BENGALURU: Sony Corporation (Sony) reported 10.8 per cent drop in sales and operating (sales) revenue for the quarter ended 30 September 2016 (Q2-17, current quarter) vis-à-vis the corresponding year ago quarter. Sony reported sales of ¥1,688.9 billion for the current quarter as compared to ¥1,892.7 billion in Q2-16. The company says that the decrease was mainly due to the impact of foreign exchange rates.
On a constant currency basis, sales were essentially flat year-on-year, due to a decrease in Mobile Communications (MC) segment sales reflecting a significant decrease in smartphone unit sales, substantially offset by an increase in revenues in the Financial Services segment, as well as an increase in sales in the Pictures segment. The company’s Music segment also reported a year-over-year (y-o-y) improvement in revenues for the current quarter.
Operating income decreased ¥42.3 billion year-on-year to ¥45.7 billion. This decrease was mainly due to the deterioration of operating results in the Semiconductors and Components segments, partially offset by improvements in the Pictures and MC segments says the Sony. Net income attributable to Sony’s stockholders decreased ¥28.7 billion y-o-y to ¥4.8 billion.
Business segments
Mobile Communications
Sales decreased 39.6 per cent y-o-y in Q2-17 (a 34 per cent decrease on a constant currency basis) to ¥168.8 billion from ¥279.2 billion. The company says that this decrease was mainly due to a reduction in mid-range smartphone unit sales, as well as a reduction in smartphone unit sales in unprofitable regions where downsizing measures were implemented during the previous fiscal year, partially offset by an improvement in the product mix of smartphones as a result of a concentration on high value-added models.
Operating income of ¥3.7 billion was recorded, compared to an operating loss of ¥20.6 billion recorded in the same quarter of the previous fiscal year. Despite the effect of the above-mentioned decrease in sales, profitability improved significantly due to cost reductions, mainly resulting from the benefit of restructuring initiatives, an improvement in product mix, the positive impact of foreign exchange rates and a decrease in restructuring charges. During the current quarter, there was a ¥5.4 billion positive impact from foreign exchange rate fluctuations (net of the impact of foreign exchange hedging).
Imaging Products & Solutions (IP&S)
The segment’s sales decreased 25.2 per cent y-o-y (a 14 per cent decrease on a constant currency basis) to ¥135.4 billion from ¥180.9 billion. This decrease in sales was mainly due to lower sales of Still and Video Cameras, primarily reflecting a contraction of the market and the difficulty of procuring components due to the 2016 Kumamoto Earthquakes, as well as the impact of foreign exchange rates, partially offset by an improvement in the product mix of Still and Video Cameras, reflecting a shift to high value-added models.
Operating income decreased ¥8.2 billion y-o-y to ¥14.9 billion from ¥23.9 billion. This decrease was mainly due to the impact of the above-mentioned decrease in sales and the negative impact of foreign exchange rates, partially offset by such factors as the above-mentioned improvement in product mix and a reduction of fixed costs. During the current quarter, there was a ¥9.5 billion negative impact from foreign exchange rate fluctuations.
Home Entertainment & Sound (HE&S)
HE&S Sales decreased 18.7 per cent y-o-y (a 5 per cent decrease on a constant currency basis) to ¥234.9 billion. This was primarily due to the impact of foreign exchange rates and a decrease in home audio and video unit sales reflecting a contraction of the market.
Operating income increased ¥1.8 billion y-o-y in Q2-17 to ¥17.6 billion yen from ¥15.8 billion. This increase was primarily due to an improvement in product mix reflecting a shift to high value-added models and cost reductions, partially offset by the negative impact of foreign exchange rates as well as the above-mentioned decrease in sales. During the current quarter, there was a ¥6.0 billion negative impact from foreign exchange rate fluctuations.
