Sony profit to beat estimates on cost cuts

TOKYO (Reuters) - Sony Corp 6758.T said it is likely to swing to an annual profit in the past financial year and beat forecasts, instead of an estimated loss, showing its rigorous cost reductions are paying off.

Analysts are however focused on how well Sony will shift gears from its restructuring phase to return to sales growth even as Japanese rival Panasonic Corp 6752.T beat its results outlook for the past year.

The profit announcement came as no surprise as local media had previously reported Sony would return to an annual profit.

The maker of Bravia TVs and Cyber-shot cameras has shed jobs and shut plants due to the global downturn and worked to boost its flat TV division, which has struggled amid fierce competition with Samsung Electronics 005930.KS and other rivals.

Last year, Sony Chief Executive Officer Howard Stringer had pushed back an elusive profit margin target to the year ended March 2013.

Welsh-born Stringer, who took the helm at Sony in 2005 and vowed to deliver growth, is holding high hopes of a shift to 3D as it would probably give a boost to many of the firm’s operations, which include TVs, digital cameras, Blu-ray DVD players and videogames.

“What’s more important now is earnings outlooks for this year as investors can’t make up their mind about the stock just by looking at the company’s past figures,” said Mitsushige Akino, chief fund manager at Ichiyoshi Investment Management.

“The company will likely announce conservative figures for this year, probably those below market expectations as the euro has dropped significantly and the volatile situation in the currency market looks set to continue for a while.”

The electronics and entertainment conglomerate is set to report full-year results and forecasts for the current financial year to March 2011 on Thursday.

Analysts on average expect Sony to post an operating profit of 209.3 billion yen for the year to March 2011. StarMine SmartEstimates, which predict earnings by putting more weight on the recent forecasts of top-rated analysts, put the number five percent higher at 219.9 billion yen.

For the year just ended, Sony expects an operating profit of 32 billion yen ($350 million), up from its previous estimate of a loss of 30 billion yen. This was partly due to a recovery at its cellphone joint venture, saving itself from a second straight year of operating loss.

The latest outlook exceeds the consensus of a 3.6 billion yen profit in a poll of 21 analysts by Thomson Reuters I/B/E/S.

Earlier this month, the Nikkei business daily said Sony’s operating earnings likely came to several tens of billions of yen in profit in the prior business year.

Analysts said Sony was falling behind rivals in sales growth.

“This is roughly within the realm of expectations. One thing that concerns me is that Sony seems to be missing its sales forecast for the year,” Mizuho Securities analyst Ryosuke Katsura said.

“Rival Panasonic, in contrast, managed to beat both sales and profit forecasts last week. We need to watch closely if Sony will be able to realize top-line growth as it enters the expansion phase from this year on.”

Sony, also the world's No.2 digital camera maker behind Canon Inc 7751.T, cut its sales estimate for the previous business year by 1 percent to 7.214 trillion yen, but did not give reasons for the slight downward revision. The company is set to report a nearly 7 percent fall in sales from a year ago.

Sony aims to sell at least 25 million LCD TVs in the year to March 2011, up two-thirds from it’s own sales target for the previous business year of 15 million units.

Sony trails Samsung in LCD TVs, and competes with Nintendo Co Ltd 7974.OS and Microsoft Corp MSFT.O in video games.

Ahead of the announcement, Sony shares closed 0.7 percent higher, in line with a rise in the Tokyo stock market's electrical machinery index .IELEC.T.

Sony shares have gained 15 percent so far this year, outperforming the sector index’s 9 percent gain.

($1=91.56 Yen)

Additional reporting by Aiko Hayashi; Editing by Anshuman Daga