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Sony's woes deepen as it plunges to €2.3bn loss


Sony revealed that the recent Playstation Network hack will likely cost the firm around €121m

Sony revealed that the recent Playstation Network hack will likely cost the firm around €121m

Sony revealed that the recent Playstation Network hack will likely cost the firm around €121m

The electronics giant Sony is set to slump to full-year losses of ¥269bn (€2.3bn), its second worst performance ever, after a tax charge forced the group to slash its forecasts.

The losses will heap further pressure on its embattled chief executive Sir Howard Stringer in a year when the group has suffered from the devastating earthquake in Japan and a cyber attack on its network. Its share price has tumbled a quarter since the turn of the year.

Sony is set to release its full-year numbers on Thursday, but was forced to issue a revised forecast to the one it released in February after it became clear the group would not post the ¥70bn profit it had predicted three months ago.

The company has been dragged into a full-year loss by a charge of ¥360bn related to rules around deferred tax assets in its home country.

While the charge is not in cash it will force a "substantial decrease from the February forecast", the chief financial officer Masaru Kato said yesterday. The loss a year earlier was ¥40.8bn.

The reversal will see Sony post its third consecutive year of losses, although Mr Kato added: "The establishment of this valuation allowance does not reflect a change in Sony's view of its long-term corporate strategy."

The company said sales would remain in line with its previous expectations, despite the slump to a full-year loss. It reported yesterday that sales were likely to be down from ¥7.2tn 12 months ago to ¥7.1tn.

This comes despite the impact of the earthquake in Japan just weeks before the end of the company's financial year, which Mr Kato said had "significantly damaged" Sony's supply chain. It had also been forced to close nine manufacturing plants.

The earthquake's impact drove sales down ¥22bn. The disaster means the company will also be hit with a charge of ¥12bn over the costs of closing manufacturing sites as well as for life insurance policy reserves in its financial services business.

It also expects expenses of ¥11bn related to repair, removal and cleaning costs to its buildings and machinery as well as inventories.

However, Sony added almost all of the losses will be offset by insurance payments. The real damage from the earthquake will come in the current financial year, with Sony predicting supply chain disruptions will see sales fall ¥440bn and profits down ¥150bn.

"Until the quake hit, we had been counting on a considerable recovery in earnings," the chief financial officer said.

Still, Sony officials predicted that the company would return to profit for the full year to the end of March 2012 with sales expected to grow year on year.

Sony was also hit by a cyber attack on its online PlayStation Network leaving millions of users details exposed. The company revealed yesterday that the hack is likely to cost ¥14bn.

This is made up of the theft protection programme for its customers as well as the cost of the incentives to bring disgruntled customers back into the fold. It will also face payouts to upgrade its network security, customer support costs as well as legal and expert costs.

Yet the company warned that costs relating to the hack could potentially spiral. During yesterday's press conference, Mr Kato revealed that should there be confirmed reports of identity theft or misuse of credit cards following the cyber-attack – which are so far yet to materialise – it could face rising costs. It also faces a series of class action lawsuits.

Independent News Service