索尼 (SONY) 2012 Q1 法說會逐字稿

Welcome to the first quarter fiscal year 2012 Sony Corporation conference call for overseas investors. My name is John, and I will be your operator for today's call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. Please note that this conference is being recorded. I will now turn the call over to Edward Reid. Edward, you may begin.

Thank you very much for that introduction, John. And thank you, all, for joining us today, August the 2nd, 2012, for the discussion of Sony's first quarter results. We hope you enjoyed music from John Mayer's latest chart-topping album Born and Raised while you were on hold.

I'm Edward Reid from the Investor Relations Department here in Tokyo. With me on the conference call tonight is Yoshinori Hashitani, VP Senior General Manager, Investor Relations Division of Sony; Steven Kober, Executive Vice President and Chief Financial Officer, Sony Corporation of America; and Alex Kobayashi from the Corporate Planning Department here in Tokyo.

Thank you very much, all -- to you all for joining us. In just a few moments, we will review today's announcement. Then we will be available to answer your questions.

Please be aware that statements made during the following remarks and Q&A session with respect to Sony's current plans, estimates, strategies, press release, and other statements that are not historical facts are forward-looking statements about the future performance of Sony.

These statements are based on management's assumptions in light of the information currently available to it. And therefore, you should not place undue reliance on them.

Sony cautions you that a number of important factors could cause actual results to differ materially from those discussed in the forward-looking statements.

In additional information, please refer to today's press release, which can be accessed by visiting sony.net/ir.

Let me remind you that a Webcast replay of the investor meeting held earlier today along with slides presented at that meeting and our detailed earnings release are available on our Website for your access.

With that, I'm now going to turn to today's announcement. I will begin by explaining the consolidated results for the first quarter ended June the 30th, 2012.

Consolidated sales increased slightly. This was primarily due to the full consolidation of Sony Mobile, which had been an equity affiliate in the same quarter of the previous fiscal year.

Partially offsetting this impact was a significant decrease in sales of televisions, resulting from a decrease in unit sales. Operating income decreased JPY21.2 billion year on year to JPY6.3 billion. This was primarily due to an unfavorable exchange rate and deterioration in the operating income from PCs, which experienced greater competition, and of Sony Mobile, which recorded increased intangible asset amortization and royalty adjustments pursuant to its full consolidation.

Although operating income was below the same quarter of our May forecast for the previous fiscal year, due to profitability improvement in the TV business, it was greater than forecast.

With JPY11.3 billion of restructuring charges included in the operating results for the quarter, we are proceeding steadily with efforts to transform our business structure.

We recorded JPY20 billion in income taxes during the quarter. This was primarily because we did not record any tax benefits for losses we recorded at certain tax filing groups due to the establishment of valuation allowances against deferred tax assets in prior fiscal years.

Net loss attributable to Sony Corporation stockholders deteriorated JPY9.1 billion year on year to JPY24.6 billion.

We have changed our segment reporting from this quarter due to a change in our organizational structure, which became effective on the 1st of April this year. Please refer to the earnings release for a detailed discussion of the changes in segment reporting and for the results of each segment.

In the interest of time, I will just touch on the results of our digital imaging, Sony Mobile, and television businesses.

Sales and operating income of digital imaging, which is now contained in the Imaging Products and Solutions segment were essentially flat year on year. Sales of video cameras were flat, as increased unit sales, a rebound from last year, which was affected by the earthquake, were offset by price declines.

Operating income decreased due to price declines and increase in promotional expenses and the unfavorable impact of exchange rates. But, we continue to maintain a high level of profitability.

Compact digital cameras experienced a significant decrease in sales and profit year on year due to a decrease in unit sales resulting from a significant contraction of the market, mainly in Europe and the US as well as the impact of unfavorable exchange rates.

Interchangeable single-lens cameras experienced a significant increase in sales and an improvement in operating results year on year due to the expansion of the market, a rebound in supply after the Thai floods in the prior year, and an increase in unit sales of high-value-added products.

Next, I will talk about Sony Mobile, which is now contained in the Mobile Products and Communications segment. On a pro forma basis, had Sony Mobile been fully consolidated in the same quarter of the previous fiscal year, Sony Mobile's sales would show an increase of approximately 40%.

This was primarily due to an increase in average selling price, due to the shift from feature phones to smart phones and increased unit sales of smart phones, primarily due to strong sales of the Xperia series.

Since the May forecast, we have revised our annual unit sales forecast of smart phones up to 34 million units.

Despite the positive impact of the increased sales, operating loss would've expanded primarily due to the impact of unfavorable exchange rates.

Next is televisions, which is now contained in the Home Entertainment and Sound segment. Television sales decreased 35% year on year to JPY157 billion because, as we explained at the earnings result announcement in November of last year, we are managing our business with an emphasis on profitability rather than unit sales. And we were impacted by price declines and unfavorable exchange rates.

