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Sony reports record loss amid disasters and strong yen

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Sony reports record loss amid disasters and strong yen

Japanese electronics maker Sony has reported a record annual loss as natural disasters last year and a strong yen hurt its earnings.

The firm reported a net loss of 456.7bn yen ($5.7bn; £3.5bn) for the year to the end of March, compared with a 259.6bn yen loss last year.

The company said falling demand from developed markets also affected its earnings.

However, it forecast a profit of 30bn yen for the current financial year.

But despite the company sounding upbeat, some analysts said the firm was likely to face tough times even in the year ahead.

“There is no respite in sight for them. Demand from Europe has been falling and the yen continues to remain strong,” Nitin Soni of Fitch Ratings told the BBC.

“These factors are contributing to the fall in profitability.”

Double whammy

Sony’s production and sales were severely affected by the earthquake and tsunami in Japan in March last year.

The twin disasters resulted in supply chain disruptions and a shortage in power supply in Japan, forcing Sony to curtail production.

Its fortunes were hurt further by floods in Thailand later in the year, which saw its factories in the country being affected.

A strong Japanese currency, which gained as much as 10% against the US dollar between April 2011 and February 2012, further added to its woes.

A strong yen hurts earnings of firms when they repatriate their foreign earnings back home and also affects sales as it makes their goods more expensive to foreign buyers.

Growing competition

Aside from the impact of the strong currency and natural disasters, analysts say the firm has also lost ground to its competitors in key areas.

Sony’s TV division has been making a loss for the past eight years, hurt by the likes of Samsung which has been steadily increasing its global market share.

At the same time, Sony’s video games unit has also been facing growing competition not just from other gaming console makers, but also from the rising popularity of smartphones and tablet PCs, and the improving quality of games available on those devices.

“The core issue is that Sony is fast losing its leadership in technology to rivals,” said Mr Soni of Fitch Ratings.

“It is not coming out with any new products or devices which can combine all their assets such as music, entertainment and gaming and have a mass appeal.”

Tags assigned to this article:
Japan tsunamiJapan's economySony

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