Sony Pictures Profits Slide in Second Quarter as Group Earnings Climb
Japanese electronics and entertainment group Sony saw its sales and profitability climb in the three months to end of September 2022, the second quarter of its financial year.
The group’s net income soared by 24% to JPY264 billion ($1.78 billion) compared with JPY213 billion in the same quarter last year. Earnings per share came in at JPY212 (or $1.36 per share), handily beating financial analysts’ consensus EPS estimates of $1.03 per share.
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Group revenue for the quarter was reported at JPY2.751 trillion ($18.6 billion), also ahead of analysts’ forecasts of $17.95 billion.
Profits in the headline ‘Pictures Division,’ which covers film, television production and television networks, weighed in at $202 million, down both on a year-on-year basis and on a quarter-on-quarter basis. That was despite the division’s revenues increasing from $2.37 billion to $2.44 billion.
Among the other entertainment units, music enjoyed a significant increase in profitability, while games and network services suffered a significant reduction.
Currency movements were always certain to be a big factor in these results. The Japanese Yen has recently tumbled to 30-years lows as central bank, the Bank of Japan, pursues an ultra-loose monetary policy that runs directly contrary to the cycle of monetary tightening and interest rate increases being operated by the U.S.’s Federal Reserve.
When Sony reported its second quarter results at this time last year one US dollar bought 114 Japanese Yen ($1=JPY114). Now the rate is $1=JPY148. And for that results presentation Sony used a quarterly average rate of $1=JPY110. For Tuesday’s results, Sony used an average exchange rate of $1=JPY138.
The weakening of the Yen against the dollar increases the value of Sony’s overseas earnings when expressed in the Japanese currency. But it increases the cost of raw materials and components that have to be imported from outside Japan.
Sony explained that on a constant currency basis, group sales increased by only 1%.
The ‘Pictures Division’s revenues increased due to higher box office revenues and improved revenues for last year’s titles licensed to TV and home entertainment, and improved revenues at Crunchyroll, Sony’s anime streaming unit. These were partially offset by lower series deliveries to television and lower licensing to streaming platforms.
Despite the quarter’s dip in operating income, the group is increasing by 15% its forecast of the Pictures Division’s full year profitability.
In the quarter it released four feature films (compared with three last year) enjoying $233 million of gross box office for “Bullet Train” and $132 million for “Where the Crawdads Sing.”
Music revenues increased from JPY271 billion to JPY359 ($2.43 billion). Operating income leaped from JPY50.6 billion to JPY78.7 billion ($531 million). The segment enjoyed higher sales of recorded music and music publishing, which were further increased by favorable exchange rates. Music profitability increased for the same reason and were further juiced by litigation settlements.
The biggest music titles of the quarter were Beyonce’s “Renaissance,” Harry Styles’ “Harry’s House” and Future’s “I Never Liked You.”
Games revenues increased from JPY645 billion to JPY721 billion ($4.87 billion). Operating income nearly halved, falling from JPY82.7 billion to JPY42.1 billion ($284 million). In a statement, Sony said that the unit’s revenues suffered from weak sales of third party games software, but were boosted by currencies. And despite the unit reducing its losses on hardware, it incurred higher software development costs and took on extra costs with the acquisition of Bungie. Sony expects the same trends to endure through the second half of its financial year and it has trimmed its fully year forecast of the unit’s profits by 12% to JPY225 billion ($1.52 billion).
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