Sony delivers first annual profit in five years

Japanese electronics icon Sony has said its global sales should pick up significantly this financial year as it launches a series of high-end TVs, PCs and smartphones.

Sony is hoping to establish a strong smartphone presence. Picture: Getty

The group, which also plans a new PlayStation this year, celebrated a return to full-year profit after four years in the red with a bullish update on its forecasts for several major divisions.

It said “significant” increases in sales of “high-value-added” products in the current period would make up for the lack of one-off items which bolstered the balance sheet in the year to 31 March.

The plunging yen inflated the value of the group’s euro-denominated sales and helped the group secure an operating profit of ¥230.1bn (£1.5bn) last year. However, the figure included more than £700 million profit on the sale of office buildings in New York and Tokyo, as well as an even larger gain from a disposal of shares.

Sony has been struggling as consumers ditch large items such as flatscreen TVs in favour of single portable devices such as smartphones and tablets which can be used to enjoy a variety of media.

With consumer spending converging on Apple’s iPads and Samsung’s Galaxy phones, Sony forecasts that its own smartphone sales will rise by more than a quarter to 42 million in the 12 months to March 2014.

Its five-inch screen Xperia Z smartphone has exceeded the company’s sales expectations since its launch in January. Its goal is to fend off challenges from Chinese rivals to secure the number three slot in the global smartphone market behind Samsung and Apple which between them account for more than half of all such devices sold.

However, analysts point out that Sony is hamstrung by its lack of a serious presence in two of the world’s biggest markets, the US and China, where it must build relationships with retailers and service providers if it is to make inroads.

Mitsushige Akino, chief fund manager at Ichiyoshi Asset Management, said: “It [42 million] does not seem a lot. Sony’s smartphones are high-spec and production costs should be hefty, so it has to sell a lot to be profitable.”

Market research firm Strategy Analytics reckons Sony captured less than 1 per cent of the US smartphone market in 2012. It expects the Japanese company to gain a 4 per cent share of the global market this year.

In other divisions, particularly its TV department, Sony has been shedding jobs and selling assets in an effort to achieve a turnaround.

It no longer makes the iconic Walkman that made the firm a world beater in 1980, and has suffered from the dramatic contraction of the market for physical music recordings such as CDs as consumers increasingly access media over the internet.

However, with the Bank of Japan’s concerted efforts to cheapen the yen making the country’s products more competitive abroad, the firm is predicting sales rises even in some of its toughest markets.

Digital sales should help turnover and profits in its music business to rise slightly, while its gaming arm is expecting a big boost when it launches the PlayStation 4. Operating income in games is expected to be essentially flat year-on-year due to an increase in research and development and marketing expenses related to the launch.