Q1 2024 Sony Group Corporation Earnings Call
<unk> a punishment from production to sales and we are managing of them at the appropriate level as the environment business environment for televisions and smartphones is expected to continue to be severe we will pay close attention to cost and inventory control. We also plan to proceed with the early reaping of income.
In additional camera space by keeping up with recent strong demand.
Have introduced the appealing new products that you see here and we are focusing on securing the stable profits by continuing to enhance our profit a product of the appeal.
Next is our I N S. S segment in slide 23 to himself significantly increased 23% year on year to $292 7 billion, mainly due to high sales of image sensors for mobile products and the impact of foreign exchange rates operating income decreased 9 billion.
Yeah on year to $12 7 billion yen, primarily due to an increase in expenses, such as depreciation and amortization expenses. Despite as opposed to the impact of foreign exchange rates and the effect of increased self adjusted or IBD increased $2 7 billion year on year to 70 billion yen.
For FY2023 Samsung expect it to be once you do your own 560 billion down 40 billion from the previous forecast operating income and adjusted or IBD, a expected to decrease 20 billion from the previous forecast of 180 billion 400, and 425 billion respectively recently.
The smartphone product market is threatening compared with our expectations due to a delayed market to recover in China, a prolonged slump in Europe and a slowdown in North America.
In our previous forecast, we assumed a gradual market recovery from the second half of the current fiscal year, but we have postponed that to the beginning of the next calendar year or the next fiscal year and have incorporated this revised timing into our sales forecast. In addition in light of such product market conditions.
Smartphone manufacturers are making even greater further adjustment to their parts procurement and this is having a significant impact on the second quarter following on the first quarter.
In addition to smartphones and the impact of the slow economic recovery in China, primarily in image sensors for industrial and social infrastructure is noticeable and we have.
Lowered our forecast.
With respect to the increase in costs associated with the launch of mass production of new products for smartphones. We have reflected the latest production on the situation and have incorporated additional costs. However production is gradually stabilizing and we do not think that costs will continue to increase significantly going forward.
On the other hand, the trend toward larger die size, the image sensors being adopted by Chinese makers in their newest smartphone products in the second half of the fiscal year is becoming noticeable not just in flagship and high end phones, but the middle range of phones. That's about there's no change to our view that going towards it.
Our mobile image sensors will drive the overall growth of the sensor market, which will grow at average annual rate of around 9% on to FY 2013, we plan to continue to implement measures from a mid to long term perspective, as well such as strengthening technology development capabilities and securing production capacity.
So that we can study capture growth opportunities when market condition recovers.
Last is financial services segment as we said at the beginning so and you had adopted the new accounting standard I F. R. F 17, starting this fiscal year.
First I will explain the impact of the adoption of the new standards focusing on the important points.
For details please refer to page 15 of the handout.
And then the new standard financial services revenue decreased primarily because the portion of insurance premium revenue amounting to surrender value that used to be recorded as revenue is no longer recorded as revenue.
In addition, under the new standard the amount of liability increases or decreases depending upon market fluctuations due to insurance contract liabilities being re evaluated based upon financial variables. The latest financial variables such as interest rates at the end of each quarter that <unk>.
Increase or a decrease of certain liabilities related to minimum guarantee of variable life insurance is recognized as profit or loss and the impacts operating income next I will explain the full year results of the previous fiscal year recalculated based upon the new standard financial Services' revenue decreased by 39%.
From the previous standard to 889.1 billion yen, mainly due to known recognition the surrender value operating income increased by $94 2 billion yen from the previous standard to 318 point to 1 billion yen as a result of a significant decrease in insurance policy liabilities.
After recalculation, primarily due to the rise in ultra long term interest rates in the previous fiscal year and the recognition of profit due to that decrease because hedging operations managed to contain the impact of profitability of market fluctuations were undertaken in the previous fiscal year in accordance with our previous standard.
At a significant difference our roads as a result of the recalculation from this fiscal year, we have transitioned to hedging operations in accordance with the new standards.
Now I will explain this segment's performance in the current quarter.
On a year on year Recalibrated basis.
Financial services revenue increased a significant 215% year on year to $681 4 billion yen, mainly due to a significant improvement in net gains and losses in the separate account at Sony life, which benefited from a rising stock prices in and outside of Japan, There's no difference.
