Sony Electronics profitable again
Sony Monday said it returned to an operating profit last year as it reported stronger-than-expected results that show the effects of a tough restructuring program introduced by Sir Howard Stringer, the group’s chairman and chief executive.
Japan’s most famous consumer electronics company made an operating profit of Yen 213B (US$2.3B) in the year to March, before restructuring costs and losses at Sony Ericsson, compared with the Yen 140B it forecast in February and a Yen 127B loss last year.
The numbers suggest that Sony is bouncing back from the recession faster than most of its Japanese rivals but analysts are waiting for Sony to announce full results and Y 2010 forecasts Thursday before passing judgment.
Under Tokyo Stock Exchange rules, companies must revise their profit forecasts as soon as they realize they will be 30% above or below their previous estimates.
That has forced Sony to rush out an outline of its results because net losses of Yen 41B are well below the Yen 70B that it forecast in February. Pelham Smithers, an independent analyst, said that the results were “to the high end of expectations” and that after recent weakness in Sony’s share price they were likely to be taken as good news.
Sony said profits in its core consumer electronics division were Yen 30B better than it forecast previously because of “less severe than anticipated price declines and reductions in both manufacturing cost and operating expenses”.
The television industry is enjoying strong sales and many liquid crystal panel plants are running at close to capacity. Sony has already said that it aims to sell 25M TVs in its new financial year, 2.5M of them 3D, compared to the 15M that it aimed to sell last year.
The TV business has been a chronic loss maker and with the results Sony posted a Yen 27B exceptional loss on the Nitra flat-panel TV factory in Slovakia, which it is selling to Hon Hai of Taiwan.
As part of its restructuring Sony has also closed TV plants in Japan and the USA and sold a plant in Mexico as it moves towards greater outsourcing.
Profits in the networked products division, which includes Vaio PCs and PlayStation games consoles, were Yen 10B ahead of plan because of cost cuts.
On top of this, life assurance will boost results by Yen 15B because of gains on Sony Life’s stock market portfolio, and an improved performance at Sony Ericsson cut its losses by Yen 10B.
Analysts say that Sony’s challenge now is to return to top-line growth as it tries to meet Sir Howard’s long-standing promise of a 5% operating margin.
Investors are looking to initiatives such as the Sony Online Service, which will deliver software and content to Sony gadgets, to give the company greater protection against low cost competition from Taiwan and South Korea. The SOS is expected to launch in the next couple of months.–Paul A. Ebeling, Jnr. www.livetradingnews.com
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