Sony Film Unit Posts $32 Million Quarterly Profit

Sony Studio Lot Gate Culver City - Getty - H 2016
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The Sony Pictures profit for July to September compared to a loss of $187 million in the year-ago period.

Sony Corp. on Tuesday reported a drop in income and sales for its fiscal second quarter ended Sept. 30, negatively impacted by the strengthening of the Japanese yen, despite the profit at its film unit.

The conglomerate, led by CEO Kaz Hirai, said its quarterly operating income came to $453 million (¥45.7 billion), down 48 percent on the same quarter of 2015.

Net income reached $48 million (¥4.8 billion), compared to $280 million (¥33.6 billion) in the same period last year.

The Japanese yen strengthened about 20 percent against the dollar and the euro over the past year, reducing the value of Sony's overseas earnings.

Sony's film unit posted an operating profit of $32 million (?3.2 billion), compared to a loss of $187 million (?22.5 billion) for the July-September quarter in 2015 and a loss in the same quarter in 2014.

Sales in the pictures division were up nearly 5 percent at $1.9 billion, mainly due to an increase in theatrical revenues from releases including the Ghostbusters reboot, which took about $230 million worldwide, the animated Sausage Party and Don't Breathe. Sales were up 25 percent on a dollar basis, but the stronger yen reduced the value of earnings for Sony in local currency terms. 

"The turnaround in movie production, the most difficult segment of the pictures division, is progressing, but it takes time and we not meet the operating income forecast announced at the investors day earlier this year in Tokyo," said CFO Kenichiro Yoshida at the results press conference at Sony headquarters in Tokyo. 

"Ghostbusters didn't reach our target, but we'll continue our focus on franchises," said Yoshida in response to a question from a financial analyst, but declined to give details of losses incurred by the underperforming Ghostbusters reboot and Inferno.

In the year-ago quarter, Pixels was Sony's biggest earner, but it failed to match expectations. Hotel Transylvania 2 did better but was released right at the end of the quarter.

Sales in television productions increased due to higher VOD licensing revenue from titles including The Get Down and The Crown, as well as higher ad and subscription income in India, Europe and Latin America.

The games division, a recent bright spot for Sony, saw falls in sales and operating profits, impacted by foreign exchange and a price cut for the PlayStation 4 (PS4) console. Sales fell 11 percent to $3.17 billion (?320 billion), while operating income dropped 21 percent to $188 million (?19 billion).

Sony launched its VR device for the PS4 in October, after the quarter ended, with a shortage of stock reported at stores worldwide.

Music continued to be profitable for Sony, with the division reporting an 8 percent (19 percent on a constant currency basis) increase in sales to $1.49 billion and operating income up 16 percent to $164 million. Sales from both streaming and recorded music increased, with best-selling titles including Celine Dion's Encore un soir.

On Monday, Sony Corp. announced the finalization of the sale of its underperforming battery business to Murata Manufacturing, an electronics component maker that supplies smartphone parts to companies including Apple, for $167 million (?17.5 billion). The Sony Energy Devices subsidiary's assets include manufacturing plants in China and Singapore, as well as R&D operations in Japan.

Sony cut its profit forecast for the financial year to March 2017 by 10 percent on the back of the write down for the battery unit sale.

Sony stock closed down nearly 1 percent at ?3,337 ($31.77) in Tokyo trading, while the Nikkei 225 index gained about 1 percent.

Updated with details and comments from the earnings announcement press conference.