Sony plan for ¥112bn writedown shocker
‘But all the bad news are out’
SONY Corporation said it will take a ¥112 billion (R13.06bn) writedown in its movie business after reviewing the future profitability of its operations.
The company said it would book the charge in the fiscal third quarter and is examining how that will affect its forecasts.
To offset part of the loss, the company also said it would sell shares in the medical web service M3 to Goldman Sachs Group’s Japan unit, in a deal worth about ¥37bn.
The announcement comes two weeks after Sony said the chief executive of Sony Entertainment, Michael Lynton, is stepping down after a 13-year run.
The studio has struggled recently, including with last year’s Ghostbusters sequel and a movie based on the Angry Birds video game. Sony warned in June the division was at a risk of posting more losses.
“There has been a suspicion in the market that Sony doesn’t have a firm grip on the movie business, but still the amount is a surprise,” said Kazunori Ito, an analyst at Morningstar Investment Services.
“That said, with Lynton’s departure and this writedown, all the bad news is out and the attention can turn on their plan for the coming fiscal year.”
Sony shares closed little changed in Tokyo. Shares listed in Germany fell 1.9 percent in light-volume trading.
“The decline in the DVD and Blue-ray market was faster than we anticipated,” Takashi Iida, a Sony spokesman said.
The Tokyo-based company is increasingly relying on its video games business, which generated twice as much income in the last fiscal year as film.
Sony’s PlayStation 4 console is outselling Xbox One, its closest rival from Microsoft, by about two-to-one, according to industry website VGChartz.
Lypton’s departure capped a tumultuous two years for the division since a cyber attack blamed on North Korea paralysed the studio.
The hacking led to private messages leaking on to the internet and the departure of film-division head chief Amy Pascal.
Sony’s chief executive Kazuo Hirai has temporarily relocated to California for sixmonths to oversee a review of the division and look for a replacement, the company said this month.
In June, Sony lowered its projection for film revenue in fiscal year 2018 by $500 million (R6.72bn) to a range of $9.5 to $10.5bn.
It also lowered its operating profit margin to a range of 6 to 7 percent, from 7 to 8 percent.
Sony’s Iida said the division’s television broadcasting unit, which generates the majority of revenue, is unaffected and continues to do well.
Sony is increasingly leaning on China to offset the downturn. In September, Dalian Wanda Group, the world’s largest movie screen operator, agreed to invest in Sony Pictures productions in an open-ended partnership.
But a slowdown in movie revenue on the Chinese mainland has raised doubts about how much the deal will bolster Sony’s performance.
M3 slipped 1.2 percent and is up 17 percent over the past 12 months.
M3 will continue to count Sony as its largest shareholder even after the deal, according to data compiled by Bloomberg.
Prior to the deal, Sony held 39.3 percent of M3’s outstanding shares. – Bloomberg
Sony Corporation headquarters in Tokyo. Sony will sell shares in the medical web service M3 to Goldman Sachs Japan unit.