Sony sets itself up for record annual profit, but strikes cautious tone

Sales of Sony’s Play Station 4 video games console and Play Station VR a virtual reality headset helped drive strong results for the Japanese electronics maker

Sales of Sony’s Play Station 4 video games console and Play Station VR a virtual reality headset helped drive strong results for the Japanese electronics maker

Sony seems to be remastering not just how to make stuff consumers want to buy but how to make money as well. (SON.L, SNE) reported Tuesday a significant increase in its first quarter profit, reflecting a sale gain, the absence of prior year charge as well as higher sales.

Also helping Sony's bottom line was the absence of the damage it suffered from the April 2016 natural disaster in southwestern Japan that shut down its semiconductor plant, and gains from insurance recoveries related to that quake, it said.

Game & Network Services sales were up 5.4% year-on-year to 348.1 billion yen ($3.16 billion), which Sony says is thanks to an increase in PS4 software sales, as well as the "contribution" of PlayStation VR, but it was partially offset by the September 2016 PS4 price drop. Earnings per share grew to 62.70 yen or $0.56 from 16.44 yen past year.

With three quarters to go in the fiscal year, Sony is already about a third of the way to its target of 500 billion yen in operating profit, which would be the highest in 20 years.

The Tokyo-based tech giant also said its operating profit had risen nearly threefold in the recording period to 157.61 billion yen, up 15.2 percent and based on sales of 1.86 trillion yen.

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The semiconductor business was the biggest contributor to the earnings, turning from a year-earlier loss of 43.5 billion yen to a profit of 55.4 billion yen.

On a constant currency basis, sales increased 14 percent. The increase in sales on a USA dollar basis was primarily due to higher sales in Television Productions and Media Networks, partially offset by lower sales in Motion Pictures. "During the current quarter, there was a 2.4 billion yen negative impact from foreign exchange rate fluctuations". Sales and operating revenue are now expected to grow 9.2 percent from a year ago to 8.3 trillion yen, higher than previous forecast of a growth of 5.2 percent to 8 trillion yen.

Home entertainment products benefitted from a shift toward high-end TV models with better margins.

Sony expects semiconductors to continue to be a cash cow, as demand for image sensors will grow with improving smartphone specifications.

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