Sony Corp Ord (SNE)

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Sony Corporation (SNE)

Q4 2010 Earnings Call

May 26, 2011 9:00 am ET

Executives

Samuel J. Levenson – Senior Vice President of Investor Relations

Masaru Kato – Executive Vice President and Chief Financial Officer

Analysts

Mark Harding – Maxim Group

Daniel Ernst – Hudson Square Research, Inc.

Yuji Fujimori – Barclays Capital

Presentation

Operator

Good day ladies and gentlemen and welcome to the consolidated Financial Results for Fiscal Year ended March 31, 2011. At this time, all participants are in a listen-only mode. We will conduct a question-and-answer session towards the end of this conference (Operator Instructions). As a reminder, this conference is being recorded for replay purposes.

I will now turn the presentation over to your host for today to Sam Levenson, Senior Vice President of Investor Relations at Sony Corporation of America. You may proceed.

Samuel J. Levenson

Thank you very much for that introduction Francis. And thank you all for joining us today May 26, 2011 for the discussion of Sony’s fiscal year results. I hope that you were all in enjoying Adele's latest hit while you were on hold.

I am Sam Levenson, Senior Vice President of Investor Relations at Sony Corporation of America. And with me on the conference call tonight is Mark Kato, CFO of Sony Corporation; Robert Wiesenthal, Group Executive, Corporate Development, M&A for Sony Corporation, and EVP and CFO of Sony Corporation of America; and Yoshinori Hashitani VP of Senior General Manager of Investor Relations Division at Sony. Thank you all very much for joining us.

In just a few moments, we will review today’s announcement, then we’ll 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 a 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 am now going to turn to today’s announcements. As we announced in our preliminary earnings results released on Monday, our operating profit for the fiscal year ended March 31, 2011 came in on forecast at approximately ¥200 billion or over six times what we recorded in the previous fiscal year.

We achieved that result despite an approximate ¥100 billion negative impact from foreign exchange combined with the initial effects of the earthquake. Excluding the impact of foreign exchange rates operating income was 9.5 times that of the previous fiscal year. Every reportable segment recorded operating profit for the year. In addition, the game business and Sony Ericsson each concluded the year in the block. At this time the television business is the only remaining key business unit where we still need to stop for operating losses.

As I will discuss in more detail later the losses of the TV business were stable year-over-year despite significant price erosion and unfavorable exchange rates. As we announced on Monday this week, we reported loss from net income attributable to Sony Corporation’s shareholders, we will be reporting an approximately ¥360 billion in evaluation allowances against deferred tax assets. However this evaluation allowance is non-cash charge and has no impact on our cash flow.

Now let’s review the fiscal year results on a segment-by-segment basis beginning with Consumer, Professional & Devices. CPD segment sales increased 2% and sales to outside customers increased 4%. This was primarily due to higher LCD sales resulting from significantly higher unit sales and higher semiconductor sales resulting from favorable performance of small to mid-size LCD panels and image sensors, partially offset by lower component sales resulting from a decrease in storage media and optical disc drive sales.

Operating income in CPD of ¥2.9 billion was recorded, a significant improvement compared to a loss of ¥53.2 billion in the previous fiscal year. This improvement was driven primarily by an increase in gross profit due to higher sales, a decrease in loss on sale disposal and impairment of assets and a decrease in restructuring charges. These factors were partially offset by unfavorable foreign exchange rates and an increase in SG&A as a result of an increase in advertising and promotional expense.

Excluding the restructuring charges, product categories was an improvement in operating results included semiconductors, reflecting an increase in sales of image sensors, and professional solutions, reflecting an increase in sales of products such as digital cinema projectors.

Product categories was a deterioration in operating results in LCD televisions reflecting a decline in unit selling prices and unfavorable foreign exchange rates despite rise in unit sales. Television business sales increased 16% to ¥1,161 billion due to a significant increase in LCD unit sales despite price declines in unfavorable foreign exchange rates.

For the fiscal year LCD TV unit sales increased 44% to 22.4 million units. This significant increase in unit sales came mostly from Japan and other areas including developing countries. Excluding restructuring charges ¥75 billion in operating loss was recorded which was down slightly year-on-year. This was due to significant price declines and the significant impact of unfavorable exchange rates despite the increase in unit sales which I talked about a moment ago along with a reduction in raw material costs and the benefits of restructuring.

Read the rest of this transcript for free on seekingalpha.com