Sony says shake-up begins to bear fruit

Sony on Thursday forecast that its aggressive restructuring programme would help it break even at the operating level in the current year, though only if costs of Y110bn ($1.1bn) for that restrucuring are stripped out.

Sony became the latest Japanese electronics company to forecast an improvement as it reported results for the year to March 2009 that beat its most recent forecast in January, suggesting that the company has reaped some benefits from restructuring and recent weakness in the yen.

The full-year operating loss was Y228bn – in which Sony includes a Y75.4bn restructuring charge – against its previous prediction of Y260bn. The net loss was Y99bn versus a January forecast of Y150bn, the group said.

“We are anticipating the severe operating environment brought on by the global economic slowdown to continue,” said Nobuyuki Oneda, Sony’s chief financial officer. But Mr Oneda added that Sony expected its restructuring programme to improve profitability. “In particular, we expect operating losses in the television business to contract significantly,” he said.

Sony also announced further sweeping changes to its domestic factory organisation. Three of its nine remaining electronics plants in Japan — making digital cameras, small LCD panels and mobile phones — will close, with production moved to other sites.

Sony became a symbol of the effects of the financial crisis on the electronics industry, and the structural problems that made the industry vulnerable to losses, when it announced a sudden profits warning soon after the bankruptcy of Lehman Brothers last year.

Sales for the year to March 2009 were down by 13 per cent and Sony expects a further 6 per cent fall this year. Profits were hit especially hard because Sony makes a relatively large part of its sales outside Japan, exposing it to weak US consumption and the strength of the yen.

In its video game business, Sony forecast a 29 per cent increase in sales of the PlayStation 3 console, from 10.06m last year to 13m this.

Given the fall in PS3 sales since Microsoft cut the price of its rival Xbox 360, that will be taken as a clear signal that Sony intends a price cut of its own later this year.

Rival Sanyo Electric also reported Thursday, recording a net loss from continuing operations of Y122bn, after Y85bn of exceptional costs to restructure its lossmaking semiconductor business.

“We expect the operating environment to continue to be severe,” said Seiichiro Sano, Sanyo’s president. For the year to March 2010, Sanyo forecast a small operating profit of Y25bn, and break-even at the net level.

But like many other Japanese electronics companies, the forecast is heavily weighted to the second half.