Currency issues compound woes at Sony and SingTel

Unfavourable currency movements are adversely affecting the results for companies across Asia, adding to the impact of stagnating demand which these firms are already weathering. The rest of 2009 does not hold much hope for improvement, say specialists.

Sony Corporation yesterday declared its first annual loss in 14 years for the fiscal year to March 31. The company posted an operating loss of ¥228 billion ($2.3 billion), down from a profit of ¥475 billion in the previous fiscal year. Revenues fell 13% to ¥7.73 trillion.

Sales in the electronics segment were down 17% year-on-year, which the company attributed to "appreciation of the yen, deterioration in the business environment brought on by the slowing global economy and intensification of price competition". Sales of games were the worst affected, down 18%, both on account of yen appreciation and a decline in the overall numbers of Playstations sold. But the games segment at least managed to contain its operating loss, as hardware costs fell and more software was sold. Among Sony's other products, the number of Bravia LCD televisions sold increased, but sales were down for Handycam video cameras, compact digital cameras and Vaio computers.

Sony Life Insurance also had its woes -- despite increasing revenues from insurance premiums, total revenue was down as the business felt the impact of the fall in the Japanese stock market.

Sony is forecasting that sales will shrink a further 6% during the course of the current year and that its bottom line will stay in the red in the financial year ending March 2010. 

After it announced results, Sony said yesterday that it will shut down three production facilities in Japan by December and consolidate operations to save costs. This brings the total factory closures announced thus far to eight.

Meanwhile, results at Singapore Telecommunications Group, though not as dire, reinforced the challenges being faced by companies due to the recessionary environment. SingTel said yesterday that despite a fall in operating revenue of 5.1% during the fourth quarter (ending March 31, 2009), it managed to achieve a revenue of S$14.9 billion ($9.5 billion) for the financial year as a whole, marginally up on the previous 12 months. SingTel owns Australia's second-largest telecommunications firm, Optus, which accounts for around 60% of its revenue. The firm attributed the fourth-quarter decline in revenues primarily to the 21% drop in the Australian dollar against the Singapore dollar.

SingTel's revenue in local currency terms increased 8.7% in Australia and 13% in Singapore. SingTel added that revenue would have been up 10% and Ebitda would have improved by 13% if the Australian dollar had stayed at the same level vis-à-vis the Singapore dollar as in the fourth quarter of the previous year.