Q2 2024 Sony Group Corp Earnings Call
Significantly decrease $106 4 billion yen year on year to 263.0 billion yen, mainly due to the $64 3 billion yen decrease in the operating income of the financial services segment I will explain the details in the parts devoted to each business adjusted EBITDA decreased 60.
8 billion yen year on year to $426 4 billion yen.
Income before income taxes decreased $113 5 billion yen year on year to $257 6 billion yen.
Income attributable to Sony Group Corporation stockholders decreased $81 6 billion yen to 200 points 1 billion yen.
Results by segment for the quarter are shown here.
Next I will explain our full year consolidated results forecast for FY2023.
The assumed exchange rate for the second half of the fiscal year have been revised to a person.
<unk> hundred 42 for the U S dollar and approximately 152 Yang for the Euro the full year forecast is for sales to be.
12 trillion 400 billion yen, an increase of 200 billion from the previous forecast for operating income to be unchanged that once you do 170 billion yen and for net income attribute to Sony Group Corporation stockholder to be 880 billion yen, an increase of 20 billion yen from the previous forecast of adjusted EBITDA.
That is exactly what Judy on 785 billion, an increase of 35 billion yen from the previous forecast.
Consolidated operating cash flow forecast, excluding the financial services segment is expected to be one Chilean 160 billion yen a decrease of 19 billion yen, mainly due to the impact of the foreign currency conversion adjustment, resulting from the exchange the change in the foreign exchange rate assumptions and the increase in working capital in the G.
And as a segment.
23 results forecast by segment is shown here.
Now I will move onto an overview of each business segment.
The G and and as a segment FY2023 Q2 sales increased significantly to 32% year on year to $954 1 billion yen, mainly due to increased sales of Playstation five hardware and an increase in third party software sales.
Operating income increased $6 8 billion yen year on year to $48 9 billion yen, mainly due to the impact of increased sales. Despite the deterioration in profitability of P. S. Five adjusted or IBD, a increased $18 9 billion yen year on year to $83 1 billion yen.
The FY2023 forecast is for sales to be for Treaty on 360 billion yen, an increase of 190 billion yen from the previous forecast operating income to be unchanged at 270 billion yen adjusted or IBD eight to be 385 billion yen an increase of 10.
And.
The overall number of monthly active users for the Playstation in September was 107 million accounts, an increase of 5 million from the same month last year and the proportion of PS five users who have high user engagement increased a little over 40% of the total in addition total gameplay.
During the quarter increased 4% year on year, a stable level of growth.
P. S drive hardware unit sales for the quarter were $4 9 million units basically in line with our expectations and up 25% increase over the number of peers for units sold in the second quarter FY 2016, when we sold 20 million units for the year.
We have kept it unchanged a high target of 25 million units for P. S. Five sales this fiscal year.
To achieve this target we plan to reduce our new P. S. Five model that is smaller lighter and has expanded the data storage capacity. We also plan to introduce to the market P. S portal through which users can enjoy remote play in combination with a b S. Five these expected to assist us in increasing the sales momentum.
During the year end selling season, which is the largest opportunity to sell products on the other hand, while carefully monitoring the results of our sales promotion activities during that year end selling season, we are proceeding with business operation that aimed at the balance the penetration appears fight with profitability as for software peers.
Fiber exclusive title Marvel's Spider Man two witches release on October 20th sold through more than 5 million units worldwide as of October 30th and it has become a big hit.
Regarding Playstation plus by continuing to offer attractive new features and content to our users such as starting cloud streaming of P. S. Five title from October.
In our top tier service premiums, we aimed to increase it.
<unk>, while further expanding the competition ratio of our top tier services extra and premium.
Yeah.
Next is the music segment.
If I twenty-three Q2 itself significantly increased 14% year on year to $498 7 billion yen, mainly due to the increased streaming revenue and the impact of the foreign exchange rates, mainly due to the impact of the sales increase operating income increased $2 3 billion yen two eight.
Gideon yen compared to FY 'twenty to Q2 in which a onetime gain of $5 7 billion yen was recorded due to the receipt of litigation settlement.
Adjusted <unk> increased $9 6 billion yen to 97 billion yen profit contribution from visual media and platform was up to approximately 20% of the operating income of this segment.
Hi, twenty-three forecast is for sales to increase 70 billion yen from their previous forecast the one Judy and 560 billion yen in operating income and adjusted all IBD a to each increased 15 billion yen to 295 billion and 350 billion yen respectively.
When I used at a basic streaming revenue for the quarter increased 9% for recorded music and 10% for music publishing which is stable growth.
During the current quarter, we had the hits shown here, including dogs or cats. They just single paint the town Red which was number one for four consecutive weeks on the Billboard Global 200 chart.
