Panasonic and Sony increase profit forecasts

JAPAN’S TWO largest consumer electronics companies, Sony and Panasonic, both increased their full-year profit forecasts yesterday.

Sony’s improved outlook is a further indication that Sir Howard Stringer, the group’s chief executive, is turning round the group after being buffeted by a tough business climate, exacerbated by falling prices and high fixed costs.

Sir Howard’s resulting restructuring involved cutting 16,000 jobs, closing eight factories, increasing outsourcing, and restructuring its supply chain in an effort to save more than 300 billion yen (€2.26 billion) a year.

Sony yesterday said it had raised its forecast because of “second-quarter results that exceeded expectations”. It said it expected to lose 95 billion yen in the full year to next March, compared with its previous forecast of a 120 billion yen loss. At the operating level, before restructuring costs and losses from affiliates such as Sony Ericsson, Sony expects to make 110 billion yen rather than its previous forecast of 30 billion yen. Its net loss in the second quarter was smaller than expected at 26.3 billion yen, but much of that was down to 32.8 billion yen of operating profits from Sony’s financial services business, which benefited from rising stock markets.

The troubled TVs-to-cameras consumer division returned to operating profit in the quarter, earning a 1.1 per cent operating margin on sales down by 37 per cent on last year at 800 billion yen.

The operating loss in networked products, however, which includes Playstation video games and is supposed to deliver much of Sony’s future growth, increased to 58.8 billion yen as sales of the old Playstation 2 died away and Sony cut the price of its flagship Playstation 3 to compete with rivals.

Panasonic said it had cut 209.3 billion yen from costs in the first half alone and raised its full-year operating profit forecast to 120 billion yen from 75 billion yen. It cut its estimated net loss from 195 billion yen to 140 billion yen.

However, the company struck a cautious note, warning it did not expect the electronics industry to make a rapid recovery.

Both Sony and Panasonic suffered from the strength of the yen, and Sony said its plans are now based on an average exchange rate of 90 yen to the dollar for the rest of this year. – Copyright The Financial Times Limited 2009