Sony: Successful 3Q Earnings

Sony: Successful 3Q Earnings, the Sony Group is one of Japan’s largest and most successful conglomerates. The group consists of many subsidiaries in a variety of businesses, including electronics, gaming, music, movies, and more.

Topics
3Q Earnings
Currency Movements
Sony Diversifying Investments
Pictures, Music and Gaming Divisions

3Q Earnings

In recent years, the corporation has struggled with dwindling profitability and the expense of smartphone recalls.
Despite this, the firm has a large client base and is one of the most well-known names in the technology world.
In addition, the business established a collaboration with Chinese automaker BYD to develop electric vehicles.
It announced a 50 billion yen ($350 million) investment in the cooperation, which seeks to create electric vehicles by 2022.
The company has been on a roll lately, thanks in part to the weak yen.
The weaker currency has made Sony’s products more competitively priced abroad and has also boosted the bottom line in several sectors including music and movies.
Investors will be closely watching to see if Sony can continue its momentum in the coming year.
If the company can deliver on its revised forecasts, it would be a big win for shareholders.
Sony anticipates a net profit to reach 840 billion yen ($5.7 billion) by March 2023, up from 800 billion yen previously predicted. It also raised its sales forecast to 11.6 trillion yen.

Currency Movements

This has led to many Japanese companies reporting strong profits in their home currency, but when those profits are translated back into US dollars they have fallen sharply.
Currency movements were always certain to be a big factor in these results.
For one thing, the US dollar has been on a tear recently, hitting 14-year highs against a basket of currencies.
This makes US exports more expensive and puts pressure on American companies that do business overseas.
At the same time, it makes imported goods cheaper for American consumers – which is why you’ve seen such strong retail sales numbers lately despite concerns about the overall economy.”
The second reason currency movements matter is because they can create big swings in reported earnings.
A company that does most of its business in Europe but reports its earnings in dollars will see its reported earnings increase if the euro falls against the dollar (as it did last quarter).
Conversely, a company with significant operations in Japan will see its reported earnings decline if there’s a weakness in the yen (as we’ve seen recently).

Last year at this time, when Sony released its second-quarter results, one US dollar purchased 114 Japanese yen ($1=JPY114). The current exchange rate is $1=JPY148. Sony utilized a quarterly average rate of $1=JPY110 for that results presentation. Sony utilized an average exchange rate of $1=JPY138 for Tuesday’s results.

When represented in Japanese currency, Yen’s depreciation versus the dollar boosts the value of Sony’s international revenues. However, it raises the cost of raw materials and components that must be imported from outside Japan.

As a result, in order to gain an accurate picture of genuine profitability, investors must pay particular attention to how firms like Sony disclose their financial performance.

Sony Diversifying Investments

Despite all of its challenges, Sony is still a very profitable company. In fact, on a constant currency basis, group sales actually increased by 1% last year. That may not sound like much, but it’s actually quite impressive considering the headwinds that Sony is facing.
Investors are clearly bullish on Sony’s prospects and believe that the company will eventually turn things around. After all, it still has some of the most popular consumer electronics brands in the world.

Pictures, Music and Gaming Divisions

Sony Corporation’s ‘Pictures Division’ is in charge of film and television production and distribution, due to stronger box office sales and improved revenues from last year’s titles licensed to TV and home entertainment platforms, as well as improved revenues at Crunchyroll, Sony’s anime streaming arm, the division’s operating income increased for the quarter ended June 30, 2020.
Despite the drop in operational income, Sony has upped its full-year profitability prediction by 15%.
It’s no secret that the music business has struggled in recent years.
However, according to the most recent financial figures, things appear to be turning around.
Music revenue climbed from JPY271 billion to JPY359 billion ($2.43 billion) in the previous fiscal year, according to the study. Operating income increased from JPY50.6 billion ($531 million) to JPY78.7 billion ($531 million).
The industry saw increasing sales of recorded music and music publishing, for the same reason, music profitability improved, which was boosted further by legal settlements.
The games industry is booming, and Sony is reaping the benefits.
The Japanese gaming giant reported strong growth in its Games & Network Services division for the quarter that ended June 30, with revenues up 9% year-on-year to JPY721 billion ($4.87 billion).
Operating income nearly halved, falling from JPY82.7 billion to JPY42.1 billion ($284 million).
In a statement, Sony said that the unit’s revenues suffered from weak sales of third-party games software, but was boosted by currencies.
Sony expects the same trends to endure through the second half of its financial year and it has trimmed its full-year forecast of the unit’s profits by 12% to JPY225 billion ($1.52 billion).
Despite some challenges, it’s clear that Sony is benefiting from rising interest in gaming around the world.

Sony: Successful 3Q Earnings

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