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Sony posts first full-year profit in 5 years

Forty of Sony's top executives, including Kazuo Hirai, the chief executive since last year, are to give up bonuses worth 30-50 per cent of their pay.

Story highlights

  • Sony helped in the final quarter by a currency market that knocked almost 20 per cent off the yen's
  • Sony has for some time relied on profits from its banking and insurance operations in Japan
  • The company has struggled to compete against South Korean and Taiwanese producers

Sony reported its first full-year net profit in five years on Thursday and said it expected earnings to grow by a further 16 per cent this year, helped by restructuring efforts and a weaker yen.

The Japanese electronics and entertainment group said net profit for the year that ended in March totalled Y43bn ($435m), a turnround from its massive Y457bn loss a year earlier. For the current year, it expects to earn a profit of Y50bn.

Sony was helped in the final quarter by a currency market that knocked almost 20 per cent off the yen's value against the dollar and euro compared with the same period a year earlier, amplifying its overseas earnings.

That added to the effect of a restructuring drive through which Sony has axed 10,000 jobs, or about 6 per cent of its workforce, shrunk its lossmaking television manufacturing business and sold its $1bn New York headquarters.

Sony booked a profit of Y94bn in the January-to-March quarter, compared with a Y255bn loss a year earlier.

Its once-dominant TV operation remained in the red, however. The company has struggled to compete against South Korean and Taiwanese producers in the era of digital flat-screens, and the operation has been losing money for nearly a decade.

Forty of Sony's top executives, including Kazuo Hirai, the chief executive since last year, are to give up bonuses worth 30-50 per cent of their pay after they failed to keep a promise to return the division to profit.

Sony closed the gap considerably, however, and said it believed it would finally achieve its profitability goal this year. Its consumer electronics loss in the year to March, of Y84bn, was 60 per cent smaller than it was a year earlier.

The group's overall earnings forecasts for the year to next March were more modest than those of industry experts. Analysts surveyed by Bloomberg before the earnings announcement were projecting a net profit of Y66bn on average.

Sony said operating profit -- earnings before tax, depreciation and other adjustments -- would probably remain static this year at Y230bn, even as its sales increase by an expected 10 per cent thanks in part to more advantageous exchange rates.

If the yen remains at its current level or weakens further, however, the company could do better than its guidance suggests. Sony based its forecasts on exchange rates of Y90 to the dollar and Y120 to the euro, levels about 8 per cent stronger than the yen's current value.

Sony has for some time relied on profits from the banking and insurance operations it owns in Japan to make up for weakness in other businesses. Last year was no different: its financial arm earned a profit of Y149bn, three times more than the next most profitable division, its US-based film studio.