Between the new and previous standards when it comes to the impact market fluctuations have on gains and losses in the separate accounts operating income decreased significantly to $84 7 billion yen year on year to $54 5 billion yen, mainly due to the fact that the impact of market fluctuation was controlled as a REIT.
Out of transitioning to a hedging operations based on the new standard and due to the fact that there was a gain on the sales of real estate in the same period of the previous fiscal year adjusted Oi B D. A decreased $84 2 billion yen year on year to $61 4 billion yen the FY2023 financial services' revenue for <unk>.
This one's really on 320 billion yen, an increase of 450 billion yen from the previous forecast, reflecting the result of the current quarter.
There are no changes to the forecast for operating income and adjusted or I B D. A.
So there is always been the case the forecast does not reflect the impact of market fluctuations from the second quarter onwards. In addition, we expect insurance service revenue result of Sony life to continue to steadily grow in line with the expansion of policy amount in force.
Finally.
I would like to summarize.
The everything business areas, such as entertainment and image sensors, which we have positioned as growth areas are rich in opportunities for growth over the mid to long term and we aim to grow through the unique competitiveness each business has in its area.
On the other hand since the operating environments. This fiscal year is uncertain and there are many risks we are operating the businesses with an emphasis on risk management in the hardware business of E. T. N S. I NSS and G and N. S. We are responding primarily due to the stagnation of the Chinese economy.
Slowdown of the economy, mainly in Europe , and the United States and geopolitical risks, while in the pictures business and plan to focus on various issues such as the strikes in the Hollywood. We have incorporated the expected impact of these factors and countermeasures into our current forecast inside Sony We have began to discuss the next mid range.
Plan, which begins next fiscal year, we're looking to the potential market recovery from next fiscal year as the opportunity and preparing to reach our next stage of growth. That's all for my presentation.
Okay.
Thank you very much to two key muscles in her car made a presentation.
<unk>.
To 16, 25, we would love to entertain the questions from the media.
16, 50, we don't seem to think Christian from the investors and analysts and each system consists of about 20 minutes.
And.
Some people have already pre submitted questions.
The zinc your phone to the registered phone number and then as to this a way to ask questions and some of the matters. We'll book of consideration. Please refer to our invitation. So please wait for a few minutes before we resume decision. Thank you.
You very much for waiting who now are nice to have decision to entertain questions from the media. The speakers is the same.
As this D V previous presenters to three people on the screen so latest to entertain questions.
We like to ask you to keep your questions to just two questions per person.
So please pushed us troops in and pushed none number one after that.
If you have a question.
The first question is from Andy flew Carson from Nikkei. Please go ahead and ask a question.
I Hope you can hear me and critical of Nikkei newspaper.
Thank you very much for this opportunity I have two parts of questions. The first question is it about you did financial results are set that Mr. Tuttle can you explain to us.
The situation is maybe leveling off like a games in semiconductors and other issues, but from the Q1 of course that you are in the middle of that the Facebook Dymista dessert Ya, let easier the vision for the growth to each area and sentiment is likely to grow more do you have.
A vision on this our growth scenario. That's my first part of her question and my second part of your question is about the situation the strikes.
To what extent that the movie new film release might be delayed because of the U S strikes Oh doctors and others. So that are in their territory. Here is the link to this problem because that might have adverse impact upon music and films and pictures some of their content assets.
Might be undermined by the potentially the yeah. So what do you think of the potential impact that thank you very much for your question.
This is due to your first question.
So in the next fiscal year, and our growth scenario that I have in mind.
Actually in this midterm business plan that the content IP D. G C as a technology investment as well as this some of them they're diversified the business segments should have a into a group of collaborations those are promoted as a result in the last three years the cumulative that one point.
And we kept saying this manuscript an imminent need to 1.8 trillion for the strategic investment. So gradually we made a progress if all the meat to long term, we have already planted the seeds for the future growth potential.
That's the first point as it a collaboration within our group companies in segments Playstation game IP will be used Tsarist bus H B O that OXXO the drama to be production, but that was became a big hit in 2022 did in February and childhood was released in the theater and those were a success.
In following those successes are numerous project so ongoing therefore.
So that there's a strong momentum now and I got in there together with our music business. This kind of entered in business in three segments over the Indian businesses in the next midterm plan that do we expect a big growth and sufficient growth to be achieved as a dye and is this a segment for this fiscal year of course, there could be maybe some stagnate.
