Toshiba Q3 profit surges on smartphone boom, cost cuts

Toshiba Q3 profit surges on smartphone boom, cost cuts

Tokyo: Japan’s Toshiba Corp more than doubled its quarterly operating profit on booming sales of NAND flash memory chips and robust demand for LCD panels used in smartphones and tablets.

But the sprawling conglomerate cut its full year sales forecast and left its operating profit outlook unchanged for the year to March, citing a strong yen and uncertain demand for some of its other products, which include everything from home appliances to nuclear power plants.

South Korean rival Samsung Electronics, is expected to benefit this year from booming demand for smartphones and tablets, but Toshiba’s hiving off of its mobile phone division may have improved its chances of maintaining close ties with Apple.

“I think they are still able to compete in semiconductors, although it is a very difficult market," analyst Yoshiharu Izumi of JP Morgan said of Toshiba.

“Samsung faces the problem of rivalry with Apple. That is something that will help Japanese makers."

Toshiba CEO Norio Sasaki, who took the helm some 18 months ago, has vowed to sharpen the focus of the sprawling conglomerate and has taken a hard line on costs, with rival Samsung firmly in his sights.

For the three months to 31 December, Toshiba reported a ¥37.5 billion profit, compared with ¥14.5 billion a year ago. In the quarter, electronic devices, including LCDs and flash memory, generated ¥17.2 billion in operating income after a loss ¥6.6 billion a year ago.

Overall performance, however, was not as strong as analysts had expected. The profit came in lower than the average forecast of ¥50.2 billion, but the discrepancy had been flagged by Japanese media at the weekend.

Toshiba’s full year profit on NAND chips is expected to be than the company had foreseen at the start of the financial year, as profit margins improve after sagging in the third quarter, Fumio Muraoka, a senior executive at Toshiba told reporters on Monday.

But the overall outlook is less certain, the company said in a statement, with the market for system chips weak.

“Although the company has so far recorded higher operating income than originally anticipated, mainly as a result of healthy performances in in memories, the LCD business and PC business, the direction of system LSIs is still uncertain at this point," it said.

To lower costs and cut its exposure to system LSI chips Toshiba said in December it would outsource output of some system chips to Samsung and sell a factory in Japan to Sony Corp as it reduces its non-memory chip exposure.

Toshiba left its full year operating profit forecast unchanged at ¥250 billion ($3.05 billion), below consensus, but said the figure had been brought down by asset impairment.

Shares in Toshiba rose to their highest level in more than eight months last week, but fell 3.2% on Monday to ¥485, ahead of the earnings report. The Nikkei stock average fell 1.2%.

The slide was triggered by the strength of the yen and jitters over unrest in Egypt, where Toshiba is set to open a TV factory in March, but the company said on Monday the plant would be unaffected.

Toshiba also benefitted from better than expected sales of televisions, after the Japanese government offered consumers incentives to buy sets that consume less power, the head of Toshiba’s TV unit said earlier this month.