TOKYO: Standard & Poor's on Wednesday downgraded Japanese electronics giant Sharp by one notch, citing competition in the liquid crystal television market and the impact of the March 11 earthquake.
The agency said its rating on Sharp's long-term corporate credit and senior unsecured debt was lowered to "A-" from "A" due to the pressures inflicted on the company by "the severe business environment".
The rating is the seventh-highest on the agency's scale of 22.
It said that a full recovery in the company's earnings and financial soundness will take longer for Sharp to achieve than the ratings agency had factored into previous assumptions about the rating.
Many players in Sharp's key businesses of liquid crystal display panels and LCD televisions are under pressure due to steep competition and falling prices, the agency said.
But Sharp faces challenges in fiscal 2011 of "a strengthening yen, a weakened domestic economy following the Great East Japan Earthquake of March 11, 2011, and termination of government incentives to buy ecologically friendly consumer electronics products", S&P added.
The 9.0-magnitude earthquake and the resulting tsunami hammered Japanese production, shattered supply chains and crippled electricity-generating facilities, including a nuclear power plant at the centre of an ongoing atomic emergency.
The nation's exporters have nervously eyed the yen's recent ascent, with a strong Japanese unit making their goods more expensive overseas and eroding repatriated profits.
The yen hit a post World War II dollar high of 76.25 to the greenback after the earthquake, prompting Japan and its G7 counterparts to stage a rare joint intervention. On Wednesday the yen traded at 80.67 to the greenback.
However, Standard & Poor's said its outlook on Sharp's rating was stable "on our view that further financial deterioration appears unlikely" despite pressure on earnings.
The agency warned it may review whether Sharp "can maintain its solid market position amid intensifying global competition."
Sharp's net profit more than quadrupled last year on brisk electronics sales but in April the company warned of a severe business climate following the March 11 disaster.
The company held off on releasing its outlook for the year to March 2012, saying the impact on its business from the massive earthquake and tsunami was too widespread to accurately assess at the moment.
Its net profit for the year ended in March came to 19.4 billion yen ($238 million), up 341.2 percent from the previous year but short of the 30 billion yen projected earlier as the disaster disrupted industrial supply chains.
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