S&P Cuts Credit Rating on Japan's Share after Loss
Standard & Poor's on Friday cut its credit rating on Japan's Sharp after the electronics giant warned a day earlier that it would likely post a bigger annual loss than first thought.
The global ratings agency said it downgraded Sharp by one notch to "BBB" -- ninth on a scale of 22 -- and kept the firm on a negative outlook, adding that a loss in the April-June first quarter "worsened beyond our expectations".
"The company also revised down its fiscal 2012 full year forecast... The current situation is well below our assumptions for maintaining the previous rating of 'BBB+'," S&P said in a statement.
Sharp shares dived more than 28 percent to a near 40-year low in Tokyo on Friday, wiping around $1 billion off its market value.
The fall came after Sharp said Thursday it now expected a net loss of 250 billion yen ($3.2 billion) for the fiscal year through March 2013, a huge increase from an earlier projection for a loss of 30 billion yen.
The firm also reported a net loss for the April-June quarter of 138.4 billion yen, nearly three times worse than the same quarter a year earlier, as it suffered losses at its struggling TV business.
The company said it would slash 5,000 jobs worldwide, its first cuts since 1950.
Sharp, which has seen its mainstay television, liquid crystal display and solar panel products struggle, said the job reductions were part of a bid to reduce fixed costs by 100 billion yen to help its balance sheet.
"The ratings remain on credit watch with negative implications, based on Standard & Poor's view that there is continued downward pressure on Sharp's core businesses," S&P said.
"We could lower the ratings on Sharp one notch if the company's earnings in fiscal 2012 worsen even further, or prospects for a recovery in earnings dampen further."
S&P also said it would review Sharp's alliance with Taiwan-based electronics maker Hon Hai Precision Industry.
Earlier this year, agreed to take a 10 percent stake in Sharp for about $800 million as part of Sharp's attempts to turn around its business.
Source: Agence France Presse
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