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Electronics and media giant Sony is not out of the woods just yet. Despite a Q1 set of results that showed great progress since last year, Fitch Ratings, in a ratings note, says profitability in Sony’s core electronics businesses remains weak, and is not helped by competitive pressures and currency exchange rate risks.
Sony’s Q1 bottom line is an operating EBIT of Yen 37 billion, which is good. However, as Fitch points out, if these numbers were stripped out of the contribution made by Sony Financial Holdings and exceptional gains, the quarter would have seen a loss of Yen36 billion. A year ago the loss was Yen 42 billion.
In the past year the Japanese Yen has depreciated by 19-20 per cent against the US dollar and Euro.
Fitch says profitability of the electronics business remains weak. Although Sony turned around the electronics business in Q1 FYE14 with an EBIT of Yen13 billion, this was mainly driven by the yen depreciation and also the reclassification of Yen 10 billion expenses to corporate overheads. Sony achieved some success in its Xperia smartphones and LCD TVs, but it still lags in several areas, such as digital cameras, games, PCs and other audio and video products. It pared its FYE14 electronics business operating profit target of Yen 100 billion to below Yen 90 billion.