OREANDA-NEWS. July 28, 2011. Sony Corporation today announced its consolidated results for the first quarter ended.


Consolidated operating income of 27.5 billion yen (340 million U.S. dollars) was recorded in the current quarter, despite year-on-year declines in sales and operating income due mainly to the negative impact of the Great East Japan Earthquake as well as the deterioration of the electronics business environment.

Business operations that had been negatively affected by the Earthquake are recovering faster than anticipated in the May forecast.

Despite lower projected annual LCD television unit sales compared to the May forecast and further unfavorable foreign exchange rates anticipated for the remainder of the fiscal year contributing to a lower consolidated sales forecast, the consolidated operating income forecast for the current fiscal year
remains unchanged because the performance of most businesses is anticipated to exceed the May forecast.


Consolidated Results for the First Quarter Ended June 30, 2011
Sales were 1,494.9 billion yen (18,456 million U.S. dollars), a decrease of 10.0% compared to the same quarter of the previous fiscal year (“year-on-year”) primarily due to decreases in sales in the CPS and PDS segments, which were mainly affected by the negative impact of the Great East Japan Earthquake (the “Earthquake”) as well as the deterioration of the electronics business environment, and unfavorable exchange rates.

During the quarter ended June 30, 2011, the average rates of the yen were 80.7 yen against the U.S. dollar and 115.9 yen against the euro, which was 12.7% higher and 0.4% lower, respectively, than the previous fiscal year’s first quarter. On a local currency basis, sales decreased 5% year-on-year. For references to sales on a local currency basis, see Note on page 8.

Operating income decreased 39.5 billion yen year-on-year to 27.5 billion yen (340 million U.S. dollars). This was mainly due to lower operating income in the CPS and PDS segments primarily resulting from a decrease in gross profit from lower sales and a deterioration in the cost of sales ratio.

Restructuring charges, net, decreased 5.4 billion yen year-on-year to 1.8 billion yen (22 million U.S. dollars). The CPS segment restructuring charges were 2.4 billion yen (30 million U.S. dollars) in the current quarter, compared with 1.6 billion yen recorded in the same quarter of the previous fiscal year. In the PDS segment, a credit to restructuring charges of 1.7 billion yen (21 million U.S. dollars) was recorded in the current quarter compared with the 2.6 billion yen restructuring  harges recorded in the same quarter of the previous fiscal year. This was mainly
due to a recording of a 2.5 billion yen (30 million U.S. dollars) gain on a sale of assets associated with the restructuring initiatives.

Excluding equity in net income (loss) of affiliated companies and restructuring charges, net, operating income on an as adjusted basis decreased by 33.4 billion yen year-on-year to 34.1 billion yen (422 million U.S. dollars).

Equity in net loss of affiliated companies, recorded within operating income, was 4.8 billion yen (60 million U.S. dollars) as compared to net income of 6.7 billion yen in the same quarter of the previous fiscal year. Sony recorded equity in net loss for Sony Ericsson of 3.1 billion yen (38 million U.S. dollars) compared to equity in net income of 0.6 billion yen in the same quarter of the previous fiscal year. Equity in net loss for S-LCD was 1.6 billion yen (20 million U.S. dollars) as compared to net income of 4.5 billion yen in the same quarter of the previous fiscal year.

During the current quarter, Sony incurred charges of approximately 5.3 billion yen (66 million U.S. dollars), consisting principally of incremental expenses, including restoration costs (e.g., repair, removal and cleaning costs) of certain fixed assets including buildings, machinery and equipment as well as inventories at manufacturing sites ьand warehouses damaged by the Earthquake, in addition to idle facility costs at manufacturing sites. Approximately 1.3 billion yen (16 million U.S. dollars) of these charges has been offset by insurance claims ьthat are deemed probable. Most of the remaining charges of approximately 4.0 billion yen (50 million U.S. dollars) have been offset by a partial reversal of an incremental provision for insurance policy reserves previously recorded due to the Earthquake in the Financial Services segment. As a result, Sony recorded net charges of
approximately 0.7 billion yen (8 million U.S. dollars) in the current quarter.

Sales and operating income of both the CPS and PDS segments for the current quarter were negatively affected by the Earthquake, resulting from issues in certain product categories such as constraints in the supply chain and lower production capacity due to damaged manufacturing equipment. However, an improvement in status of such issues is progressing faster than the expectation that was included in the forecast for consolidated results for the fiscal year ending March 31, 2012, which was announced on May 26, 2011.

Due to the cyber attacks on Sony’s network services for PlayStation®Network, Qriocity™ and Sony Online Entertainment, the network services were temporarily shut down and related expenses such as security enhancement measures were  ecorded in the current quarter. The network services that were shut down in April
2011 were restored in phases beginning in May, culminating in a full restoration on July 6 in all countries and regions where Sony provides the network services. Most recently, user logins to PlayStation®Network in North America have returned to a similar level as before the cyber attacks.

The net effect of other income and expenses was an expense of 4.4 billion yen (54 million U.S. dollars), compared to income of 11.9 billion yen in the same quarter of the previous fiscal year, primarily due to the recording of a net foreign exchange loss as compared to a net foreign exchange gain in the previous fiscal year.

Income before income taxes decreased 55.8 billion yen year-on-year to 23.1 billion yen (285 million U.S. dollars).

Income taxes: During the current quarter, Sony recorded 27.5 billion yen (340 million U.S. dollars) of income tax expense resulting in an effective tax rate of 119.1%. The effective tax rate for the current quarter was higher than the Japanese statutory tax rate primarily due to the recording of a valuation allowance on deferred tax assets resulting principally from losses incurred during the current quarter at Sony Corporation and its national tax filing group in Japan. As a result, no tax benefits associated with the losses were recognized.

Net loss attributable to Sony Corporation’s stockholders, which excludes net income attributable to noncontrolling interests, was 15.5 billion yen (191 million U.S. dollars) as compared to net income of 25.7 billion yen in the same quarter of the previous fiscal year.

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