News

Sony credit rating downgraded, "strong recovery in earnings unlikely"
Posted: 10.02.2012 13:03 by Simon Priest Comments: 15
Standard and Poor's, the credit rating service, has downgraded Sony from A- to BBB+. Only stellar performance in the next 6-12 months will stop it dropping.

Falling prices, demand and tough competition motivated the downgrade. The long-term view of Sony's credit rating "is negative," they said. Sony's profitability "significantly weaker" than others.

If there's "no meaningful sign of a recovery" within 6 to 12 months then it will slip again. However S&P believe Sony "will gradually recover in fiscal 2012" barring no more "one-off expenses".

"The outlook on the long-term corporate credit rating is negative," declared a Standard and Poor's statement.

"We base the downgrade on our view that severe circumstances in Sony's mainstay electronics businesses make a strong recovery in earnings unlikely."

"We base the negative outlook on the long-term corporate credit rating on our expectation that we could lower the ratings further if we see no meaningful sign of a recovery in Sony's earnings within six to 12 months."

Floods in Thailand have had a dramatic effect on the electronics’ market with Sony suffering significant manufacturing setbacks and costs. Prices for hard disk drives have already risen.

"Because of continuing net losses since fiscal 2008, Sony's profitability looks significantly weaker than that of its global industry peers. In addition, we believe its ratio of adjusted debt to EBITDA is likely to remain high for the next one to two years, even for companies in the 'BBB' category," the report went on.

"Standard & Poor's also believes Sony's adjusted total debt to capital (excluding finance operations) will rise to around 40% as of March 31, 2012, from 35% a year earlier."

"However, we base our one-notch downgrade on our view that Sony's profitability and financial standing will gradually recover in fiscal 2012 because there will be no repeat of one-off expenses due to floods in Thailand and impairment losses on stockholdings. Also, we believe Sony's strong short-term liquidity (excluding finance operations) continues to support its financial stability." Sony expects itself to lose ¥220 billion for this fiscal year.

Comments

By djole381 (SI Elite) on Feb 10, 2012
djole381
Damn credit rating companies. World would be a slightly better place without them.
By JonahFalcon (SI Elite) on Feb 10, 2012
JonahFalcon
They're absolutely critical for large companies. Would you want a bank bailing out a failing company?
By djole381 (SI Elite) on Feb 10, 2012
djole381
I would want all the bank CEO's in jail for what they did to world economy, but noooooooo, they're rewarded with bonuses while honest working people are laid of in thousands.
By herodotus (SI Herodotus) on Feb 10, 2012
herodotus
No doubt this is what the incoming CEO knew was coming when he made his statement about this new job being "tough".
Looks like Anonymous got what they were after. I'll bet Apple comes next, with the current controversy over their production methods in China where it comes to poor working conditions for underpaid employees.
By SirRoderick (SI Elite) on Feb 10, 2012
SirRoderick
All big corporations suck, they have to in order to exist. It's an unfortunate effect of a free market economy.
By herodotus (SI Herodotus) on Feb 10, 2012
herodotus
Free market economy, or Capitalism which as Karl Marx rightly pointed out is a flawed and ultimately failing system. Just predicted it a bit early and erroneously adopted by Russia, North Korea, Cuba and China as Communism, particularly with Russia. His idea for a successful system, named by that now reviled term "Socialism" was intended for industrial nations, not rural-based economies.
How's that for kicking off a controversial debate:)
By SirRoderick (SI Elite) on Feb 10, 2012
SirRoderick
Not controversial from where I'm sitting. You're correct.

And Communism never really existed in the first place. Even Lenin immediately started acting against his own doctrine.
By Chosen_One (SI Elite) on Feb 10, 2012
Chosen_One
I'm insulted! I demand satisfaction!
By herodotus (SI Herodotus) on Feb 11, 2012
herodotus
What about, Chosen? Nothing against Mother Russia, but Marx (and indeed Frederick Engels, his associate) intended for the Socialist Revolution to occur in an Industrial Nation, as Britain was at the time. Lenin, Stalin and Trotsky all argued among themselves shortly after their people's revolution (citing Marx and Engels as having co-authored "The Communist Manifesto", which they did not), and we all know what happened to Trotsky. Russia was ill-suited at the time to adopt such radical changes being a rural-based economy. What happened very quickly was of course the rise of nepotism within the Party and the rise of the Communist version of Oligarchs. Then of course the worst of situations arose with Stalin taking over - Despotism, of a magnitude as bad as, if not worse than Hitler's.
But getting off-topic, yet again:(
By obiwanmccartney (SI Veteran Newbie) on Feb 11, 2012
obiwanmccartney
Maybe Sony shouldnt have spent so much money bribing studios not to support HD-DVD. Time to sell the Beatles publishing rights back to Paul :)
By Chosen_One (SI Elite) on Feb 11, 2012
Chosen_One
I do not think that it was bad, I think that it was suit the time back then. We tried something new on our own skin, was it bad or good is subjective opinion. We had high industry before war...maybe highest in all Europe and won the war. And was the greatest fear for the rest of the world. I doubt, really doubt that we could win that war if our Government would not be that, what it was.
By unsilviu (SI Core) on Feb 11, 2012
unsilviu
And the solution to not having a well-developed industry was to artificially create one, and thus Eastern Europe is now becoming a graveyard of old, unused factories.
But staying on-topic, does anyone else think this might make them rush the PS4?
By herodotus (SI Herodotus) on Feb 11, 2012
herodotus
I doubt it. A push on the PS3 is more likely as they still have not flogged it for all it's worth as they did with the previous two iterations of the console.
By Jasca_Ducato (SI Core) on Feb 12, 2012
Jasca_Ducato
Poor, poor Sony. The way things seem to be going for them, a PS4 could be the make/break point for them....
By herodotus (SI Herodotus) on Feb 12, 2012
herodotus
...if and when it ever arrives on the shelves. Whatever the case, Microsoft will be strides ahead with their XB 720 and Windows 8 (the latter released to a mostly ill-informed public). I'm going to a seminar later this week on the new tablet tech and Win 8 so that might be revealing.