Reports 11% sales decline.
Sony’s consolidated sales for the second quarter ended September 30, 2016 decreased 11% year-on-year to 1.69 trillion yen ($20 billion). Consolidated operating income decreased 48% year-on-year to 45.7 billion yen ($570 billion). The company estimates that the negative impact from the April 2016 Kumamoto Earthquakes on the operating income of the second quarter was approximately 13.7 billion yen ($170 billion), including opportunity losses.
On Monday, Sony signed a definitive agreement with Murata Manufacturing, related to the transfer of its battery business. “Due to the recording of a loss related to the transfer of this business, we have downwardly revised our consolidated results forecast for the fiscal year. In the second quarter ended September 30, 2016, we recorded a 32.8 billion yen operating loss and 4.5 billion yen of income tax expense related to the transfer of the business,” Sony said in a statement.
“At this point in time, we expect these amounts will constitute essentially all of the losses we will incur as a result of this business transfer. Primarily due to the incorporation of these losses related to the business transfer, we have revised our forecast for consolidated operating income downward by 30 billion yen,” the statement continued.
Euromonitor International consumer electronics analyst, Karissa Chua told Appliance Retailer, “The downward revision of Sony’s operating income for its fiscal year ending March 2017 highlights the deep-seated challenges the company is facing in reinvigorating growth. While strong sales of its static consoles and the launch of the PlayStation VR are growth drivers for Sony, other core businesses like its mobile devices and imaging products are expected to continue to decline due to weakness in demand and the impact on production due to the Kumamoto earthquakes earlier in the year.”
Mobile Communications
- Sony is reducing mid-range smartphone model unit sales and downsizing the scale of the business in unprofitable regions.
- Sales for the quarter decreased 40% year-on-year due to these initiatives and an underperformance of sales in Europe.
- Product line-up launched this spring did not meet the needs of the market.
- Operating results improved 24.3 billion yen year-on-year and 3.7 billion yen in operating income was recorded, mainly resulting from cost reductions.
“We have downwardly revised our sales forecast for the fiscal year by 60 billion yen, due to a downward revision of our annual smartphone unit sales forecast by 2 million units to 17 million units, primarily resulting from the underperformance in Europe. Our operating income forecast for this fiscal year remains unchanged.
“This is primarily because the impact of the lower sales is expected to be offset by our ability to ship our flagship model in line with expectations, fixed cost reductions and a positive impact from exchange rates. Although we recorded operating profit in the first half, the business is subject to significant risks, such as market environment volatility, and recent underperformance in Europe. Thus, we are conservatively forecasting our performance in the second half,” Sony said in a statement.
Game and Network Services
- Sales and operating income for the current quarter decreased year-on-year, and 19 billion yen of operating income was recorded due to the appreciation of the yen.
- The year-on-year decrease in operating income attributed to the price cut of the new PS4 model launched in September.
- The negative impact on operating income of the price cut was partially offset by continued cost reductions, but operating income for the segment decreased due to the residual impact of decreased PS3 software sales.
- Strong momentum continues with a 31% year-on-year increase in network revenues.
- Sales of PS VR, launched in October, are on track, with plans to launch the PS4 Pro, a high value-added model, in November.
Imaging Products and Solutions
- Sales for the quarter decreased 25% year-on-year, partially offset by an improvement in product mix, cost reduction and other factors.
- Operating income decreased 8.2 billion yen year-on-year to 14.9 billion yen, mainly due to the negative impact of the appreciation of the yen.
Home Entertainment and Sound
- Sales decreased 19% year-on-year but operating income increased 1.8 billion yen to 17.6 billion yen due to the negative impact of the appreciation of the yen
- Increase in operating income due to a shift to higher value-added products and cost reductions.
- Fiscal year operating income has been revised upward by 6 billion yen, compared with the July forecast, to 47 billion yen, primarily due to the strong performance of the television business in the first half of the fiscal year.