Sony Annual Profit Hit by Damage from Earthquake

On Tuesday, Sony Corporation based in Japan forecast earnings for this year that were weaker than had been expected after it had to partially halt production of its image sensors in April to make an assessment of the damage in its factory caused by an earthquake

The maker of electronics expects to have an operating profit increase of only 2% to just over 300 billion yen equal to $2.75 billion for its year that ends in March, compared to the 409 billion yen projection by analysts.

Strong sales of its image sensors for use in smartphones have helped to revive earnings at Sony recently, masking the slowdown in sales of its other electronics for consumers like televisions.

However, Sony delayed its forecast for earnings during late April following the quakes that shook Kumamoto a city in the south, which is home to one of the company’s five plants for making image sensors.

Earlier this month it resumed operations partially and Tuesday said that its wafer production would be resuming before the end of August.

Sony announced it was expecting close to 400 billion yen of profit if the quake would not have hit. It has been estimated that the over business impact from the quake is 115 billion yen with 105 billion yen being from images sensors and its digital cameras.

The company has forecast that its division related to devices, which includes its image sensors, to have an operating loss of over 40 billion yen in comparison to a loss last year of over 29.2 billion yen.

Sony is in possession of close to 40% of the market for complementary metal oxide semiconductor image sensors, which are the type of integrated circuits that are able to convert light into an electrical signal.

It has sensors in Apple’s iPhones. Analysts have said that the quakes did not have much impact on the overall supplies due to Kumamoto not being the main site for production.

However, the company said there was going to be delays to begin the mass production of the camera modules that are dual range, that Apple is rumored widely to adopt for a high-end module for the upcoming release of the iPhone 7.

Sony said its expected loss at the devices arm factored in a yen cost of 30 billion for cancelling the development as well as production of some of its high-end camera module models.

While the overall outlook by Sony was weaker than what Wall Street predicted, a selloff of any Sony shares would be a huge opportunity to purchase the company stock, said one analyst.