Sony slashed its operating profit forecast by 57 per cent because of the strong yen, falling stock market and weakening global economy. The company will hold a board meeting in Tokyo next Wednesday to discuss its response to the situation, according to two executives at the company. Sony’s warning will erase any lingering optimism about sales of consumer electronic gadgets this Christmas and suggests that the euro’s weakness is seriously hurting Japanese exporters.
The group now expects to make only Y200bn ($2bn) at the operating level in the year to March 2009, but even that forecast depends on an exchange rate of Y140 to the euro for the rest of the year – against today’s Y125 – and a 20 per cent recovery in the Japanese stock market.
“The magnitude of the current difficulties is unprecedented,” said Nobuyuki Oneda, Sony’s finance director, but added that Sony would address them from a position of financial strength. Mr Oneda said there would be cuts to capital expenditure and refused to rule out plant closures or job losses, showing the impact of weak exports and the strong yen on the Japanese economy.
Due to a change in Sony’s assumptions for foreign currency exchange rates in the second half of the fiscal year, as noted above, to reflect the significant appreciation of the yen above the rates assumed in July, Sony expects results to be lower than the July forecast with operating income decreasing by approximately ¥130 billion, mainly within the Electronics and the Game segments (assumed foreign currency exchange rates in July were approximately ¥105 to the U.S. dollar and approximately ¥165 to the euro for the quarter ended September 30, 2008 and approximately ¥105 to the U.S. dollar and approximately ¥160 to the euro for the second half of the fiscal year).
Sony expects the results of certain businesses in the Electronics segment, such as the LCD television, compact digital camera and video camera businesses, to be lower than the previous forecast due to a deterioration in the market environment brought on by the slowing global economy and an intensification of price competition. Sony anticipates this will negatively impact operating income by approximately ¥90 billion compared to the July forecast.
Check out more of Sony’s FY08 forecast at Sony’s IR page.
