Sony nearly doubles first-half net profits

Sony said its six-month net profit was boosted by video games sales, including blockbuster software titles like ‘God of War’ and ‘Spider-Man.’ (AFP)
Updated 30 October 2018
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Sony nearly doubles first-half net profits

  • Sony had previously forecast a moderate slowdown for the rest of the year
  • ‘Its game sector has continued spearheading its recovery. Strong titles offset slowing sales of PlayStation 4 consoles’

TOKYO: Sony announced on Tuesday that its six-month net profit had nearly doubled from last year to a record high, and upgraded its annual forecasts, with games and movies leading the way.
The electronics and entertainment giant said April-September net profit reached ¥399.4 billion ($3.5 billion), up 88.7 percent from a year ago and marking its best performance for the period.
Operating profit and sales were both up, with video games driving the good news, including blockbuster software titles like “God of War” and “Spider-Man.”
Sony’s quality sensors for smartphone cameras saw explosive demand, becoming a major pillar of the firm’s revenue.
The movies and music segments also contributed to growing profits, though Sony’s mobile phone business continued to struggle.
The robust six-month performance, with operating profit up 20.1 percent at ¥434.5 billion and sales rising 5.5 percent to ¥4.1 trillion, prompted Sony to upgrade outlook for the second half.
It now projects an annual net profit of ¥705 billion, which would mark a new all-time high, along with annual operating profit of ¥870 billion and sales of ¥8.7 trillion.
Sony had previously forecast a moderate slowdown for the rest of the year.
“Various areas including music as well as the game and network services field” are doing better than earlier thought, the firm said.
Among movies, television licensing revenues from “Jumanji: Welcome to the Jungle” and “Peter Rabbit” added to its sales.
Foreign exchange rates and strong sales of Sony’s paid membership game service also contributed to the optimistic annual expectations, the company said.
However, for the mobile phone segment, Sony braced for further struggles particularly with smartphone sales falling in Europe and Japan.
Sony expected to see a loss from the segment despite attempts to cut costs. The firm has struggled to win market share against giants Samsung and Apple, and faces pressure from Chinese manufacturers as well.
Analysts said the company results showed it was entering a growth phase after a remarkable recovery that followed several painful years of huge losses.
“Its game sector has continued spearheading its recovery. Strong titles offset slowing sales of PlayStation 4 consoles,” Hideki Yasuda, an analyst at Ace Research Institute in Tokyo, said ahead of the company’s announcement.
“Other than mobile businesses, I have not seen any major risks surrounding Sony,” he said.
Yasuo Imanaka, an analyst at Rakuten Securities in Tokyo, said: “Sony has already completed a full-fledged comeback and is now heading toward a new growth phase.”
“The only concern is its mobile phone business. Sony is required to revamp the sector drastically,” he said before the announcement.


Record budget spurs Saudi economy

The budget sets out to lift spending and cut the deficit. (Shutterstock)
Updated 19 December 2018
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Record budget spurs Saudi economy

  • “It is a growth-supportive budget with both capital and current expenditure set to rise.”
  • Government spending is projected to rise to SR 1.106 trillion

RIYADH: Saudi Arabia on Tuesday announced its biggest-ever budget — with spending set to increase by around 7 percent — in a move aimed at boosting the economy, while also reducing the deficit. 

However, analysts cautioned that the 2019 budget is based on oil prices far higher than today — which could prove an obstacle in hitting targets. 

Government spending is projected to rise to SR 1.106 trillion ($295 billion) next year, up from an actual SR 1.030 trillion this year, Minister of Finance Mohammed Al-Jadaan said at a briefing in Riyadh. 

The budget estimates a 9 percent annual increase in revenues to SR 975 billion. The budget deficit is forecast at SR 131 billion for next year, a 4.2 percent decline on 2018.

“We believe that the 2019 fiscal budget will focus on supporting economic activity — investment and wider,” Monica Malik, chief economist at Abu Dhabi Commercial Bank (ADCB), told Arab News.

“It is a growth-supportive budget with both capital and current expenditure set to rise.”

A royal decree by Saudi Arabia’s King Salman, also announced on Tuesday, ordered the continuation of allowances covering the cost of living for civil sector employees for the new fiscal year.

“The continuation of the handout package will be positive for household consumption by nationals,” said Malik. “We expect to see some overall fiscal loosening in 2019, which should support a further gradual pickup in real non-oil GDP growth.”

World oil prices on Tuesday tumbled to their lowest levels in more than a year amid concerns over demand. Brent crude contracts fell to as low as $57.20 during morning trading.

Malik cautioned that the oil-price assumptions in the Saudi budget looked “optimistic.”

“We see the fiscal deficit widening in 2019, with the higher spending and forecast fall in oil revenue,” she told Arab News.

Jason Tuvey, an economist at London-based Capital Economics, agreed that the oil forecast was optimistic, but said this should not pose problems for government finances.

“The government seems to be expecting oil prices to average $80 (per barrel) next year,” he said. 

“In contrast, we think that oil prices will stay low and possibly fall a little further to $55 … On that basis, the budget deficit is likely to be closer to 10 percent of GDP. That won’t cause too many problems given the government’s strong balance sheet. 

“Overall, then, we think that there will be some fiscal loosening in the first half of next year, but if oil prices stay low as we expect, the authorities will probably shift tack and return to austerity from the mid-2019, which will weigh on growth in the non-oil sector,” Tuvey said.

John Sfakianakis, chief economist at the Gulf Research Center, based in Saudi Arabia, said that the targets of the budget were “achievable” and the forecast oil price reasonable. 

“It is an expansionary budget that should spurt private sector activity and growth,” he said. 

“With Brent crude averaging around $68 per barrel for 2018 and $66 per barrel for 2019, the authorities have applied a conservative revenue scenario.”