Moreover, the new album release in October, but we must entertainment artists that money has become a huge hit debuting at number one on the U S. Billboard album charge, and having took even songs from the oven ranked in the top 145 school of southern rankings immediately.
After the release.
In order to achieve growth that outpaces the market over the mid to long term. The Sony Music group is focused on strengthening its competitiveness in growth areas in the rapidly expanding field of indeed, aprils and independent artists. We are building an ecosystem across S.
G, including expanding our repertoire and service capabilities for artist through the Orchard.
Evil.
We are also focusing on expanding our business in growing global markets in that in America, where the market size last year increased significantly 26% year on year to $1 3 billion U S. Dollars SMT has established itself in the number one.
Position in recorded music as close in places like Brazil has accelerated due to the acquisition of some dividend in March 2022.
Other growth markets, such as China, India, and Southeast Asia. We are also actively discovering and developing artists acquiring catalogues and expanding audit services through the Orchard and Eva.
Next is the pictures segment.
Sales for the quarter increased significantly the 18% year on year to $399 6 billion yen and operating income increased 1.8 billion yen to $29 4 billion yen, mainly due to an increase in the number of delivered works in <unk>.
We shouldn't productions and the impact of foreign exchange rates adjusted EBITDA increased $2 2 billion yen year on year to $42 6 billion yen.
The FY2023 sales forecast is one trillion 460 billion yen down 10 billion yen from the previous forecast operating income is forecasted to be 115 billion yen downside binion and adjusted EBITDA to be 165 billion no change.
The writers Guild of America strike ended on September 27, following an agreement with the American Association of the motion picture and television producers.
Yes.
In addition, an agreement was reached on November eight local time in a negotiation with the screen actors Guild and we expect that the protracted strike will come to an official and after certain processes are undertaken within the union due to delays in production constraints and promotional activities we are seeing.
The negative impact such as a D day in the release of certain motion pictures and a delay in the delivery of TV productions.
We have incorporated the impact that can be assumed at the present time into our forecast for the fiscal year, even after the strike and it will take time for business activities normalize due to the concentration of protections and theatrical releases. So we expect this to have a negative impact on next fiscal year's results. However.
To engage in cost control and other measures to try to reduce the impact.
Additionally, crunchy most business is growing steadily and that's month it finalize a global distribution agreement with Amazon as a result, Amazon Prime video members can now subscribe to the service as an add on channel and they enjoy more than 1300 titles of anime content provided by credit.
She rules. This service has already been lodged in the U S, Canada, Sweden, and the United Kingdom, and we plan to further expand the service area in the future.
Next is the E and S segment sales for the quarter were $613 5 billion yen down 9% from the same quarter of the previous fiscal year in which demand for Tvs increase due to a recovery from lockdowns in Shanghai.
Operating income significantly decreased $16 8 billion yen year on year to 61.0 billion, mainly due to the impact of the lower sales of Tvs.
Adjusted EBITDA decreased 15.0 billion yen.
Year on year to $87 6 billion.
Slide 23 shows are expected to be two two D and 440 billion yen an increase of 10 billion from the previous forecast and the forecast for operating income and adjusted EBITDA remain unchanged at 180 billion and 280 billion yen respectively.
The market environment for our major product categories during the quarter continued to be difficult for televisions.
Products, such as digital cameras and headphones remain strong.
Regarding televisions in response to such demand and increasing price competition.
Activity revising our sales plan conservatively and controlling sales risks and inventory risks as well as focusing on cost reduction measures.
Regarding the digital camera market, especially in China pretty strong we will aim to maximize sales and profits during the year end selling season and further expand market share in each region. She was our sales of new mirror the single lens cameras and interchangeable lenses, which we introduced in the current quarter and October and which are selling well.
Regarding inventory levels, we have thoroughly managed everything from production to sales and we have further reduced inventory levels compared to the same period of the previous fiscal year across all our major product categories and have been able to control inventory at appropriate levels.
Next is the I N S. A segment sales for the quarter increased 2% year on year to $406 3 billion yen.
Operating income decreased significantly by $27 6 billion yen year on year to $46 four.
4 billion yen, mainly due to an increase in expenses, including depreciation and amortization expenses. Despite the positive impact of foreign exchange rates.
It Oh IBD a decreased by 15.0 billion yen year on year to $107 1 billion yen.
FY2023 sales are expected to be one Chilean 590 billion, an increase of 30 billion from the previous forecast and operating income and adjusted Oh IBD Eh are expected to be 195 billion yen and 440 billion yen, respectively, an increase of 15.
You're young each and a smartphone product market, although we see signs that the demand decline is bottoming out in China and emerging markets. The North America market shows a significant year on year decline and at this point, there's no change to our view that a recovery in the market will take place from next fiscal year.
