Sony Corp Ord (SNE)

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Sony (SNE)

Q3 2012 Earnings Call

February 07, 2013 8:00 am ET

Executives

Edward Reid

Masaru Kato - Chief Financial Officer, Executive Vice President, Corporate Executive Officer, Director and Member of Compensation Committee

Analysts

Daniel Ernst - Hudson Square Research, Inc.

Richard Kramer - Arete Research Services LLP

Kota Ezawa - Citigroup Inc, Research Division

Presentation

Operator

Welcome to the Sony Corporation Third Quarter Fiscal Year 2012 Conference Call for Overseas Investors. My name is John, and I'll be your operator for today's call. [Operator Instructions] Please note that this conference is being recorded. I will now turn the call over to Edward Reid. Edward, you may begin.

Edward Reid

Thank you very much for that introduction, John. And thank you, all, for joining us today, February 7, 2013, for the discussion of Sony's third quarter results. We hope you have all enjoyed music from 2CELLO's new album on Sony Masterworks, IN2ITION, while you're on hold. I'm Edward Reid from the Investor Relations department here in Tokyo. And with me on the conference call tonight is Mark Kato, CFO of Sony Corporation; Steven Kober, Executive Vice President and Chief Financial Officer, Sony Corporation of America; and Yoshinori Hashitani, VP, Senior General Manager, Investor Relations division of Sony.

Thank you very much for joining, us all of you. In just a few moments, we will review today's announcement and then we will be available to answer your questions.

Please be aware that statements made during the following remarks and Q&A session with respect to Sony's current plans, estimates, strategies, press release and other statements that are not historical facts are forward-looking statements about the future performance of Sony. These statements are based on management's assumptions in light of the information currently available to it and therefore, you should not place undue reliance on them. Sony cautions you that a number of important factors could cause actual results to differ materially from those discussed in the forward-looking statements. For additional information as to risks and uncertainties, as well as other factors that could cause actual results to differ, please refer to today's press release, which can be accessed by visiting www.sony.net/IR.

Let me remind you that the webcast replay of the Investor Meeting held earlier today, along with the slides presented at that meeting and our detailed earnings release, are available on our website for your access.

With that, I'm now going to turn to today's announcement. I shall begin by explaining the consolidated results for the third quarter ended December 31, 2012. Consolidated sales increased 7%, primarily due to the consolidation of Sony Mobile and higher sales in the Pictures and Financial Services segments.

If Sony Mobile had been consolidated in the previous year, consolidated sales would have been essentially flat year-on-year. The Pictures and Financial Services segments are performing quite well, with sales of Pictures up 30% and Financial Services up 21%, both significant increases.

Operating income of JPY 46.4 billion was recorded, a JPY 138.1 billion improvement compared to the JPY 91.7 billion operating loss recorded in the same quarter of the previous fiscal year. This improvement was primarily due to the contribution of the home entertainment and sound segment where a JPY 63.4 billion impairment loss on shares of S-LCD was recorded in the same quarter of the previous fiscal year and where improvement in the profitability structure of LCD TVs is progressing smoothly. The mobile products and communication segment also contributed to the improvement due to the recording of a JPY 33 billion valuation allowance on certain deferred tax assets at Sony Ericsson in the same quarter of the previous fiscal year and an increase in unit sales of smartphones.

In addition, the Devices segment, which had a significant increase in sales of image sensors and the Pictures segment, which had a significant increase in motion picture revenues, also contributed to the improvement in operating results.

Income before income taxes of JPY 29.4 billion was recorded, an improvement of JPY 135.3 billion compared to the JPY 105.9 billion loss recorded in the same quarter of the previous fiscal year. JPY 25.9 billion of income tax expense was recorded during the quarter. Since we continue to record valuation allowances against deferred tax assets, primarily in Japan and the U.S., the effective tax rate for the quarter exceeded the Japanese statutory tax rate. Net loss attributable to Sony Corporation's stockholders decreased JPY 148.2 billion year-on-year to JPY 10.8 billion.

I will now explain our forecast for the fiscal year ending March 31, 2013. Assumed foreign currency exchange rates for the fourth quarter are approximately JPY 88 to the U.S. dollar and JPY 150 to the euro. The consolidated sales forecast for the fiscal year ending March 31, 2013 remains unchanged from our November forecast of JPY 6,600,000,000,000. This is due to the favorable impacts of the depreciation of the yen, as well as the higher-than-expected Financial Services revenue in the third quarter being offset by downward revisions in annual unit sales forecasts of several key electronics products, resulting from the stagnation of the electronics device market and intensification of competition in all regions.

The consolidated operating income forecast for the fiscal year remains unchanged from the November forecast of JPY 130 billion. This is because lower-than-expected results of the electronic segments are expected to be offset primarily by higher-than-expected Financial Services revenue in the third quarter and with planned asset sales. I refer you to our earnings release for a discussion of the results of each business segments compared to the previous fiscal year. And I will now briefly touch on how each segment's third quarter operating results compare to our November forecast and explain our revised fiscal year forecast.

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