Sony slashes profit outlook on weaker economy, higher yen

TOKYO, Oct. 23 Kyodo - Sony Corp. on Thursday announced sharp downward revisions to its earnings forecasts for the current business year through March 2009, due largely to the yen's appreciation and the global economic slowdown that has dampened demand for various consumer appliances.

The Japanese electronics and entertainment giant is now projecting a group net
profit of 150 billion yen, down from a profit of 240 billion yen projected in
July. The latest net profit forecast represents a plunge of 59 percent from the
previous year's profit of 369.44 billion yen.
The announcement came on the heels of similar cuts in earnings forecasts by
other major Japanese electronics companies including NEC Corp., Toshiba Corp.
and Sharp Corp, as the slowing global economy has dealt a heavy blow to such
companies.
''The yen's further appreciation, the slump in stock markets and changes in
global economic conditions were well beyond our imagination,'' Sony Chief
Financial Officer Nobuyuki Oneda told a press conference.
Oneda said consumer spending is slowing especially in the United States and
Europe as he announced downward revisions to the company's fiscal 2008 sales
targets for Bravia flat-panel televisions and Cyber-shot digital cameras.
He said the company is mulling action plans to overcome the current difficult
situation and that the plans could include restructuring of production bases
and personnel adjustments.
For fiscal 2008, Sony cut its operating profit outlook to 200 billion yen from
an earlier projected 470 billion yen and its sales outlook to 9 trillion yen
from 9.2 trillion yen.
In fiscal 2007, the company racked up an operating profit of 475.30 billion yen
on sales of 8.87 trillion yen.
Given the yen's recent sharp appreciation against the U.S. dollar and the euro
amid the global financial crisis, Sony said it has revised its assumptions
regarding foreign exchange rates, resulting in a decline in its operating
profit outlook of around 130 billion yen from its July estimate, mainly at its
electronics and game businesses.
The company's earnings forecasts are now based on the assumption that the
average exchange rate against the dollar will be 100 yen for the latter half of
fiscal 2008, compared with the previously estimated rate of 105 yen.
It also changed its estimate for the average exchange rate against the euro to
140 yen from 160 yen.
Strengthening of the yen makes Japanese exporters' products more expensive
overseas and reduces the yen value of profits brought back to Japan.
Aside from the adjustments in foreign exchange rate assumptions, Sony said
deteriorating business conditions stemming from the slowing global economy as
well as intensifying price competition have also slashed its operating profit
projection by about 90 billion yen.
Sony said it is also expecting losses from stock and other equity holdings due
to recent sharp falls on the Tokyo stock market, lowering its operating profit
projection by 60 billion yen.
Losses stemming from such adverse factors will largely overwhelm a projected 10
billion yen operating profit from Sony's full acquisition of Sony BMG Music
Entertainment this month.
Given such unfavorable factors, Oneda said it would be ''difficult'' to achieve
Sony's original plan of turning around its loss-making TV and game businesses
this fiscal year.
Sony is scheduled to release its earnings results for the first half of the
current business year on Wednesday.
For the July-September quarter, Sony said it expects to report a group net
profit of 21 billion yen, down 72 percent from a year earlier and an operating
profit of 11 billion yen, down 90 percent, on sales of 2.07 trillion yen, down
1 percent.
==Kyodo