Forums - Sony Discussion - Sony rating now cut by S&P too.

Bloomberg Reports:

Sony Credit Rating Cut One Level by S&P on Earnings, Competition Concerns


 

Sony Corp., which widened its loss forecast for the current fiscal year, had its credit rating lowered one level by Standard & Poor’s because of falling prices, waning demand and tougher competition.

The long-term ratings were lowered to “BBB+,” S&P’s third-lowest investment grade, from “A-,” the ratings company said in a statement today. The outlook was set at “negative,” reflecting a view that the ratings may be cut further in the absence of a sign of recovery in earnings, S&P said.

The announcement follows downgrades by Moody’s Investors Service and Fitch Ratings in the past two months on concern the Japanese electronics maker will have difficulty turning around its unprofitable television business. Last week, Sony more than doubled its annual loss forecast to 220 billion yen ($2.9 billion), blaming a stronger yen, production setbacks caused by floods in Thailand and the cost of exiting a display-panel venture with Samsung Electronics Co.

Moody’s assigned Sony “Baa1,” its third-lowest investment grade, while Fitch gave a “BBB-” rating, one level above junk.

Panasonic Corp., Sony’s closest domestic rival, had its rating cut to the same level as Sony by Fitch on Feb. 6. Fitch said it had a “negative” outlook on Panasonic because of weak economic conditions and competition with South Korean companies.

Earlier this week, Moody’s said it will monitor Sony’s strategies for improving profitability, particularly in its TV business, while reiterating its ratings on Sony.

To contact the reporter on this story: Mariko Yasu in Tokyo at myasu@bloomberg.net

To contact the editor responsible for this story: Michael Tighe at mtighe4@bloomberg.net



Around the Network
Reuters take: TEXT-S&P:Japan's Sony downgraded to 'BBB+'; outlook negative

 

 

Wed Feb 8, 2012 2:32am EST

(The following statement was released by the rating agency)

 

Feb 08 -

 

-- The likelihood of a strong recovery in Sony's earnings is low, due to a massive erosion of prices, falling demand, and harsh competition in Sony's mainstay businesses.

 

-- Standard & Poor's lowered the long-term corporate credit and debt ratings on Sony to 'BBB+' and removed the ratings from CreditWatch. We affirmed the 'A-2' short-term corporate credit rating.

-- The outlook is negative, reflecting our view that we could lower the ratings further if we see no meaningful sign of recovery in Sony's earnings within six to 12 months.

Standard & Poor's Ratings Services today lowered its long-term corporate credit and senior unsecured debt ratings on Sony Corp. to 'BBB+' from 'A-' and removed the ratings from CreditWatch, where we placed them Nov. 4, 2011. The outlook on the long-term corporate credit rating is negative. 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. We affirmed the 'A-2' short-term corporate credit rating on the company.

Sony's TV business has made repeated losses since fiscal 2004 (ended March 31, 2005). The company expects to incur a net loss of JPY220 billion in fiscal 2011. Standard & Poor's believes the major reason for the extended losses is Sony's strategy to aggressively expand its global market share despite strong competition, a massive erosion of prices, and its high cost structure compared with overseas competitors. Massive pressure on the prices of Sony's key products, such as flat-panel TVs and mobile handsets, is likely to continue, and the company's position in the global market is under strong pressure amid severe competition from Korean manufacturers and emerging Chinese companies. In our view, an enhanced focus on profits, rather than on expanding sales, and efforts to lower costs are likely to reduce losses in its TV business. However, circumstances are so severe that Standard & Poor's believes it will be difficult for Sony to return its TV business to profitability even in fiscal 2013. Therefore, we see a low likelihood of a strong recovery in Sony's earnings in the next two years or so.

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. 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.

The outlook on the long-term corporate credit rating on Sony is negative, reflecting our view that we could lower the ratings further if we see no meaningful sign of a recovery in earnings within six to 12 months. We expect strong price erosion and a fall in demand may delay a recovery in earnings in the company's TV segment and lead to further expenses in restructuring.

Sony's progress toward a recovery of earnings in its TV business in the coming six to 12 months will be key to our analysis of the company's credit quality. We may consider lowering the ratings on Sony if we see a likelihood of weak performance in the TV business leading to another net loss in fiscal 2012. Adjusted total debt to capital (excluding finance operations) of above 40% for an extended period would also pressure the ratings. To consider upgrading the company, we would need to see Sony stabilize earnings in its core businesses and show stronger prospects for financial improvement. Given the severity of the business environment, though, we consider the possibility of such an outcome low at present.

RELATED RESEARCH

Principles Of Credit Ratings, Feb. 16, 2011





As long as they make a PS4, and make awesome first party games.



Am I reading correct they actually wanted to knock it down with more then 1 grade?

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.



Face the future.. Gamecenter ID: nikkom_nl (oh no he didn't!!)

Around the Network
NiKKoM said:
Am I reading correct
they actually wanted to knock it down with more then 1 grade?

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.

Well, yeah. If another natural disaster appears.



Major suckage. But that's how the market works.

Yesterday I went to buy a new TV for my bedroom and it is unbelievable how expensive Sony TVs are, even for brazilian standards. Went with an LG 50' instead, and Philips for the HT. BTW I couldn't even look to Sony's HT offerings without thinking "dying company". I wonder if Apple will make us feel the same towards Nintendo and Microsoft a few years from now?

Anyways, thanks VGC =/



"Wer mit Ungeheuern kämpft, mag zusehn, dass er nicht dabei zum Ungeheuer wird. Und wenn du lange in einen Abgrund blickst, blickt der Abgrund auch in dich hinein."

- Friedrich Nietzsche

I don't pay an Internet service for you to hurt my feelings.

- Me


 

 

 

 

IIIIITHE1IIIII said:
NiKKoM said:
Am I reading correct
they actually wanted to knock it down with more then 1 grade?

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.

Well, yeah. If another natural disaster appears.

not just that... they want to see progress in the TV area... I still dont see how this is going to happen.  Its taken 8 years for Sony to fall to where it is now in TV's they arent going to turn that around over night.

The long-term ratings were lowered to “BBB+,” S&P’s third-lowest investment grade, from “A-,” the ratings company said in a statement today. The outlook was set at “negative,” reflecting a view that the ratings may be cut further in the absence of a sign of recovery in earnings, S&P said.



Sony to do good in the TV-business is like Xbox360 needs to seill 10 million in Japan...

but didnt Sony did the first step and let Samsung now manufact their TVs?



Around the Network
kowenicki said:
IIIIITHE1IIIII said:
NiKKoM said:
Am I reading correct
they actually wanted to knock it down with more then 1 grade?

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.

Well, yeah. If another natural disaster appears.

not just that... they want to see progress in the TV area... I still dont see how this is going to happen.  Its taken 8 years for Sony to fall to where it is now in TV's they arent going to turn that around over night.

The long-term ratings were lowered to “BBB+,” S&P’s third-lowest investment grade, from “A-,” the ratings company said in a statement today. The outlook was set at “negative,” reflecting a view that the ratings may be cut further in the absence of a sign of recovery in earnings, S&P said.

Kaz has already made a lot of progress on the TV front. He slashed their project sales from 40 million to 20 million, getting rid of the LCD manufacturing partnership with panasonic, forcing the electronics department to adopt a "build what we can sell" idology. He also seems to have a reasonable viewpoint on state of the TV business asiming to cut its losses in half in fiscal year 2012-2013 and generate a small profit in 2013-2014.

Before Kaz the TV business just did its own thing and it seems like Sir Howard Stringer spent his time on goals for the company as a whole instead of forcing changes within un-profitable departments.