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Sony reports surge in Q1 net profit and lifts sales outlook


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Sony reports surge in Q1 net profit and lifts sales outlook

Japanese consumer electronics group Sony Corp. said on Aug. 1 net income for its fiscal first quarter more than tripled on higher sales and the proceeds from the disposal of a Chinese manufacturing subsidiary.

The Tokyo-based company lifted its sales outlook for the year ending March 2018 to reflect changes to its currency exchange-rate assumptions.

"Our profit trend is volatile," Sony CFO Kenichiro Yoshida said during a press conference in Tokyo following the earnings announcement. "Our challenge is to expand it steadily. We are also taking a good look at our balance sheets."

The maker of smartphones and cameras said net income attributable to shareholders for the three months ended June 30 surged to ¥80.87 billion from ¥21.17 billion a year earlier. Net income beat a mean consensus of analysts' estimates of ¥66.10 billion, according to S&P Capital IQ.

The profit surge was largely due to a ¥27.5 billion gain in the semiconductors business from the sale of Sony Electronics Huanan Co., a Chinese subsidiary that makes camera modules. Sony also booked ¥9.3 billion in insurance recoveries related to earthquakes in the Kumamoto region, which disrupted some production in 2016.

These gains were reflected at the operating level. Operating profit surged to ¥157.61 billion from ¥56.19 billion a year earlier, beating the market consensus of ¥132.81 billion. Excluding one-off items, operating profit advanced 10.4%, according to the company's earnings statement.

Sales jumped 15.2% to ¥1.858 trillion from ¥1.613 trillion, surpassing analyst expectations of ¥1.736 trillion.

Sales grew in all divisions except mobile communications, which suffered a 2.5% drop, mainly due to a shift in sales mix for smartphones. "Sales of premium lines dropped slightly," said Kazuhiko Takeda, in charge of corporate planning & control and accounting, during the conference. "However, we do not expect this to become a longstanding trend nor affect our full-year profit."

The semiconductors business saw the fastest growth, booking a sales increase of 41.4%. This was due to volume growth in image sensors for mobile devices. Year-ago output was hurt by earthquakes in Kumamoto. The favorable comparison outweighed a sales decline in camera modules, a business that was scaled down.

In financial services, Sony saw revenue jump 30.3% mainly due to growth at Sony Life, whose investment performance improved thanks to rallies in the Japanese stock market.

The imaging products & solutions business enjoyed sales growth of 27.3%, largely due to favorable comparisons from a year earlier as well as stronger sales of high value-added still and video cameras.

The music business saw sales jump 18.8% after benefiting from the strong showing of mobile game app "Fate/Grand Order." The business also saw higher revenue from digital streaming; best-selling titles included Harry Styles' debut album and The Chainsmokers' "Memories…Do Not Open."

Sony's pictures unit enjoyed sales growth of 12.3%. This was primarily due to higher sales in television productions and media networks, which enjoyed higher licensing revenue from U.S. television series such as "The Last Tycoon" and "Better Call Saul," as well as increased ad revenue in India. These partially offset declines in motion pictures.

Yoshida said it was important for Sony to establish a beneficial relationship with Netflix Inc. and other over-the-top content players, which were enjoying strong growth.

"Sometimes these [OTT] players are our partners, sometimes competitors, and others times they are our clients," Yoshida said. "It's very important for us how we partner with these companies."

Sony on Aug. 1 also said it would acquire 95% of U.S. animation distributor Funimation Productions Ltd. for about $143 million through an indirect wholly owned subsidiary. The deal should not have any major impact on Sony's full-year earnings guidance, the company said.

The home entertainment & sound division saw sales advance 8.9%, aided by a shift to high value-added television models. The game & network services segment saw revenue rise 5.4% mainly due to increase in PlayStation4 software sales.

For the year ending March 2018, Sony lifted its guidance for sales to ¥8.3 trillion from ¥8.0 trillion to reflect changes to its currency exchange outlook.

As of Aug.1, US1$ was equivalent to €110.40.