Karen or we're living off the growth that doesn't have to a certain extent cause the revenues and the sales are going up in terms of profitability. There's a slightly some areas, where we are not fully satisfied. So we must secure the profitability in our glass scenario, that's something we'd have to implement in the mid term the plan.
That's a challenge and priority in 'twenty 'twenty four enough doors semi conductor market situation and now maybe the market situation improves, especially in China that Greg recovery in Chinese smartphone market is expected.
Oh, we have to be prepared for these so that we will be ready for the next time as to respond to your second type of Christian about the strike related issues.
And it has no direct or just a link to desist strikes, but because the charity. The AE has a adverse impact and I think that's something I'd like to respond to you.
It's not only affecting this and Filmless in pictures of the game of production of the music production and created a support older. If all your argument that the multi lingual D. D. D. D D D, where the translation and so forth could be supported there so the stakeholders have them.
<unk> and copyrights and that should be respected in our introduction of Enzo like music music copyright it might be.
The violated so they have to protect the IP as well.
Additional content to meet the dishes must be solved just not by Sony Standalone, but do we have to have the entire industry involved in order to discuss to identify the future solution. That's my thought on this thank you.
Okay.
So we've liked them along to the next question.
Mr Song Fraser Freelancer. Please go ahead.
Mr. Zhang please.
Very difficult to hear your voice.
I'm very sorry, but I cannot hear your voice.
Can you repeat your question once again.
Can you hear me.
Your voice is not clear.
Yeah voice is not Korea. Unfortunately.
Can you just put the microphone a little bit more differently.
I am very sorry, since the voice is not clear.
For that time safely black moves onto the next person.
To ask question.
So we made that song from Toyo Keizai other please.
The way that came from Toyo case, I can't hear me, yes, I can hear you. So please go ahead I have two questions and first question is that as Chris already mentioned the three areas all of the segments of our the payment that total other income like sees a 54%.
The three are the segments combined it is still very high and so you talked about next MLP. What are the percentage you would like to reach a full the total other income of those three segments.
And so now are that China slowdown and you have already mentioned in I NSS and for other segment. What is the impact for instance for the consumer spending has been quite weak in China. So what is the impact on overall business of Sony Group.
Thank you very much for your question and so that I would like to answer the two questions and asphalt entertainment three segments combined.
Operating income.
What is our plan to to reach our the that certain percentage that and we don't have any target in terms of the percentage that three segments entertainments are the segments are combined and also I N S S where the growth is X.
Specced it so comprehensively I believe that that percentage of the portion of the profit earned by those segment will increase and the second question is are there other than I N. S says what is a slowdown of Chinese economy on other segments and for the consumer spending.
That E T N S will they affect it's the TV and smartphones are areas, there which is severely.
Impacted but currently as far as they fly twenty-three is concerned.
The slowdown in China since there is a great concern about that so our plan is made quite conservative conservatively and therefore much meant itself has been going quite well, but on the other hand as for the camera the market, which is a quite performing quite well and.
Covid.
The activities have been restricted in the past.
But there is a very good demand in this area. So we've liked to reap the profit as early as possible in this area. That's all.
No real active move onto the next question.
<unk>.
If you have any questions.
Anybody.
Please press ethic, followed by number one.
Okay.
Our VSAT from Nick Kankles.
Industry daily.
And I bet from industry Daily Nick Conca can you hear me, yes, I can.
Thank you.
Related to the question asked earlier.
E T N S segment.
Digital camera.
He is the area that I have question.
The so as a unit increase of which you read about an increase to our profit.
Profit.
By regions can you explain for example.
Year on year basis growth rate can you enlighten me in addition.
In this area.
Chinese market, you said that there is a robust market demand in China going for it.
We expect a robust demand will continue in the Chinese market. What is your view of the Chinese market and the demand in the market in China. Thank.
Thank you very much for your question here.
Hey, Dan There is segment.
Digital camera.
The increase in the number of units sold and what is the breakdown by regions was your question in the first quarter.
Camera body and dance, both are doing well by regions.
China.
And Asia.
So this has been very robust.
And the Europe and U S foods lemon.
Competition with others is getting more severe.
So in some areas there is some slight decline in solar in this year, but we are making additional investments such as <unk> says promotion and we expecting of a share to increase going for it.
We should not be optimistic and we have to be prepared for the possible slowdown of the market and we have to invest there for new products and also it will be controlling both production and sales.
Thank you.
Who would like to entertain next question.
So due to Shing Endo someplace.
Yeah.
Ando from Q2 to Shing I Hope you can hear me.
