Oct 31, 2015
Executives
Casey Kuester - Investor Relations Kenichiro Yoshida - Chief Financial Officer, Executive Vice President, Representative Executive Officer, Director Kazuhiko Takeda - SVP, SGM of Corporate Planning and Control Department Atsuko Murakami - Vice President, Senior General Manager of Finance Department Steven Kober - Chief Financial Officer and Executive Vice President, America
Analysts
Kota Ezawa - Citigroup Nam Kim - Arete Research John Litschke - CREF Giles Edwards - Lazard Eric Chamber - Electro-Motive Kendrick Chia - Tahan Capital
Operator
Welcome to the Sony Corporation Conference Call for Overseas Investors for the Second Quarter Ended September 30, 2015. My name is John.
I will be your operator for today's call. At this time, all participants are in a listen-only mode.
Late, we will conduct a question-and-session. Please note that this conference is being recorded.
I will now turn the call over to you host, Casey Kuester.
Casey Kuester
Thank you very much for that introduction, John. Thank you all, for joining us today, October 29, 2015, for a discussion of Sony's results for the second quarter ended September 30, 2015.
We hope you all have enjoyed the Essential Van Morrison while you were on hold. I am Casey Kuester, in the Investor Relations Department here in Tokyo.
With me on the conference call tonight is Kenichiro Yoshida, Executive Deputy President and CFO of Sony Corporation, Kazuhiko Takeda, Senior Vice President and Senior General Manager of Sony's Corporate Control Department, Atsuko Murakami, Vice President and Senior General Manager of Sony's Finance Department and Steven Kober, Executive Vice President and Chief Financial Officer, Sony Corporation of America. Thank you, all, very much for joining us.
In just a few moments, we will review today's announcement and then we will be available to answer your questions. Please be aware that statements made during the following remarks in Q&A session, with respect to Sony's current plan, estimates, strategies, press release and other statements that are not historical facts are forward-looking statements about the future performance of Sony.
These statements are based on management's assumptions in light of the information currently available to it and therefore, you should not place undue reliance on them. Sony cautions you that a number of important factors could cause actual results to differ materially from those discussed in the forward-looking statements.
For additional information as to risks and uncertainties, as well as other factors that could cause actual results to differ, please refer to today's press release, which can be accessed by visiting sony.net/ir. Let me remind you that a webcast replay of the investor meeting held earlier today, along with the slides presented at that meeting and our detailed earnings release, are available on our website for your access.
Before turning to Yoshida san for some remarks, please allow me to briefly give an overview of our results for the second quarter and our forecast for the remainder of the fiscal year. In the second quarter, consolidated sales were essentially flat year-on-year at ¥1,892.7 billion.
Consolidated operating income was ¥88 billion, an improvement of ¥173.6 year-on-year. This significant improvement was due to the recording of ¥176 billion goodwill impairment loss, in the Mobile Communication segment, in the same quarter of the previous fiscal year.
Excluding the impairment loss, operating results deteriorated ¥2.4 billion year-on-year. However, the year-on-year negative impact of foreign exchange rates for all five electronics segments in aggregate was approximately 34 billion, so if you exclude the impact of foreign exchange rate, result would have improved.
Income before income taxes of ¥72.2 billion was recorded and net income attributable to Sony Corporation's stockholders of ¥33.66 billion was recorded, both significant improvements year-on-year. Please consult our earnings release and presentation materials from today's announcement for Sony's results for the second quarter and first half of the fiscal year.
Our consolidated sales and operating income forecast for the fiscal year remain unchanged from the July forecast. However, we did make changes to the forecast of several of our segments that I will now explain.
In Game & Network Services, we will revised our sales forecast upward by ¥30 billion and our operating income forecast upward by ¥20 billion, due to the continued strong performance of the PS4 platform including software. We recently adjusted the sales price PS4 hardware and today we will revise our unit sales forecast upward by 1 million units.
Imaging Products & Solutions sales and profits results for the quarter increased year-on-year mainly due to our continued successful shift to high value added model in the shrinking digital camera market. In light of the situation, although we downwardly revised our sales forecast for the segment due to the impact of foreign exchange rates, we upwardly revised our operating income forecast for the segment for the fiscal year by ¥10 billion.
As a side note, we have decided to include the medical business, which was previously included in all other. In the Imaging Products & Solutions segment starting from the third quarter.
The reason for this change is that we believe it is important to draw on synergies in the Imaging field to strengthen and grow the medical business. In Home Entertainment & Sound although we are forecasting lower sales due to the negative impact of foreign exchange rates, we upwardly revised our operating income forecast by ¥3 billion mainly due to cost reductions and further improvement in product mix.
However, we have not changed the operating income forecast of the Television business for the full year as we continue to have a cautious view going forward. In Devices, we have downwardly revised our forecast for sales from the July forecast due to lower sales of polymer-type batteries, as well as temporary problems in the second quarter with manufacturing equipment for image sensors.
However, our forecast for operating income remains unchanged mainly due to an expected improvement in image senor productivity and yield as well as cost reductions. As is mentioned in today's release, Sony is in the process of our annual review of our mid range plan, including for our battery business.
An increase in competition in the battery industry adversely impacted the financial performance of our battery business in the current quarter, was the factor in the downward revision of the full year forecast of the Devices segment and could continue to negatively impact this business going forward. As a result, it is possible that the business environment I just mentioned might result in an impairment charge against long-lived assets in the battery business.
