Sony lifts outlook after strong quarter

Sony on Wednesday showed the benefits of its restructuring programme when Japan’s leading electronics brand cut its forecast loss for the year to March 2010 after a strong Christmas quarter.

The group said it now expected to make a net loss of Y70bn ($782m), down from its October forecast of a Y95bn loss. Excluding restructuring costs and losses at affiliates, Sony expects to make a full-year operating profit of Y140bn, up from its previous forecast of Y110bn.

The results appeared to vindicate the aggressive programme of job cuts, factory closures and internal restructuring launched a year ago by Sir Howard Stringer, chairman and chief executive.

Sony Q3 2009 (change on Q3 2008)
TurnoverNet IncomeEPS (diluted)

However, analysts said attention would now turn to whether Sony had a credible plan to achieve acceptable sales growth, margins and profits in its next fiscal year.

“When we look at the flash reports of sales in January they are about the same or a bit better than expected,” said Nobuyuki Oneda, Sony’s chief financial officer.

Mr Oneda said that Sony might still be able to break even at the operating level after restructuring costs – suggesting profit could be Y30bn higher than even the raised forecast.

The group announced the closure of a plant in Singapore, and confirmed that
its Isehara measuring equipment plant in Japan would be sold to rival Mori Seiki.

Those measures would take Sony’s manufacturing base down from 57 sites in December 2008 to 45 sites by May 2010.

Sony said that it was on course to hit its targets of a 20 per cent reduction in procurement costs and a Y330bn cut in fixed costs.

In the third quarter, every division of Sony made money at the operating level except its share of the Sony Ericsson mobile phones joint venture.

While sales of Sony’s core consumer devices were down by more than 10 per cent on the previous year, costs were Y77bn lower, so the division swung back into profit.

The networked products and services division made a profit because of increased sales of Vaio PCs, but PlayStation video games continued to struggle. Sales of 6.5m PlayStation 3 consoles in the quarter, up from 4.5m last year, could not offset a price cut on the PS3 and weak sales of the PlayStation Portable.

Sales at Sony Pictures were up by 16 per cent on the previous year because of the success of 2012 and the Michael Jackson film This Is It. Michael Jackson songs, along with Susan Boyle’s version of the track I Dreamed a Dream, also helped boost Sony Music.

Sony is still only forecasting an operating margin of 1.9 per cent on its core businesses for the full year, indicating how far it still has to go to complete its recovery.

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