Yeah.
I have one question of a camera.
Yeah.
The Souza going up the crews that are after the COVID-19, there so maybe the percussion after the debt before the people covering a game that they like to use a more digital camera is that the new demand.
A link to the COVID-19, and the pandemic of how the demand is cruising after the COVID-19 pandemic.
Thank you for the question as I said, the DISA maybe reaction after the COVID-19 pandemic.
The display at one times demand was down that's a fact.
So people now have the pent up demand.
So last year.
Oh already that the people who already has a board lots of cameras. After that so the strength of demand is still persistent which is a oh great pleasure, maybe have a continuing demand from a macroscopic standpoint that the travelling demand is going up people spend more money.
On traveling vacations and so on I suppose so that might have a good impact on the demand.
<unk>.
Okay.
So we'd like to move on to the next question.
Those that questions. Please press asterisks Canton press nimble one.
Yeah.
[noise] niche that's some athletes a freelancer. Please go ahead can you hear me yes.
Yes, I can hear you please.
I have two questions and the first point is about games business.
That third party are the application has increased or how do you assess this.
Think that this trend will be here to stay or do you think that do you need more efforts to promote this and so that is related to that in your document.
Playstation plus.
The number of use there are there is a change in the disclosure condition. So is there any reason for that and secondly.
Now about pictures, particularly for drama.
The streaming service.
Overseas are you seeing any other impact all food of the fluctuation of the overseas market in this area. Thank.
Thank you very much for your question, our game and network service.
Uh huh.
They are taught you are talking about the increase of third party titles.
And I think your question is about our assessment on that.
And during the first quarter.
The new title from that third party, we have a very strong ones.
And so.
In our software are the overall Oh, yeah. There has been increased revenue from this.
So of course, all our apart that strong titles other third party titles.
Should continue to prosper and as a pro forma we are very happy about it and first party titles.
And our new titles are.
Because of the release timing are there has been the reduced sales earlier, but not only the third party titles, but we'd like to make greater airports for the first party titles.
And your second question is about PS plus.
And a change of that assumption about disclosure conditions and about T. S. A plus are we just cease to now's a reveal and the disclosure and also there has been some expansion of its disclosure. So mazzuca Sun will cover this point.
<unk>.
Yeah.
And as slide 22 in June there was renewal and after that.
The P S. Plus in addition to the greater number of the subscribers and move to a more attractive the titles are which are the increase in app and so we have been expanding the P. S Atlas business so extra.
<unk> and premium.
I'd like to continue to promote the shift in order and they know to do so we'd like to increase our service appeal and this spaces.
Yeah.
Ah, we're able to confirm our the gross AR, that's true that network services expansion and so are we stopped disclosing the number of subscribers as a result.
And what are included in others.
That is the software sales other than P. S plus they will be newly released.
So in this area.
The multi platform will be covered including P. C is so we've like to the promote this so is the additional disclosure I hope that we can guess update about our progress.
Yeah.
And about the pictures.
And your second question drama streaming is is there any the impact of overseas market.
And so in overall the business environment.
Surrounding this area is that in all the seas, a theater Oracle the market there are that many a tenfold. The films are released so they become very active but as a result of strike than a major studios the productions have been actually delayed it.
Our studios and so there is some concern about advertising so the theatrical business. After July they have to pay close attention.
And are there is a the competitive environment among the streamers and so the contents investment all of those players may not the decreased immediately but as a result of the strike there will be the change of the schedule about the production.
And therefore, the future development since impact a will be a will emerge from now we'd like to pay attention to that thank you.
Time is running short. So then next will be the last question.
So the constraint of time I'd like to ask the person to limit to one question because to me sound from Nikkei newspaper. Please.
Since I'm here from Nikkei can you hear me, yes, we can please.
One question P S five.
Sales.
They are big.
You said that the actual is lower than their forecast, but what is the reason for lower than expected itself. The sluggish personal spending or other gay is of users who went to other game hardware.
Can you please explain the reasons.
Thank you for your question.
First quarter ourselves was $3 3 million units.
Slightly lower than the expectation.
But from last year, 38% decrease.
We also believe that the demand is strong and.
Promotion itself.
I was rather limited.
In view of the profitability with limited promotion activities and a slightly weak so starting from mid July in some regions. We have started the promotion of a full fledged basis. So it was a sell through it we are looking at the sell through and we are seeing good signs already so in view.
