Japanese electronics group Toshiba Corp. posted a jump in quarterly operating profit on Monday, thanks to solid flash memory chip prices and power plant sales, and raised its full-year outlook by 12 percent, closer to market estimates.
Steady NAND chip prices has helped Toshiba, which makes two-thirds of its chip earnings from flash memory, whereas top memory maker South Korea's Samsung Electronics Co Ltd has seen gains in NAND largely lost in PC memory price falls.
The nuclear reactors-to-washing machines conglomerate lifted its full-year operating profit outlook to 290 billion yen ($2.54 billion) from a previous forecast of 260 billion yen, as it expects better sales in flash memory, used in digital music players such as Apple Inc's iPod and power systems.
That compares with a consensus estimate by 15 analysts polled by Reuters for a full-year operating profit of 302 billion yen.
These are good and reassuring results, Mitsushige Akino, chief fund manager at Ichiyoshi Investment Management said.
Toshiba said it earned an operating profit of 61.34 billion yen ($537.2 million) in July-September, helped by sales at its newly-acquired U.S. nuclear power unit Westinghouse.
Toshiba's rosy outlook in microchips, power systems and medical devices outweighs its slumping digital product segment, where Toshiba cut its forecast by 70 percent to 10 billion yen.
The conglomerate's TVs and hard drives are hurting from price competition in the United States and in Europe, acting as a drag on the segment closest to consumers.
This is Toshiba's weak spot, said CLSA analyst Takeo Miyamoto. The company says the business is on the brink of a turnaround, but I get the feeling I've heard that one before.
In July-September, Toshiba's liquid crystal display business also remained in the red as prices of mobile phone displays plunged.
We aim to break even in both LCDs and TVs by the end of the business year, by examining costs thoroughly, Executive Vice President Fumio Muraoka said at an analyst meeting.
BREAD AND BUTTER
Toshiba has been trimming its operations to focus on semiconductors and also on its nuclear power business, where it competes with General Electric.
Toshiba expects prices in its bread-and-butter NAND chips, used for data storage in portable gadgets, to fall 20 percent in October-March. The resulting 40 percent price decline for the year to end-March compares favourably with the firm's previous estimate for a 50 percent decline, Muraoka said.
Semiconductors earn half of Toshiba's operating profit.
Toshiba, which plans to build a new NAND plant by 2009 and also plans to buy microchip production lines from Sony Corpx, is likely to have its lines running at full capacity in January-March, up from 90 percent in the current quarter and 75 percent in July-September as supply tightens, Muraoka said.
Prior to the results announcement, Toshiba shares closed up 3.4 percent, while the benchmark Nikkei average rose 1.2 percent.
Shares of Toshiba have gained 29 percent since the start of the year, as NAND chip price falls eased and unit Westinghouse won orders to build nuclear plants in China and the United States. The Nikkei shed 3 percent in the same period.
(Additional reporting by Taiga Uranaka)