Unit sales for the quarter decreased 27% year on year to 3.6 million. Excluding restructuring charges, a JPY6.6 billion loss was recorded. But, this was a JPY8.1 billion improvement year on year. This loss includes JPY1.5 billion of impairment charges.

As a result of our managing the business with an emphasis on profitability and our continuing to cut costs, unit sales and revenue of televisions for the quarter decreased year on year. But, operating loss improved to less than half the amount recorded in the same quarter of the previous fiscal year.

The loss was better than our May forecast, and we are making steady progress towards a profitable structure. For the rest of the fiscal year, we are taking a cautious view of the market, especially in Europe and China. And we have revised downward our unit sales forecast from the 17.5 million units announced in May to 15.5 million units.

However, we have made no change to our May forecast for a full-year operating loss of approximately JPY80 billion because we expect profitability to improve. Going forward, we plan to continue to improve our profitability structure as we aim to turn a profit in the fiscal year ending March the 31st, 2014.

Lastly, I will explain our forecast for the fiscal year ending March 31st, 2013. Assumed foreign currency exchange rates for the second quarter onward are approximately JPY80 to the $1 and approximately JPY100 to the EUR1.

Consolidated sales for the fiscal year ended March 31st, 2013, are expected to be JPY6.800 trillion, primarily down to downward revisions in annual unit sales forecasts of key products, resulting from deceleration of the economy and updated foreign exchange rate assumptions from the second quarter to account for the appreciation of the yen against the euro.

Consolidated operating income is expected to be JPY130 billion, JPY50 billion lower than the May forecast. The forecast for each business segment is as follows. Sales and operating results of the IP&S segment, in which the annual unit sales forecast for compact digital cameras was revised downward, the game segments in which the annual unit sales forecast of portable hardware was revised downward, and the MP&C segment, in which the annual unit sales forecast of PCs was revised downward, are all expected to be lower than the May forecast.

Sales of the HE&S segment are expected to be lower than the May forecast, but operating results are expected to remain unchanged from the May forecast.

The forecasts for operating income in the pictures, music, and financial services segments are unchanged from the May forecast.

All other and corporate and elimination are expected to improve compared to the May forecast due to improvement in the operating results of businesses in all other and cost improvements at headquarters.

That ends my discussion of our results and forecast. Please note that our CFO Mark Kato is not available to be on the call today due to health reasons, and we apologize for his absence.

I shall now turn the call over to Hashitanisan, Kobersan, and Steve in New York for Q&A. John, may I ask you to queue up the questions, please?

Thank you. We will now begin the question-and-answer session. (Operator Instructions). And our first question is from Daniel Ernst from Hudson Square Research.

Yes, good evening. Thanks for taking my call. Two questions, if I might. Looking at the big-picture reduction in sales forecast for the year, clearly, currency is not helping, the macro environment's not helping. But, those two issues were present in May when we heard the forecast previously. And I'm wondering, to what extent is the reduction in forecast also a function of product positioning relative to competitive products on the market?

And then second question on the mobile phone, where you're actually raising your smart phone projections after I think a reasonably strong launch of the new Xperia line, I'm wondering if you have any color on what the sell-through of those products is that gives you confidence that carriers will begin to reorder and give you that continued momentum to achieve the new raised guidance. Thank you.

Yes, of course, the biggest one of these is the reductions, impact of the top line, best due to the currency movement. But, in addition to that, well, maybe more than that, impact of the (inaudible) in euro, in European market, and also make a big impact to our result.

And also, as we explained that the -- in additionally, to keep the profitability of the TV business, we are accepting the reductions over the shares in the US market or European market for TV business. So, that also makes a big impact to the reduction with the sales over the total products.

In addition to that, in the case of distance to cover in Europe, especially in Europe or Chinese market, of course, we can try to manage -- maintain the market share. But, the market sales is declining. So, the top line is also declining.

And regarding the second question, already, this past quarter, we sold the -- sorry, 7.4 million units of smart phones. And especially the acceptance in the Japanese market quite high. So, this was the -- one of the reasons we -- and we achieved the sales of the smart phones in total for first quarter is better than -- or in line or better than our expectations so that we decide to increase the total sales for this fiscal year.

Understood. And just as a housekeeping item, on a comparable like-for-like basis, what was smart phone sales for the combined Sony Ericsson for this period last year?

Wait a second. I'm checking the figures.

Sorry, we don't have figures for the quarter-by-quarter basis for last year's result. But, for your information, the last year's sales was, say, 8.2 million units, including feature phones and smart phones.

Right, that's number we had. Okay. Thank you.

