 | SCOTT REID

[M. Espinola]

ELECTRONICS giant Sanyo today posted a £90 million quarterly loss, and asked its employees to spend up to £10,000 each to help limit what is expected to be the group’s biggest full-year loss ever.

The loss follows sluggish demand for digital cameras and earthquake damage to a Japanese chip factory.

Japan’s third-largest consumer electronics manufacturer said its group net loss totalled some £89.9m in the three months to the end of December, against a profit of £50.6m recorded in the same quarter a year earlier.

During the period, sales fell by five per cent to £3.2 billion.

Although Sanyo is one of the world’s largest makers of digital cameras, about 90 per cent of its output is supplied to Olympus and other camera producers, many of which have scaled back production plans due to tough competition and sluggish demand.

Sanyo’s earnings were also hit by a devastating earthquake which occurred last October around 150 miles north of Tokyo, forcing the group to suspend operations at chip-making subsidiary Niigata Sanyo Electronic.

The firm had estimated damage at Niigata Sanyo would come to about £260m. It has also said the earthquake would cause a similar decline in sales and a £189.5m fall in operating profit in its semiconductor business in 2004/5.

As a result, the group warned last month of a net loss of £363.5m - its worst-ever loss - for the 12 months to the end of March.

Underscoring the tough conditions, Sanyo has asked its domestic workers to buy its products to help stem the losses.

Executives have been asked to spend up to £10,000 or so, division chiefs £2500, and other employees some £1000 on Sanyo products, which include televisions, fridges, mobile phones and insurance.

A company spokesman said: "This is not the first time that we’ve conducted the ‘buy Sanyo campaign’. The campaign is to have employees buy Sanyo products, as well as to invite friends and family to do the same."

In December, Sanyo also lowered its full-year estimate for group operating profit by 38 per cent to £307m and trimmed its annual sales forecast.

The Osaka-based company aims to restore 70 per cent of the operation at the Niigata plant by the end of March but may also make fewer products there as part of a review of the group’s semiconductor output.

Sanyo has said it would unveil a reformed structure in the coming months that could involve merging some of the production lines at Niigata with lines at other plants.

The firm is also working to reform its home appliance business, which has been making a loss for the past three years.

Sanyo today slashed its digital camera production forecast for the year to March 31 to 11 million units from its target of 14 million.

Last week, industry titan Sony lowered its 2004/5 digital camera sales estimate to 14 million units from 15 million while rival Canon announced it had sold 14 million units in 2004, falling short of its 14.7 million unit forecast.

• Toshiba said its quarterly operating profit has plunged 93 per cent after being hit by price declines in microchips used in electronics such as flat panel TVs.

[BurbankKarl]

Is that right? Twenty grand worth of Sanyo products per employee? That is a lot of crappy batteries.