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Sony Corporation (SNE)
F3Q11 Earnings Conference Call
February 2, 2012 3:30 AM ET
Masaru Kato – EVP and CFO
Howard Stringer – Chairman, CEO and President
Kazuo Hirai – Executive Deputy President and Officer in charge of the Consumer Products and Services Businesses
Hideki Yasuda – Economic Institute
Yasuo Nakane – Deutsche Securities
Eiichi Katayama – Merrill Lynch
Nico Yura – CNBC
Yuji Fujimori – Barclays Capital
Masahiko Ishino – Mitsubishi UFJ Morgan Stanley
Kota Ezawa – Citigroup Securities
Previous Statements by SNE
» Sony Management Discusses F2Q 2011 Results - Earnings Call Transcript
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So there are two parts to this session. The initial 40 minutes, we will cover the third quarter results as well as the full-year forecast, and the Q&A. And then the latter 40 minutes, the top management press conference and the session will be over at 7:10 p.m. Simultaneous interpretation services are provided, Channel one for Japanese and Channel 2 for English.
Now first, about the earnings announcement, I’d like to introduce the members on the stage. On the right-hand side, the EVP and Corporate Executive Officer, CFO, Masaru Kato; and next to him, EVP in charge IR, Yoshinori Hashitani.
Now Mr. Kato, please.
Thank you. But first, a summary of the consolidated results for the quarter. Sales decreased significantly year-on-year due to the impact of floods in Thailand, deterioration in the market environment in developed countries, and even greater relative impact of exchange rates. The floods in Thailand were one of the major factors behind the significant decrease in sales and deterioration in operating results for the quarter.
Several of our manufacturing facilities incurred direct damage, resulting in a halt in production, and the delayed launch of certain products. Moreover, the supply chain across the entire industry was impacted, and the demand decreased as companies we do business with were affected. The decrease in sales and significant deterioration in equity in net income of affiliated companies caused us to record an operating loss for the quarter.
The deterioration in equity in net income of affiliated companies was primarily due to an impairment loss on our shares in S-LCD which we transferred to Samsung to improve the cable business profitability and the recording of the – a valuation allowance on the deferred tax asset at Sony Ericsson.
Excluding extraordinary items, operating results in nearly every segment include compared with the November forecast, excluding equity in net income of our three companies and restructuring charges in LCD television asset impairment, operating income on an adjustment basis was ¥23.7 billion profit.
Now, let me explain income statement. Consolidated sales decreased 17% year-on-year. On a local currency basis, sales have decreased 12%. On a segment basis, sales of CPS and PDS segments decrease significantly. Consolidated operating results deteriorated ¥229.2 billion year-on-year to an operating loss of ¥91.7 billion. Equity net loss of affiliated companies recorded in operating income was ¥108.8 billion compared to a profit of ¥2.6 billion in the same quarter last year.
As I explained at the outset, contained within this loss was ¥63.4 billion impairment loss on our shares in S-LCD and the evaluation lower is on the DDA at Sony Ericsson, ¥33 billion.
The net effect of other income and expenses was expensed of ¥14.2 billion compared to expense of ¥6 billion in the same quarter of previous fiscal year. Gross before income tax was ¥105.9 billion compared to a profit of ¥131.5 billion in the same quarter of previous year.
During the current quarter, we recorded ¥28.9 billion of income tax expense. It is recorded despite a net loss before income tax due to Sony not recognizing the tax benefit associated with losses at Sony Corporation and its national tax filing will be in Japan with a valid allowance against a certain different assets and equity in net loss of affiliated companies, so as recorded, net over income taxes and income tax expenses recorded as the result of profit from overseas and in the Financial Services segment.
Reduction or the net loss applicable to Sony Corporation’s third quarter was ¥159 billion compared to net income of ¥72.3 billion in the same quarter previous year. Concerning the segment, result as we will explain?
First, I’ll explain the result of Consumer Products and Services segment, service and operating profit.
CPS segment sales decreased 25% due to the impact of the flooding in Thailand. Nearly every product category in the CPS segment was impacted by the floods. On a product category basis, if you look at the decrease in sales of LCD television, it was a major factor drop due to the price decline resulting from deterioration in market conditions in Japan, Europe and the North America. Operating loss was ¥85.7 billion compared to operating income of ¥63.5 billion in last year. This decrease was driven by deterioration in equity in net income of operating companies and a decreasing gross profit from losses, deterioration in cost of sales ratio even though this SG&A was improved.
Primary factors affecting are as follows. The excluding restructuring charges and impairment losses, the product category affected the LCD TV and the Game business. Sales in the TV business decreased 42% to ¥237 billion. This was due to a shifting of this unit sales expansion to profitability, price declines resulting from deterioration of operating environment and the impact of the flood. During the quarter, LCD TV unit sales decreased 24% to 6 million units.