Semiconductors
Semiconductors sales in Q2-17 decreased 5.0 per cent y-o-y (a 12 per cent increase on a constant currency basis) to ¥193.7 billion from ¥203.9 billion. This decrease was primarily due to a decrease in sales of image sensors, reflecting the impact of foreign exchange rates, partially offset by an increase in the unit sales of image sensors for mobile products. Sales to external customers increased 1.1 per cent y-o-y.
Operating loss of ¥4.2 billion) was recorded, compared to operating income of ¥34.1 billion recorded in the same quarter of the previous fiscal year. This deterioration was primarily due to the negative impact of foreign exchange rates and ¥9.4 billion in inventory write-downs of certain image sensors for mobile products, partially offset by the above-mentioned increase in the unit sales of image sensors for mobile products. Operating loss in the current quarter includes the net expense of 1.2 billion yen resulting from the 2016 Kumamoto Earthquakes. During the current quarter, there was a ¥19.7 billion negative impact from foreign exchange rate fluctuations.
Components
Sales decreased 23.7 per cent y-o-y (an 11 per cent decrease on a constant currency basis) to ¥46.7 billion. This decrease was primarily due to the impact of foreign exchange rates and a decrease in sales in the battery business due to increasingly competitive markets.
Operating loss increased ¥35.1 billion y-o-y to ¥36.6 billion. This increase was primarily due to a ¥32.8 billion yen impairment charge related to the planned transfer of the battery business. During the current quarter, there was a ¥1.6 billion negative impact from foreign exchange rate fluctuations.
Pictures
Pictures sales increased 4.6 per cent y-o-y (a 25 per cent increase on a U.S. dollar basis) to ¥192.1 billion. The increase in sales on a US dollar basis was due to higher sales for Motion Pictures, Television Productions and Media Networks. The increase in Motion Pictures sales was primarily due to higher theatrical revenues from films released in the current quarter including Ghostbusters, Sausage Party and Don’t Breathe. Sales in Television Productions increased significantly due to higher subscription video-on-demand licensing revenues for The Crown and The Get Down. Media Networks sales increased primarily due to higher advertising and subscription revenues in India, Europe and Latin America.
Operating income of ¥3.2 billion was recorded, compared to an operating loss of ¥22.5 billion recorded in the same quarter of the previous fiscal year. This significant improvement in operating results was primarily due to the above-mentioned increase in sales.
Music
Music Sales increased 8.0 per cent y-o-y (a 19 per cent increase on a constant currency basis) to ¥150.2 billion from ¥139.1 billion. The increase in sales was primarily due to an increase in sales of Visual Media and Platform as well as Recorded Music, partially offset by the negative impact of the appreciation of the yen against the US dollar. Visual Media and Platform sales increased due to the strong performance of Fate/Grand Order, a game application for mobile devices. Recorded Music sales increased primarily due to an increase in digital streaming revenues. Best-selling titles included Celine Dion’s Encore un soir, Nogizaka46’s Hadashi de Summer and Kana Nishino’s Just Love.
Operating income increased ¥2.3 billion y-o-y to ¥16.5 billion. This increase was primarily due to the higher sales of Recorded Music as well as Visual Media and Platform above, partially offset by the negative impact of the appreciation of the yen against the US dollar.
Financial Services
Financial services revenue increased 23.6 per cent yo-y to ¥260.5 billion primarily due to a significant increase in revenue at Sony Life. Revenue at Sony Life increased 29.9 per cent y-o-y to ¥230.8 billion due to an improvement in investment performance in the separate account. This improvement was mainly due to a rise in the Japanese stock market during the current quarter, as compared with a decline in the same quarter of the previous fiscal year.
Operating income decreased ¥7.6 billion y-o-y to ¥33.6 billion yen. This decrease was mainly due to a foreign exchange loss incurred at Sony Bank on foreign currency-denominated customer deposits compared to a gain in the same quarter of the previous fiscal year. Operating income at Sony Life decreased ¥3.7 billion y-o-y to ¥31.0 billion mainly due to a decline in net gains on sales of securities in the general account.
