Sony reported a surprise Y260 billion (USD 3.18 billion) net loss and said the effects of Japan’s March earthquake and tsunami could do lasting damage to its ability to make money in its home country.
The loss, revealed in a preliminary earnings report on Monday, was the technology and entertainment group’s third in as many years and its largest under Sir Howard Stringer, chief executive since 2005.
The immediate cause was a Y360 billion one-time tax charge, as Sony wrote-off deferred tax credits it had banked during the past two years of deficits. The credits have value only if Sony is confident it can earn taxable profits in Japan in the future – but it said that confidence had been eroded by the disaster.
“The earthquake and tsunami did major damage to our supply chain and created the risk of lasting electricity shortages,” Masaru Kato, chief financial officer, said. “There is some distortion in our domestic profit structure.”
Sony stressed that it remained in the black at the operating level and that the accounting charge would not drain the company of any cash. Still, the results could unnerve investors who had expected the company – which is in the midst of a general restructuring – to return to net profit this year.
Stock analysts had predicted a lossmaking fourth quarter, owing in large part to the natural disaster, but had expected Sony to be profitable for the full year. The company’s operating income of Y200 billion, before taxes and one-off charges, was also short of analysts’ average estimate, by about Y50bn.
Sony itself had forecast a Y70 billion net profit in February. It is not scheduled to announce final earnings numbers until Thursday, but a Tokyo Stock Exchange rule forced it to release the preliminary results three days early.
Companies listed on the exchange are required to inform investors immediately if they conclude that they will miss earnings targets by 30% or more.
The March 11 earthquake and tsunami – Japan’s worst natural disaster since the war – have pushed the economy into recession and caused losses at many manufacturers with factories and suppliers in the stricken country’s northeast.
Sony has suffered the additional blow of an attack by computer hackers last month on its PlayStation Network video game platform and other internet-based services, in which personal information belonging to 100 million users was exposed to theft. Sony said it expected the security breach to cost it Y14 billion, a sum that will come out of its earnings in the current year.
But it was the natural disaster that was most damaging. Sony said the effects of the quake and tsunami would cost it Y150 billion this year, leaving its operating profit roughly at the level of last year after anticipated gains from the restructuring.,