Japan's Hitachi Ltd, which makes consumer electronics and nuclear reactors, posted a narrower first-half loss on booming sales of power plant equipment, but it kept its full-year outlook as losses continue for its flat TVs and hard drives.
Hitachi, the world's No. 3 hard disk drive maker, is hurting from weaker prices for hard drives and plasma TVs in markets where bigger rivals Seagate Technology and Matsushita Electric Industrial Co Ltd reported growth.
The company, which also makes industrial robots and control systems, kept its outlook for a net profit of 40 billion yen ($348.2 million) for the year to March, from a 32.80 billion loss the previous year and in line with market estimates.
The results, which follow an upward revision for Hitachi's first-half forecast made just last week, would not mean a surge in sentiment, said Mitsushige Akino, chief fund manager at Ichiyoshi Investment Management.
There are various areas of concern with Hitachi and they still haven't been solved. So we need to wait and see, he said.
Hitachi's flat TVs would deepen losses this year, as its strategy to focus on 50-inch size plasma TVs in the United States backfired and sales of its big TVs made only half of Hitachi's expectations, Chief Financial Officer Toyoaki Nakamura told an analysts' meeting.
With its newest plasma display lines in Miyazaki, western Japan, operating at only 70 percent capacity, Hitachi expects losses in its digital media and consumer segment to balloon to 72 billion yen from a 58.4 billion yen loss last year.
The company, which expects to ship 1.2 million plasma TVs this year against Matsushita's forecast of 5 million units, would start supplying plasma display panels to Chinese TV makers in an effort to ramp up output, Nakamura said.
For April-September, Hitachi posted a smaller net loss of 13.06 billion yen, compared with a 78.09 billion yen shortfall last year, helped by sales of thermal power plants and trains in Europe, as well as elevators and excavators in emerging markets.
The company expects profit from its industrial systems products to quadruple to 150 billion yen from 36.3 billion yen in 2006/07, when it was hit by costs to repair turbines at nuclear power plants in Japan and cost overruns at U.S. plants.
These power systems businesses are set to contribute around half of Hitachi's operating profit this year.
A MOUNTAIN AHEAD
In its core hard drive business, however, Hitachi said it still expects to post a $300 million loss in calendar 2007, even as market leader Seagate eyes continued double-digit growth on storage demand in games and portable gadgets, as well as PCs.
Sources told Reuters in September that the group is seeking a strategic partner to invest in the hard disk drive unit, which has not posted a profit since Hitachi bought it from IBM five years ago.
Asked if the firm was getting advice from Merrill Lynch to sell the unit, Nakamura said, (That news) did not come from us. We have offered incentives to get an executive from another firm to join us. If we were to close shop and say good-bye, we could be sued.
Hitachi, which appointed Western Digital Chief Financial Officer Steve Milligan as CFO of its HDD unit earlier this month, has repeatedly said it had no plans to withdraw from hard drives or from flat TVs.
But asked if its hard drives were on a recovery track, Nakamura said only, I am beginning to be convinced that we will be able to post a profit in HDDs in October-December.
I can't see the top of the mountain we need to climb, he later told reporters. There's so much to do.
Hitachi shares rose 3.4 percent prior to the announcement, against a 0.5 percent rise in the benchmark Nikkei average.
Hitachi's shares have fallen 17 percent since hitting a five-year peak in April, when the company sold its stake in Japan Servo Co to precision motor maker Nidec Corp.
The Nikkei fell 6.28 percent in the same period.