Financial Material

Sharp forecasts fiscal 2012 sales of 2,700.0 billion yen, up 9.9%. Forecasts are for operating income of 20.0 billion yen, up 57.5 billion yen from the previous year, and net loss of 30.0 billion yen, an improvement of 346.0 billion yen over the previous year. Sharp plans to significantly increase overseas sales. In particular, we predict overseas sales growth of large-size LCD TVs, mobile LCDs and other products, along with expanded sales of health and environmental equipments in ASEAN countries. Regarding profits, we predict an operating loss of 45.0 billion yen in the first half of fiscal 2012, as the harsh conditions of the second half of fiscal 2011 are expected to continue during that period. But for the second half of fiscal 2012, we predict a rebound in operating income to 65.0 billion yen (an increase of 110.0 billion yen from the first half of the year) and we expect to move net income into the black. We aim to realize a V-shaped recovery, with the second half of fiscal 2011 as the bottom point of the 'V.' Forecast for fiscal 2012 is based on the following assumptions by product group. We forecast sales of Health and Environmental Equipment and Information Equipment to continue increasing from fiscal 2011. It appears, however, that Audio-Visual and Communication Equipment will continue to face a tough climate in the first half of fiscal 2012. We therefore predict a sales decrease of 5.0% compared to the previous year in these three product groups comprising Consumer/Information Products. Meanwhile, we predict a sales increase in LCDs, where sales of LCDs for mobile terminals are expected to grow; Solar Cells, for which increased demand is anticipated in Japan; and Other Electronic Devices, which promise growth centered on camera modules and LEDs. We forecast a sales increase of 22.6% compared to the previous year, in these three product groups comprising Electronic Components. Sharp is expecting overall operating income to increase by 57.5 billion yen, thanks mainly to significant reductions in losses for LCDs and Solar Cells. Sharp projects capital investment of 100.0 billion yen, down 15.9% compared to the previous year, depreciation and amortization of 230.0 billion yen, down 3.7%, and R&D expenditure of 150.0 billion yen, down 3.1%. We are assuming exchange rates of 78 yen to the U.S. dollar and 102 yen to the euro.

The followings are details of how we are progressing with the measures to improve business performance that we explained during the third quarter consolidated financial results announcement on February 1, 2012. Sharp will work at measures in four areas in order to improve business performance in fiscal 2012.

In April 2012, we started full-fledged mass production of IGZO LCDs at the Kameyama No. 2 Plant, where production is shifting to mobile LCDs. We will expand the application of IGZO LCDs from tablet terminals to larger screen sizes, such as high-resolution LCD monitors, as part of measures towards business growth. In the area of large-size LCDs, Sharp will use a partnership with Hon Hai Group, as well as business integration in LCD color filters at the Sakai Plant, to enhance the framework of its new strategic vertical integration. The goal is to increase the utilization ratio and strengthen cost competitiveness. The impact of partnership with Hon Hai Group has not been reflected in the results forecast announced today (April 27, 2012), as we are still determining the most suitable practical business approach to take. At this point, it is still difficult to quantify the effects of the partnership.

The solar cell business is in an extremely difficult business environment. However, with the feed-in tariff system being upgraded in Japan in July 2012, we will boost development capabilities and associated sales and support systems for industrial solar power generation systems, an area that includes the promising fields of large-scale solar power generation systems and the power generation business. In addition, we will develop and strengthen sales of system equipment, including power convertors, HEMS, and storage batteries. Through these measures, we will increase expansion into downstream business areas. Overseas, we aim to promote local production for local consumption and to enhance the business in downstream areas, including alliances with Enel Green Power in Italy and Recurrent Energy, LLC in the U.S. In terms of production and technology, in Japan, we will promote the concentration of high value-added production lines in plants, the development of new technology such as highly efficient solar cells, and the functional strengthening of mother plants, thus enhancing a global production framework.

Sharp started a new administration on April 1, 2012 aimed at responding to changes in the business environment and reinforcing our business foundations. To speed up decision making, Sharp appointed two Executive Vice Presidents: one responsible for technology and product development, and the other for sales both in Japan and overseas. On the business division level as well, Sharp integrated the organizations of various areas including solar cells and domestic sales. Furthermore, we will promote the strengthening of our business structure and cost reductions by shifting about 2,000 personnel to priority sectors, including health and environmental equipment, solar cells, and B2B.

Sharp's financial situation has worsened due to a sudden drop in business performance. The company will improve this situation by decreasing inventory and by reducing noncurrent assets. Sharp aims to improve its financial position by about 150.0 billion yen based on these measures. The company will also improve cash flows by continuously reducing capital investment. In addition, we will increase capital and enhance business foundations through the transfer of shares in Sharp Display Products Corporation and the capital increase through third-party allotment in association with the recently announced capital and business alliance with Hon Hai Group. We will continue to improve our business performance and financial strength by steadily carrying out these measures. We will also strive to maintain and improve Sharp's corporate value.