Sony Corp slashed its annual earnings forecast yesterday, projecting its first net loss in 14 years on slumping sales, a strong yen and restructuring costs.
The last — and only — time Sony reported a loss, for the fiscal year ending March 1995, the red ink came from one-time losses in its movie division, marred by box office flops and lax cost controls.
The Japanese electronics and entertainment company expects to sink into a ¥150 billion (US$1.7 billion) loss for the fiscal year through March, a reversal from ¥369.4 billion profit the previous year.
Like other Japanese exporters, Sony is taking a beating from crimped consumer spending during the critical year-end shopping season. The yen’s appreciation and a plunge in gadget prices have also taken a toll.
Sony is particularly vulnerable to the strong yen since about 80 percent of its sales come from overseas. The dollar has dropped to below ¥90 recently from as high as ¥117 last year.
Trouble has been brewing at Sony for some time. In October, it lowered its forecast to a ¥150 billion profit, but it said conditions had worsened since then.
Sony said the slowing economy and price declines were wiping out ¥250 billion in operating profit, while the yen’s appreciation took out another ¥40 billion. Restructuring charges cost ¥30 billion and the declining equity value of its affiliates was a ¥20 billion loss.
Profitability had worsened at its video game and movies units, as well as with its financial businesses in Japan, including an insurer and Internet bank, it said.
Last month, Sony announced widespread cost cuts, including trimming 8,000 of its 185,000 jobs and shutter five or six plants — about 10 percent of its 57 factories. It also said it was cutting an additional 8,000 temporary workers, who aren’t included in the global work force tally.
Sony also plans to reduce its electronics investments by about one-third by the end of March next year.
The moves are expected to deliver more than ¥100 billion in savings a year by March next year, the company said.