And our next question's from Jeff Loff from Macquarie. Please go ahead.

Hi. Just on the imaging segment, you said that compact was weak, but interchangeable cameras grew. I'm wondering, can you talk about the trend between mirrorless and DSLR? And are you seeing DSLR slow as mirrorless grows?

Hi, Jeff. It's Edward here. I'm afraid we don't give a breakup for the alpha series of cameras between mirrorless and SLT-type of cameras.

Okay. Shifting gears to the game segment, it looks like portable units were down more than 20% year over year, despite the launch of Vita. Is that Vita falling below expectations, or is it PSP that's trending below expectations?

Sorry, this is also -- we are not disclosed Vita and PSP separately. We just announced the total number.

Right. Even if you don't break it out, I mean, obviously, it's clearly tracking below expectations because you lowered the full-year target by 25%. So, are you able to give any insight on where the weakness is, if it's Vita or PSP, even if you can't give specific numbers?

For [your difference], portable is a system to hardware. Compared last year, it's increased the -- almost double. And the (inaudible) compared with our last forecast, we revised the figure from 16 million units to this 12 million units. And the decline in this forecast is the -- from both the PSP and PS Vita.

And the -- as you know, the PS Vita, we are perhaps not making huge investment for this hardware. Key chips are also outsourced or we are buying from our side so that the reductions of this forecast are not making a big impact to the bottom line.

The -- so, the reductions of our forecast for the bottom line for the game business is merely due to the current visibility of this forecast change, forecast for these sales.

And then the last question is just on mobile handsets. Looks like there's still limited exposure in the US, despite the fact that you're putting more emphasis I guess on marketing, marketing spend there. How long do you think it'll take to get a stronger presence in the US? And what do you think is the hang-up there?

Yes, I can tell you until how many years to achieve the -- some amount of profit -- market share. But, we are trying to think about how to reach the higher market share. First of all, we have to communicate with the carrier. And by utilizing that -- Sony's brand, we are going to increase the market share. But, it will take more than three years I think.

Sorry, at this moment, we don't have any concrete idea when to going to make a -- for, say, going to the US market again in the large amount. At this moment, we haven't concentrated to the areas which we are not strong -- we are having a strong market shares, like in Japan and Europe.

And also, so that the (inaudible) expansion [in] those markets, we are going to achieve the current forecast. And so that, if we decide to -- the time we are not having [good] ideas, but the -- when we found it a good chance, then we will decide. But, at this moment, we don't have any concrete ideas.

Great. Thank you very much.

And our next question is from Kota Ezawa from Citigroup.

Hi. Thank you for taking my questions. I have a question on a downward revision. I'd like to see if this action is realistic enough or might have a further downside. In this downward revision in operating profit of JPY50 billion, you mentioned that the currency impact is all the reason for this. So, basically currency impact is JPY50 billion.

On the other hand, having JPY600 billion sales estimate cut off in this revision, how much you see that marginal profit reduced by this sales shrink? And also, what is specifically the additional reason to cover this profit deterioration by sales reduced? Could you specify those additional cost reduction or savings as many as possible, like a personnel cost or advertisement and promotions, or it might be an R&D cost, additional reduction, and so on? Thank you.

Yes, the currency impact is the figure which you described so that the reduction of the top line will be offsetted by the cost reductions and also the -- was a reduction of the cost side and also, say, sales and marketing cost side.

And the -- so, that's how we calculated the reduction of the operating profit at this moment for the forecast basis.

Is that fair to say JPY600 billion sales reduction in the guidance brings like JPY200 billion like operating profit negative impact, and you're saying the same size of JPY200 billion cost reduction additionally in [your planning to]?

Just one moment while we calculate.

Okay. Let me put it this way. After the impact of the foreign exchange rate for the operating profit is around JPY50 billion. And we are trying to offset the -- to keep the price or to increase the price when the product itself is very strong.

As for the sales reduction based on the reduction of the sales unit, we are going to cover the improvement, the operating cost reduction. We can describe the amount itself otherwise now. But, it's a kind of the explanation.

Sorry, any clarification about this cost -- additional cost reduction? Is it coming from which cost? Any color is fine.

Yes, one of the -- around the cost, and at the same time, the marketing cost or the cost based on the manpower, so over the cost is one of the items we are going to reduce.

Okay. Thank you.

(Operator Instructions). And there's no further questions at this time.

In that case, if we have no further questions, we're ready to end the call.

Okay. Thank you, ladies and gentlemen. This concludes today's conference. Thank you for participating. You may now disconnect.

Thank you very much, John. We'd like to thank all of you for joining us today to discuss the announcement. Please feel free to contact our London, New York, or Tokyo Investor Relations offices if you have any further questions. Thank you, all, for joining us. And good night from Tokyo.