Sony cuts outlook on film unit writedown, profit decline

Bloomberg

Sony Corp.’s struggling movie division is weighing on the rest of the company, even as the PlayStation is booming and semiconductors show signs of a rebound.
The electronics and entertainment company cut its full-year profit forecast a second time in three months after posting quarterly earnings that missed estimates, following a 112 billion yen ($1 billion) charge against its film business that was unveiled earlier this week. Net income will be 26 billion yen in the 12 months ending March, a steep cut from an already-reduced outlook for 60 billion yen, the Tokyo-based company said in a statement Thursday. Still, solid performance by the games and chips businesses were bright spots, helping the company’s shares pare losses in European trading. The stock was down less than 1 percent in Germany, from an earlier drop of as much as 3.6 percent.
Sony has been seeking to recover from setbacks last year, when component production was halted due to earthquakes and a loss on the sale of its battery division. In the entertainment division, the lack of box-office hits and the increasing popularity of streaming services has eroded the profitability of the business. The unit has relied on its television and media operations to make up for the shortfall in films, which suffered a paralyzing cyberattack two years ago. “Hopefully they will start to get a grip there,” said Amir Anvarzadeh, Singapore-based head of Japanese equity sales at BGC Partners Inc. “Ghostbusters was a big flop last year. There were a lot of big flops this past fiscal year.” Operating profit for the quarter ended in December was 92.4 billion yen, compared with the 154 billion yen average of estimates compiled by Bloomberg. Sales fell 7.1 percent from a year earlier to 2.4 trillion yen, below analyst expectations for 2.49 trillion yen.
The loss in films “is being taken extremely seriously by management,” Chief Financial Officer Kenichiro Yoshida said at a briefing. “There are various issues piled up at our film studios. Our intellectual property is insufficient, our catalog is insufficient. We have no choice but to grind our way through these things.”
The head of the film division, Michael Lynton, announced last month the end of his 13-year run, paving the way for new management. Chief Executive Officer Kazuo Hirai has temporarily relocated to California to oversee the transition, and is seeking to find a replacement for Lynton, shore-up profitability and expand into regions such as China. To offset part of the one-time loss, Sony sold shares in medical services provider M3 Inc. to Goldman Sachs Group Inc. in a deal worth about 52 billion yen.
The loss in movies came three months after Sony cut its full-year profit forecast by 25 percent, after agreeing to sell its ailing battery division at a loss.