Sony Q2 profit falls short of estimates on battery unit sale

Bloomberg

Sony Corp.’s second-quarter profit missed estimates, as a one-time charge and stronger yen weighed on profit from financial services and PlayStation games.
Operating profit in the period ended September was 45.7 billion yen ($436 million), the Tokyo-based company said in a statement Tuesday. That compares with the 49.7 billion yen average of analysts’ estimates compiled by Bloomberg before the company disclosed a 33 billion yen charge from the sale of its unprofitable battery unit to Murata Manufacturing Co.
Investors will probably look past the one-time charge and focus on Sony’s games division, its main earnings driver. Excluding the impact of a stronger yen, revenue at the unit grew even though it lacked new titles before the launch of a virtual-reality headset and an upgraded version of the PlayStation 4. Sony has relied on games this year to make up for losses at its image-sensor division, where earthquakes in April temporarily shut production of chips used in cameras.
“While the numbers may be below consensus estimates, it actually reflects the impairment from the battery business, so they aren’t that bad at all,” said Kazunori Ito, an analyst at Morningstar Inc.
Chief Executive Officer Kazuo Hirai’s efforts to dispose of unprofitable businesses and restore operations following the April earthquakes appear to be paying off, with Sony shares up more than 10 percent this year, compared with a 8.4 percent decline in the Nikkei 225 Index.
The higher yen, which reduced income earned abroad, and a price cut for the PlayStation weighed on the division’s results, Sony said in the statement. The games unit reported operating profit of 19 billion yen on sales of 320 billion yen. Sony shipped 3.9 million PS4 units in the latest quarter, and maintained its forecast to ship 20 million units in the 12 months through March.
“The focus is on the momentum of the PlayStation,” Damian Thong, an analyst at Macquarie Group Ltd., said before the earnings release. “Image sensors should be back by the December quarter.”
Sony on Monday announced the sale of its battery unit for about 17.5 billion yen and transfer of 8,500 workers, resulting in the impairment on its components business. The affected workers represent 6.8 percent of the 125,300 employees Sony had as of March. The company also reduced its profit forecast for the fiscal year by 10 percent to 270 billion yen.
The company had announced the sale of the battery business in July without disclosing a price, but warned the deal would probably have a
negative impact on earnings. The company also cut its net income forecast
for the year by 25 percent to 60 billion yen, but maintained that sales will total 7.4 trillion yen.
Estimated damage at the image-sensor unit from the earthquakes was revised to 53.5 billion yen, from 80 billion yen. The semiconductors unit had an operating loss of 4.2 billion yen in the second quarter, while sales declined 5 percent to 194 billion yen.