We have downwardly revised our Picture sale forecast, due to decrease in sale in all categories. Within the Motion Pictures category, we have revised our sales forecast downward due to the underperformance of the current fiscal year's film slate.
We have also revised downward our current year forecast for operating income in this segment, primarily, due to the underperformance of the film slate, as well as the negative impact of foreign exchange rates and lower advertising revenue in Media Networks. In regards to our Music segment, our sales and operating income forecast remained unchanged from the July forecast.
Our forecast for the Mobile Communication segment remained unchanged as well. Within this business, the restructuring plan that we have announced is progressing according to plan and we are confident that we will be able to meet our forecast for the fiscal year.
The results of each business in the Financial Services segment continue to be strong, especially; Sony Life and our forecasts for sales and operating income for the fiscal year remain unchanged. We have slightly increased the projected loss in all other corporate elimination to ¥188 billion this fiscal year.
¥80 billion of this ¥188 billion is an allocation for risk, the same amount that we had budgeted at the time of our previous earnings announcement. Now, before we turn to Q&A.
I would like to turn the mike over to our CFO, Kenichiro Yoshida.
Kenichiro Yoshida
Thank you, Casey. I wanted to take a little more time than usual tonight to give a view as to Sony's recent progress.
It is true that during the past several years we have been struggle as a company to maintain profitability, particularly in our electronics businesses, but we believe that the results we reported today are a sign that we have made significant progress. In our traditional electronic segments including mobile, IP&S which contain our digital camera business and HE&S which contains our TV business.
We have moved to assets like structure and they are focus on improving of our return on invested capital. All three of these segments are committed to prioritizing competitive advantage from both product and supply management perspective over the expansion of scale.
The financial performance of our TV business has stabilized and we expect that the Mobile segment can achieved breakeven next fiscal year by applying to focus to its product line up and geographic footprint. As Casey mentioned, we revised upward our profit forecast for both HE&S and IP&S today.
We are also very pleased with the strides being made by the Game segment, the focus for which we revised upward today as well. The difference between the Game segment and the three segments I just mentioned is that we do want to grow scale in the game business.
In particular, we are committed to turning the PlayStation network into a truly comprehensive global entertainment platform and we have already begun to have some success. In September, we achieved a record amount of network revenue for a single month.
We also focused on growing scale in the CMOS image sensor business within our device segment over the mid-term. Also, we revised downward by ¥10 billion of our sale forecasts for the image sensor business today.
As a result of the temporary production equipment progress Casey mentioned earlier. We are still excited about the mid to long-term growth opportunities for this business.
One of the ways we plan to grow share in image senor the expansion of production capacity. Yesterday, we announced that we entered into an MOU with Toshiba to acquire certain semiconductor production facilities from them.
One of the benefits of potentially acquiring these facilities is that we could utilize them to either increase our scale by adding to our photodiode production capacity or to reduce our costs and improve our margins by internalizing the production of logic which is used in our world class spec image sensor and it is currently outsourced. Another benefit of potentially acquiring these facilities is that possibility of bringing a large pool of engineering talent into Sony.
Leveraging the expertise of these people will also help us to grow this business over the long-term. Why it is that we are concerned about pictures business.
The Motion Pictures part of our picture business is a windows business. In other word, we monetize the content we create and distribute multiple times and in multiple countries.
Therefore, to maximize our profitability we need to develop franchise IP which would appeal to customers in as many windows as possible. The head of our entertainment business, Michael Lynton, recently appointed a new head of Motion Pictures business, who we believe strong value the development of franchise IP.
Over the long-term, we are optimistic about financial performance of the pictures business will improve, but it is going to take some time as we develop our IP. Music is also a segment where monetization of content on a recurring basis is crucial.
That is why we are excited about the growth of digital streaming platform. We will continue to invest in artist development to ensure that we have a pipeline of content that we can be exploited.
Financial Services remain one of our most profitable segments. We believe we can continue to record consistent profit in the segment going forward, so we are on track to achieve the 10% or high ROI and ¥500 billion or more operating income targets we have set for the mid-term.
Thank you for your attention. Back to you, Casey.
Casey Kuester
Thank you, Yoshida san. I am now going to turn things back over to John.
We can start the Q&A session. Thank you again for your attention.
John, would you please queue up the question?
Operator
Thank you. We will now begin the question-and-session.
[Operator Instructions] Our first question is from Kota Ezawa from Citigroup.
Operator
[Operator Instructions] We have question from Nam Kim from Arete Research.
Operator
[Operator Instructions] We have a question from John Litschke from CREF. Please go ahead.
Operator
Our next question is from Giles Edwards from Lazard. Please go ahead.
Operator
[Operator Instructions] We have a question from Eric Chamber from Electro-Motive. Please go ahead.
Operator
We have a question from Kendrick Chia from Tahan Capital. Please go ahead.
Operator
Okay. Now I would like to turn the call back to Casey Kuester for closing remarks.
Casey Kuester
Thank you all for tuning in today to listen to Sony's results announcement for the second quarter results. Good night from Tokyo.
Operator
Thank you. Ladies and gentlemen, this concludes today's conference.
Thank you for participating. You may now disconnect.