The seasonality of the Soc, the first quarter slightly less than the target, but it on a fiscal year basis, especially calendar year year end calendar year end by that time, we believe that there is ample possibility for us to catch up especially towards the third quarter, we will be increasing the.
A number of cells and it is important to increase ourselves and we will aim to achieve that.
Target.
Thank you.
Thank you very much you know it is time for us to.
And these are media Q&A session. Thank you very much the Q&A session for analysts and investors will start at the full 50.
Yeah.
[music].
So we like to soon start the Q&A session for analysts and investors to please wait for a few minutes. Thank you.
Thank you very much for waiting and it doesn't start this Q&A session and for the investors and analysts.
I would like to serve as M. C. I am condo over the finance and I O group member.
Mm speakers.
Our speakers are the same as the media session. The photos as shown on this powerpoint slides.
So what we'd like to now entertain questions and comments from the the analyst zone of two questions per person. Please and you have a question please push to ethics.
And then a push number one.
First from the Moga Siam area, if she only Sam please.
Thank you for this opportunity I'm owner or Morgan Stanley .
Sure.
My question is about games and the other one is I N is so I have two questions first of all that the third year that do have the annual plan.
From a game and network systems in the 207 billion yen is something that our citizens are 270 billion, so that it actually that its own.
Video so that the software of course, the third parties a focus so.
You had an analyst who's affluent, but you have already that the did a plan and so there might be some impact maybe the upside of this is those trigger whoever. The this is the only that level of profitability you achieved and so maybe a harder a promotion.
Accumulated and maybe that's the result, but what is the size and scale you're expecting do you have there some inked for that the total scale you'd be achieving the second partner Krishna is I and he says it previously that a huge show the outlook for the downward turn in.
Lord.
The revenue and income so that the production costs are very high.
And then that is a very challenging situation Fujitsu are the expenses are regarded as a and you switched to be very high.
On the other hand, China is another place where the the mid to low range of the smartphones that the price reduction has to be implemented in China and so the additional 20 billion. The downward adjustment was done but what is cheng ease of change taking place to influence that but those are two parts of the Christian.
Thank you very much aware of questions. The first one about the game and network service related to Christmas throughout the year what is the annual plan.
On your plan.
And how should we interpret the on your plan.
Maybe that's the gist of your question, but in terms of profit first avidity. What you said is right third party software.
E. D of this are good to sales in the first quarter district is reflected in there in the second quarter enough doors are the sales plan was adjusted upward. So that is one impact and the other one is the foreign exchange rates that are the we have revised it to the end of the.
The weaker yen situation, so that would push up this ourselves on the other hand, whatever the operating income.
And the third party software sales are.
Going up and then of course, so do your appropriate where we pushed up by that but the first party titles. There soon launch was delayed or postponed.
And their system postponement from this Cisco turn to the next term so that to US taking two accounting debt adjustment. Another factor is the promotion and other activities.
There's no major change to the promotion plan.
However, some part of the mucus there was the original channel mix that is direct sales versus the a so called the other sales channels.
And that's kind of yourself, so that the sales channel mix compared to our original forecast no rather than direct sales and I think other ones going through the deep do retail shops and in the Ddos I think.
That proportion is likely to increase more so there you have do we have to pay module for the so that margin has we think we need to account in a change to sales 10 onyx that overall.
Okay.
That part means this Ah Ah how to characterize the and estimate this our experience there and we are quite conservative, but they're shifting immediate units is 25 million. It is something that we havent sit that's a target and we would like to really achieve that target and our intention.
<unk> is taking to account in this revised plan another factor the second positive progression about iron is this related Christian.
Gotcha.
There is some there's a degree of production cost increase that was an impact and in China the smartphone momentum.
Is being changed but these are two factors.
Fitch has to be considered and taking to account that is to say as of April we announced to our the outlook and just to change the production expense.
Compared to the original plan has increased slightly.
So that decrease production cost was taken into account, but no I think we have considered the foodie order potential increase.
And in China.
As of April compared to debut outlook. The current outlook in the smartphone market. The recovery is more likely to be delayed.
So that was also taken into account. So these are the factors Richard again added to revise this current plan. Thank you. Thank you.
Thank you Jonathan.
So we've liked and move to the next question.
Yeah, Colin sung from both Securities. Please.
Thank you very much and my name is hit a car from both I have two questions. The first is about the semiconductor.
And previously and therefore the.
The announcement from January to March.
