The Mothership Makes a Profit, But the Games Division Disappoints
Early this morning, Sega Sammy Holdings, the parent company of Sega, released its annual earnings report for fiscal year 2011. For the year, the company in whole more than doubled net income versus FY2010, earning ¥41.5 billion, or over $513.8 million in US dollars. That, on a three percent year to year increase in net sales of over ¥396 billion, or over $4.9 billion.
In principle, that is good news, until you look at the consumer business division. The house Sega holds together tanked versus FY2010, making just ¥1.9 billion ($23.5 million) in operating income versus an original estimate of ¥6 billion–a drop from last year of nearly 70 percent. Net sales in the division also missed estimated; the division raked in ¥88.8 billion (about $1.1 billion), a nearly 27 percent decline from FY2010. The Amusement Machine division’s sales and operating income did grow, while Amusement Center Operations–the Joypolises and the like–turned a profit for the first time in a while.
In its earnings report, Sega Sammy called the Western home video market “weak” and that Consumer Business “needs to adapt to [a] changing business environment” that is now more geared toward smartphones and social networking. Still, European software sales were the best of the bunch, with 8.2 million units sold in that area during the fiscal year. North American software sales at 7.8 million during the same period, and Japan added 2.6 million more. The combined 18.7 million software units sold was well below the 26.7 million Sega sold in fiscal year 2010, and the company only expects a partial recovery to about 23.3 million units for FY2012.
Sonic Colors sold 2.18 million units up to March 31, according to the earnings report. That sounds impressive until you consider the number was at 1.85 million at the close of the Holiday season. So just about 300,000 units moved in a three month period, versus that 1.85 million figure in what was essentially half that time during the Holidays. Sonic 4: Episode I was listed as a major “other” title, but no sales figures for the game were released.
Looking ahead, Sega Sammy expects net sales to increase more than 13 percent in FY2012, while it projected net income to fall more than 20 percent. The consumer business division is expected to more than double its profits, on expected sales increases of more than 35 percent. The report singled out Mario and Sonic at the London 2012 Olympic Games–but not Sonic Generations–as one of its major titles for the coming fiscal year.
But continued questions in the aftermath of the Japan earthquake, tsunami, and nuclear disaster further complicate the matter.
“The Japanese economy during the fiscal year ending March 31, 2012 is expected to remain unpredictable, as it is likely to remain adversely affected by various influences from the Great East Japan Earthquake that hit Japan on March 11, 2011, including response measures to the shortage in electricity supply which is feared to prolong, concern for procurement of materials and components, and companies’ withering appetite for capital expenditure as well as consumption,” said the earnings report.
It is that uncertainty,in part, that hurt Sega Sammy stock hard in both America and Japan on Friday. Domestically, SGAMY on the Pink Sheets closed down almost three and a half percent. In Japan, the stock closed down more than two percent.
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