Weak economy, strong yen sink earnings
The headwinds of the ailing global economy and strong yen have hit Sony as hard as other Japanese giants, but its movie biz provided a ray of light amid the gloom.
Conglom swung to a net loss of ¥98.9 billion ($1.03 billion) in the most recent fiscal year from a $3.88 billion net profit a year earlier, Sony announced Thursday.
Sales fell 12.9% to $81.2 billion for the company’s fiscal year, which ended March 31.
Film division sales fell 16.4% (5% on a dollar basis) in the past financial year to $7.3 billion, while operating profit plunged 48.9% (43% on a dollar basis) to $305 million. Sony attributed the drops to slumping sales in the home entertainment market caused by the bad economy and less new product on the shelves.
Theatrical revenues, however, were a bright spot, with the hits “Hancock,” “Quantum of Solace” and “Paul Blart: Mall Cop” pumping the balance sheet.
Also, stronger ad revenue from international strands boosted TV earnings.
Much of the red ink came from the key electronics segment, which racked up an operating loss of $1.76 billion on sales of $57.6 billion — down 17% year on year.
Under prexy-CEO Howard Stringer, however, Sony has been restructuring and is targeting cost cuts of $3.15 billion, up on the $2.6 billion in cuts previously announced.
Also, Sony plans to close eight manufacturing sites out of 57, including four overseas, while staying on track to trim the headcount by 16,000, including 8,000 full-timers.
The games segment continued to bleed red ink, recording an operating loss of $614.5 million, while sales fell 18% to $11.1 billion. Sony blamed the yen’s appreciation against the dollar and euro, as well as softening sales of the PlayStation 2 console.
One bright spot was the year-on-year cut in operating loss by $694 million as Sony continued to reduce hardware manufacturing costs, while boosting software sales. The PlayStation 3 console sold 10.6 million units worldwide for a year-on-year gain of 940,000 units, while PS3 software moved 103.7 million units for an increase of 45.8 million.
For this financial year, which ends in March 2010, Sony foresees a further slump in sales, which will be down 6% to $76.7 billion, as business conditions continue to be bad, if not worse than the past year.
On the other hand, the company predicts a smaller operating loss –$1.16 billion vs. $2.39 billion last year, as cost-cutting measures take hold.
In the games division, sales are expected to fall again, with the strong yen and weakening demand for the PS2 the prime culprits.
Meanwhile, the film division is looking forward to a better year with a stronger pic slate and more cash flowing in from global strands.