At the end of the odds are this are the quarter that will be higher than a year on year, but the market condition is worse than your April forecast. So is there any change about your strategy and are thus well the re.
And for the the March I fly twenty-three why you are quite optimistic and for pictures because of validation. It's not easy for you to reveal your strategy about the pictures and so strike how to deal with strikes or all of writers and the actors.
How do you incorporate the impact into your financial results at this moment.
Thank you very much for your question and first is I NSS.
The first quarter at the end of first quarter, our inventory level.
And about Oh, yeah. It if I may explain Oh as a result of self expansion that has increased.
And also are there is some downside.
Uh huh of a downward revision of our sales during the first quarter and for the future outlook.
Logic and sensor strategic inventory will a decline towards the end of the the ear Bud.
But the inventory amount itself the sales has been expanding so FY 'twenty.
It's three at the end of FY2023.
There compare to the end of FY 'twenty two it is expected to increase and there is no change in this forecast.
But I should say that basically as a result of sales expansion.
This is an increase as a result of self increase and so it does not mean that we have excessive inventory.
And we have to pay close attention to the quality of inventory, but.
<unk> tested an extent, we'll keep inventory the control and we have to effectively utilize the equipment and have the appropriate timing for the investment and the what is the reason we're optimistic about FY 'twenty four.
And the reason is that.
Yeah.
The demand for the image sensor.
We do not think that we make a wrong assumption about it and the issue is that pertains to the manufacturing cost or excessive inventory over a the dial our competitors inventory in China. So as a result decline of a S. B so that has.
Adversely impact the profitability.
And.
As for the business are the volume itself are the our forecast is not quite incorrect and so that is the reason why we are quite optimistic about FY 'twenty four and your second question about the pictures.
About this fiscal year.
Under our assumption.
The we have actually incorporated.
And our assumption into our the forecast and for the details very difficult difficult for me to share the details with you but in terms of profitability.
The impact on the this fiscal year is our business is relatively limited.
Because business turnover is long for the motion pictures industry.
And therefore that is the reason that we forecast this way.
Thank you very much for your answers.
Thank you Augusta moving on J P Morgan Securities <unk> San please.
Thank you.
<unk> from JP Morgan I have two questions if I may.
The first question about game.
Earlier through the year.
Profit increase to do as they explained the first quarter profit.
Change can you elaborate on the first quarter.
Third to last year.
$3 6 billion decrease and excluding FX impacts about six video decrease.
In your explanation you took up at Bungie expense, it's a negative $16 6 billion.
And potency beside.
Software increase at one point about 80 billion yen so.
The software increase in their contribution to profit.
The change of our sales channel, what's explained as well on the other hand to profitability of software seems to be a deteriorating in.
In the current quarter their sales of software is large but the mindy older titles are sold so the content of our software says can can you explain that that's my first question.
My second question I N S S for the year.
<unk> the revision 20 videos and the breakdown of this downward revision with FX about 50 billion yen positive I believe.
So.
Negative side 70 around 70 billion impact is there.
On the negative side to that breakdown.
They says forecast is our revised downside and this is about half of that total about 30 to 40 million and then the increase in a fair in the expenses of a mass production launch about 30 to 40 billion. So the magnitude of the increase in expenses.
Can you. Please elaborate these are my two questions.
Thank you very much for your questions. Your first question.
First quarter profit increase or decrease in the breakdown for that.
Profitability itself.
Basically.
He is not changing so much.
According to our analysis first quarter the factor for the first quarter first in mandate related expenses acquisition related expense.
And then Bangee acquisition and this is on a fully consolidated basis now so the costs related to consolidation of Bungie and the first quarter. The breakdown I have not explained on the hilli and the fiscal year about 68 billion.
M&A related expenses and expenses for food consolidation combined.
Combined we are looking at that number.
For your reference.
And then.
Your second question I NSS.
Yeah.
As you pointed out the impact of the reduced revenue.
Andy.
<unk> expenses related to launch of a mass production of new products. These are negative factors and a positive factor if exchange rate.
I do pointed out the breakdown.
We are not disclosing them they breakdown so it's very difficult for me to explain but.
I would say.
Image sensors for mobile with decrease in revenue and the industrial social infrastructure in my sensor decrease in revenue so not only for the mobile, but sessa image sensor itself is the impacted by reduced revenue that.
It can be a hint for you to understand that's all thank you.
Thank you very much.
We have a short time so.
