TOKYO (Reuters) – Cash-strapped Japan Display warned it cannot guarantee a return to profit this year as demand for smartphone screens stays weak, and turned in yet another quarterly loss, casting doubt over its proposed bailout deal with a Chinese-Taiwanese group.
FILE PHOTO: Japan Display Inc’s logo is pictured at its headquarters in Tokyo, Japan, August 9, 2016. REUTERS/Kim Kyung-Hoon/File Photo
The supplier for Apple Inc also said it would slash about 1,000 jobs, or a tenth of its workforce, as it continues to bear the brunt of its late shift to organic light-emitting diode screens and disappointing sales of the iPhone XR, the only model with a liquid crystal display (LCD) screen.
Japan Display’s < net loss for the three months ended March was 98.6 billion yen, versus a 147 billion yen loss a year earlier, its ninth consecutive quarterly loss.
“We took some restructuring measures before, but they turned out to be not enough to offset a worse-than-expected drop in demand for smartphone (screens),” acting CEO Yoshiyuki Tsukizaki said at an earnings briefing on Wednesday.
“The tough environment in the smartphone segment is likely to continue through the first half,” he said, adding the company cannot promise it will return to profit this year after five consecutive annual losses.
Japan Display’s results will be closely watched by its Chinese-Taiwanese suitors, who delayed an up to 80 billion yen investment this week to reassess the company’s prospects.
However, according to Japan Display CFO Takanobu Oshima, the screen maker is making steady progress in discussions with the buyer group.
The suitors “had conducted necessary due diligence and had no concerns about our financial conditions,” he said at the briefing. “But the outlook of the business is changing and they want to review that.”
The bailout deal would allow the buyers – including Taiwanese flat screen maker TPK Holding Co Ltd and Chinese investment firm Harvest Group – to become Japan Display’s biggest shareholders with a 49.8 percent stake, replacing the Japanese government-backed INCJ fund.
A prolonged delay in the bailout could put at risk the survival of Japan Display, formed in 2012 by combining the LCD businesses of Hitachi Ltd, Toshiba Corp and Sony Corp in a deal brokered by the government.
Japan Display recorded a 75.2 billion yen writedown in the quarter ended March on an LCD plant launched two years ago.
Apple had requested the plant and fronted most of its $1.5 billion construction costs, sources familiar with the matter have said. A Japan Display executive said last month the company still owes “its client” about 100 billion yen.
Reporting by Makiko Yamazaki and Chang-Ran Kim; Editing by Christopher Cushing and Himani Sarkar