Sony taps into new shares andbonds
Plans to raise nearly R49bn
JAPAN’S Sony Corporation plans to raise nearly $4 billion (R49bn) via new shares and bonds to plough into image sensors as it reinvents itself as a niche component maker, pulling back from consumer goods like TVs that dragged it into losses.
In Sony’s first new share issue in 26 years, the firm said yesterday it expects to raise ¥321bn (R32.16bn) from a public stock offering after a rally that has seen its market value double in a year. It will raise a further 119bn yen from a convertible bond issue to fund a boost in sensor output capacity at its advanced plants in Japan.
Worth close to a tenth of its current market value, the share issue provides the clearest signal yet that chief executive Kazuo Hirai is prioritising the sensor business to anchor Sony’s turnaround.
The firm has long been plagued by losses in branded goods like smartphones, hit by fierce competition from both cheaper rivals in Asia and industry giants such as Apple and Samsung.
Image sensors, a key hightech component in digital cameras and smartphones, emerged as one of Sony’s strongest lines alongside its PlayStation video games unit, helping the company recover from a long slide in TV and smartphone sales. Sony is only just emerging from decline, booking a net loss of ¥126bn in its latest fiscal year, but it expects a profit of ¥140bn in the current year.
The move caught investors by surprise yesterday, with fears the new stock will dilute per-share earnings sending the stock 8.3 percent lower at the close. Yet the company’s market value has climbed in step with its recent recovery progress, and has more than doubled since June 2014 to close to $35bn.
Unlike video games, developing sensors requires a consistently heavy drain on capital expenditure with Sony’s balance sheet already stretched as it restructures, selling or splitting off loss-making operations and slashing jobs.
More positive
Despite yesterday’s shares drop, Takatoshi Itoshima, the chief portfolio manager at Commons Asset Management, said the move was seen as more positive by longer-term investors.
“It’s positive that it is investing in the sensor business which is seen promising,” he said. “But short-term investors may question the strength of its balance sheet, or wonder whether the company could have slashed more of its businesses before raising money from the market.”
Sony had previously flagged smaller-scale commitments to expand in sensors. It said in April that it would spend ¥45bn to bolster sensor production capacity this fiscal year, on top of a ¥105bn investment announced in February.
Tomoyuki Suzuki, the head of Sony’s device solutions business, which includes image sensors, said earlier this month that he expected sensor sales to grow by nearly a quarter to ¥550bnin the year toMarch. – Reuters