This Oh one question per person from an AUM. Please from Citigroup is awesome. Please.
Thank you very much on his other over Citigroup Securities I have a question on the semiconductor related question.
The de Souza to inventory is to be lowered to reduced and then the production expense I think related to this production yield, but I think that will be improved I understand in the future.
And demand is actually to go up.
Three factors are.
Affecting the Q2 in a later one those are the important factors.
If you're new to separate this do Q2 and the second half I think the semiconductor is actually grew improved muchly best do the figure is still so low. Despite this for maybe the improvement of recovery might be delayed slightly.
So doing decision have food atop remoxy. So could you. Please do as the factors and background the factors.
For your forecasting another his thank you for your question about Iron is this who goes through during the second quarter.
And the second half can you split the two analysis as to the second quarter Theres a seasonality influence.
In other words did demand is weak in Q2. So there is the emphasis on this second half so that the second half I think is emphasized mostly that's how to read it.
Thank you is awesome.
So from Mizuho a tick.
These are not unless I'm pleased.
<unk> from Mizuho Securities.
I have one question.
For the game P. S. Five are the now the celsis bit weak, but in the U S. In Asia and Europe . What is the situation and can you just show US a promotion 25 million is the target of in itself. According to total caisson.
And so current exchange rate assumed to continue.
Are there is some of the gap of the exchange rate. So I believe that tour that portion there is deterioration of profit if.
The exchange rate stays this way or if all of the this depreciation of yen installed base is important. So you put more emphasis on installed base than the current profitability Ora P. S. Five when you think about future profitability. If there is a major change in foreign exchange rate.
You have a plan to change this now under 35 yen against the dollar and do you think that this is a conservative estimate.
Thank you very much for your question for P. S. Five.
Gaming network, our service segment P S. Five.
And currently are that it's a bit weak and what is the situation by regions easier question and by regions.
Currently in Japan are the sales is strong and the same holds true for Asia.
And about North America.
Are there a response to that promotion is quite favorable and United Kingdom, its a bit weak, but Europe as a whole has been performing quite well and that seems to be the current response.
And and our target of 25 million units.
And so in light of the impact of foreign exchange rates.
Evenly sacrifice profitability are whether we will put emphasis on installed base and that seems to be here at the heart of your question and.
And currently of course expansion of installed base is important. So we will continue to make efforts, but we did not make any extreme the measures in order to achieve this.
So is the strength of demand.
And of course, the certain level of profitability and expansion of installed basis. So those three factors must be well balanced.
So the extreme promotion as a result of extreme the promotion, even we acquired our the our subscribers are very difficult to follow.
Follow that the that trend and therefore, we've like to use a data driven the methods approach to make at the appropriate level. Thank you like an S M.
Next person will be the last person F N B C Nikko securities cuts at assemblies.
Yes.
Got it I from S. N B C. Nikko Securities can you hear me, yes, we can.
Thank you.
I would like to ask a question on our consolidated operating cash flow, excluding financial services segment for the year.
One point to two 5 billion remains unchanged.
A significant improvement improvement as compared to last fiscal year first quarter.
Cash flow.
He is a negative but compared to last year slight improvement.
And going forward.
How are you going to look at this can you. Please explain that as a background inventory E. T. N S. It did the inventory level is controlled at you have explained first quarter, DNS and I and the SSL slightly heavy inventory other factors.
Full year.
Operating cash flow.
Is maintained as compare to three months ago, what are the plus and what oven minus negative factors. Thank you excluding financial services consolidated cash flow.
Please.
I'd like to respond to your question first the first quarter operating cash flow is minus 80.7 billion yen.
Year on year, you have made a comparison, but as compared to year on year positive by 90 billion in first quarter than it is negative.
As a key point to the Playstation five inventory and I in there says first quarter and second quarter.
Inventory has built up slightly so based upon these cash flow level has come down.
But.
This is a.
The working capital, especially Playstation five towards the third quarter.
Quarter, our selling and sell through which results in cash returning that is our assumption. So ultimately this fifth Korea, excluding find ourselves says 1.25 trillion yen and indias ever forecasted weighted remains unchanged basically for the cash flow working capital, especially game Playstation five and.
And I and this is inventory in the first quarter of these will have an impact.
That's our analysis.
Thank you very much.
So this concludes this today's to F. 2023 consolidated financial results presentation on behalf of the Sony Group Corporation I would like to again. Thank you all very much for your participation.