Dive Brief:

• Sony Corporation reported an 86% plunge in quarterly net profit this year, with its electronics products division being hit the hardest, the company said in its Wednesday earnings call. 

• CFO Hiroki Totoki said the coronavirus pandemic will impact countless other businesses under the Sony conglomerate umbrella, including music production and mobile devices.

• Amid retail and theater lockdowns, demand for consumer electronics and new films has plummeted, resulting in substantial losses for Tokyo-based Sony. 

Dive Insight:

Sony, whose market cap exceeds $18 billion, expects operating profit for fiscal 2020 to drop at least 30%, its lowest level in four years. Despite its decades of widespread success across the motion picture, video gaming, television and technology industries, the corporate giant has been kneecapped by the pandemic.

"The spread of COVID-19 has crimped consumer spending, shut movie theaters, canceled events and sent share prices falling — all damaging for a company with sprawling businesses like Sony," according to an AP report. 

Sony controls 51.5% of the world’s $15 billion image sensor market, and its image sensor sales are one of its key drivers of growth. But, Totoki said, profitability could decline. The pandemic may cause a shift away from high-end smartphones that use Sony image sensors.

Things are not much better on the music side. Totoki said new releases are delayed, mainly because artists are unable to record. "The impact of the delays in new music is limited in countries, like the U.S., with a high proportion of streamed music," he said. "But in countries like Japan and Germany, where streaming rates are relatively low, CD and other packaged media sales are sharply decreasing."

Box office revenue has also been "significantly impacted," he said, with Sony unable to release completed films or produce new projects. "As a result, we expect theatrical revenue, and rental and video sales, to decrease, too."

Due to the global closures, retail sales have also decreased significantly, Totoki said. "The severity of the impact on a geographical basis is changing frequently, but deterioration of market conditions in Europe is currently the most severe. We are concerned that this might continue for a long time."

Sony leadership "cannot reasonably predict" the pandemic's long-term impact, so they left their consolidated results forecast for the 2020 fiscal year undetermined. 

"The best we can do is make certain hypotheses," Totoki said. "We estimate consolidated operating income will decrease at least 30%, compared to 2019."

Nevertheless, Totoki said the company has managed its balance sheet "with a high degree of financial discipline while closely monitoring [its] credit ratings."

“We believe we have sufficient liquidity to continue to conduct business in a smooth manner, even if the economic environment were to deteriorate going forward,” he said. “Our policy of steadily increasing our dividend over the long-term has not changed. Moreover, we believe we are in a position to proactively consider strategic investments in the growth opportunities in the post-corona world."