Friday, April 22, 2016

Sony delays annual forecasts to assess earthquake fallout

Tokyo: Sony will postpone its forecasts for the current fiscal year while it assesses the damage from an earthquake that shut its main plant for camera sensors.

The Japanese company said it won’t provide its usual financial outlook when it reports earnings on April 28 and will instead announce guidance in May. On Thursday, the company reported a preliminary profit for the last fiscal year that was more than nine per cent below its own forecast, in part because of slowing global demand for smartphones and the components that Sony supplies.

Operations at its Kumamoto facility remained suspended and there’s been damage to the building, clean rooms and equipment, Sony said in a statement. The facility is the primary manufacturing site for image sensors used in digital and security cameras as well as micro-display devices.

"There is some damage to upper floors, so we’re considering ways to carry out reinforcements,” said Haruka Kitagawa, a spokesman for Sony. "Some production lines on the upper floors are askew. We’re checking whether we can use them or not.”

The earthquake damage may have an adverse impact on operating results, particularly in its devices and imaging products group, according to the statement. It’s unclear when operations will resume. A month’s suspension could reduce Sony’s sales by 50 billion yen ($453 million), said Hideki Yasuda, an analyst at Ace Research Institute in Tokyo.

"Sony can increase the production of CMOS in other factories but it’s not enough,” he said. "The impact on the supply chain is also big. It’s possible that this problem will affect the production of high-end smartphones such as the iPhone.”

The earthquake that hit the southern island of Kyushu this month killed 44 people, derailed a bullet train and forced factory closings at companies such as Toyota Motor. Sony’s Kumamoto plant, which started operating in 2001, makes CMOS sensor chips that turn light into digital signals — a key component in digital cameras and smartphones such as Apple’s iPhone. It accounts for more than 30 per cent of Sony’s CMOS-sensor production, according to Bloomberg Intelligence.

Any disruption to the supply of digital-imaging chips could cause production delays and lost sales for manufacturers. The stoppage also hit Sony’s chip business at a time demand is slowing and a stronger yen makes it harder to sell products abroad.

Sony has relied on image sensors to bolster profits while Chief Executive Officer Kazuo Hirai shifts focus from consumer electronics to chips, video games and movies. The smartphone slowdown will test its ability to generate earnings from PlayStation 4 consoles, streaming services for its 50 million online users as well as movies and music.

The Japanese company is expected to post revenue of 8.1 trillion yen for the fiscal year ending March 2017, according to the average of analysts’ estimates compiled by Bloomberg. In January, the company had reduced its sales forecast for the devices business by 120 billion yen.

Its shares closed 1.7 per cent lower at 3,017 yen on Friday, before Sony released its statement.
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