Sony warns of Y90bn net loss this year

Sony on Wednesday warned it would suffer a Y90bn ($1.2bn) net loss this year and said it would shrink its unprofitable television business, making it the second Japanese electronics group this week to announce a strategic retreat from TVs.

The company had forecast a Y60bn net profit for the financial year to March but a series of problems has worsened the outlook – including slowing demand for consumer electronics, an increasingly expensive yen and floods in Thailand that have disrupted parts supplies.

Sony followed its longtime rival Panasonic in drastically scaling back its ambitions in TVs, a product that once defined Japan’s electronics brands. In the flatscreen era Japanese groups have lost competitiveness to lower-cost producers from South Korea and Taiwan. Sony’s TV business has been in the red for the past eight years.

“We are facing a big loss but I believe it is necessary, so that we can return to profit in the future,” Kazuo Hirai, the Sony executive vice-president in charge of televisions and other consumer electronics, said on Wednesday.

The company is to take a Y50bn restructuring charge on the TV business on top of operating losses in the segment but hopes, as a result, to return it to profit by the fiscal year ending in March 2014.

Only two years ago, Sony unveiled an ambitious plan to sell 40m liquid-crystal display televisions annually by 2013. Now it says it will halve that goal to 20m – roughly what it expects to sell this year – and will write down the value of investments it made in factories and equipment in pursuit of its earlier target.

Mr Hirai called media reports that Sony plans to sell its 50 per cent share of a panel-making joint venture with South Korea’s Samsung “rumour and speculation”. Sony has already sold or closed down a number of TV factories and now relies on contract manufacturers to make about half of Sony-branded sets.

In the quarter to September 30, Sony made a net loss of Y27bn, against a Y31bn net profit in the same period a year earlier. Sales at its consumer products division, which includes TVs, tumbled 12 per cent, leading to an operating loss for the segment of Y35bn.

Sony’s professional devices and components division, which makes products such as semiconductors, also lost money.

Like other Japanese manufacturers, Sony has suffered from the yen’s rise to a postwar high and from the impact of flooding in Thailand . Sony has delayed the introduction of new camera models as a result of the floods and it said on Wednesday factory repairs and lost sales would probably cost it Y25bn.

Currency swings have become less of a problem for Sony than in the past, as it has shifted more production outside Japan. Foreign exchange effects actually increased its profits from consumer electronics in the latest quarter, by Y6bn, though that was outweighed by Y10bn of currency-related losses in the professional segment.