Smartphone manufacturers are incorporating larger die size sensors into their new product, mainly at the high end and the mobile sensor market by value driven by this is expanding as expected.
Regarding the yield rate of our new mobile sensor product, we have achieved a certain level of improvement through the initial measures taken so far and also unit shipments are increasing the impact on profit remains unchanged from the previous assumption and is expected to push down the operating income forecast of the segment.
The fiscal year by approximately 15%.
Regarding automotive sensors the market as a whole continues to show high growth due to the normalization of the supply chain and our progress of electrification in the automotive industry, but intensifying competition in the Chinese market as a resulting in some of our customers capturing although share this combined with.
The fact that the shift to higher Adas functionality by our major customers is lower than we expected has resulted in a slightly revising downward our forecast for the current fiscal year. Furthermore, regarding the image sensor market for industrial and social infrastructure. We have further reduced our forecast for this fiscal year, mainly due to the effects.
Of the slow economic recovery in China.
Spite these factors by incorporating the positive impact of foreign exchange rates and additional cost reduction measures. We have upwardly revised our operating income forecast for FY2023 for the segment.
Here I would like to explain our current view of next fiscal year and beyond.
Looking ahead to next fiscal year, although we expect the sluggish smartphone market, which is pushing putting pressure on profits in the current fiscal year to recover we believe that the improvement will progress slowly.
Guarding the ear the issue, which is another factor pushing putting pressure on profits. We are re examining our processes and systems from design through manufacturing, but the impact is expected to remain into next fiscal year.
Next fiscal year deterioration from our original plan, resulting from yield coast per our new mobile sensor is expected to decrease significantly from the current fiscal year to approximately one third however, the production volume of the sensor is expected to grow significantly as our main model. So we expect that the.
Impact on profit for the next fiscal year will be approximately 70% of the impact on profit for the current fiscal year, There's no change to our view that the trend toward larger die size mobile sensors will drive the overall growth of the image sensor market in the mid to long term and that the business will steadily expands in at.
The motive as well as in industrial and social infrastructure applications, which I expect it to grow in the midterm due to labor saving automation Lastly is the financial services segment financial services revenue for the current quarter was $103 9 billion, a significant decrease of 42% year on year, mainly.
Due to deterioration in gains and losses from market fluctuations associated with variable life insurance. Despite the steady growth in instruments profitability at Sony Life operating income was $15 7 billion yen.
If again $64 3 billion decrease year on year, mainly due to a deterioration in net gains and losses at Sony life and the impact of revaluation pursuant to the application of the new accounting standard on the results of the same quarter of the previous fiscal year as well as a $22 1 billion a year in recovery of an unauthorized withdraw.
Funds recorded in the same quarter of the previous fiscal year, adjusted Oh, IBD and decreased $41 8 billion yen year on year to $22 7 billion yen, Sony Life's new policy amount significantly increased 49% year on year to reach two trillion $507 nine.
Billion yen and policy amount in force continues to steadily increase in the current quarter regarding the FY2023 forecast based on the results of the current quarter. We are forecasting financial services revenue to be one Julien 210 billion yen a decrease of 110 billion yen from the previous forecast.
Operating income and adjusted <unk> to be 155 billion and 180 billion yen, respectively. A decrease of 25 billion yen. Each. Please note that this forecast does not take into account the impact of market fluctuations from the third quarter onwards, and also the application of the new account.
<unk> standard has affected valuation gains and losses due to market fluctuations, we expect Sony Life's insurance service results, which is the core business of this segment to continue to grow in a stable manner.
Finally, I would like to summarize everything.
First I would like to discuss the growth of the Sony Group.
Three year cumulative adjusted EBITDA, which as the K P. I of our current mid range plan is expected to be approximately $5, one trillion yen or 19% above the target of $4. Three trillion yen. This is an average annual growth rate of approximately 9% compared to the results of the fiscal.
At year end at March 31st the 2021 the final year of our previous midrange plan in particular during the current quarter. The operating income of the three entertainment businesses of D. N. A N S music and pictures, which are our growth areas all increased year on year and accounted for 61% of consolidated operating income.
We are steadily making progress on the evolution to a growth business portfolio.
The other hand, we need to continue to pay close attention to the business environment surrounding Sony which includes economic slowdown around the world as well as geopolitical risks and the division of the global economy as a result, and a second half of the fiscal year, we intend to focus on responding to this business environment in each business and so.
Publish a foundation for growth for the next midrange plan and beyond.
In particular, we plan to focus our efforts on the top priorities of increasing the market penetration of P. S. Five and expanding the past five years our base as a result in the G. N S segment as well as an improvement of the product yield and measures for improving profitability such as operational efficiency in the eye and SME segment.
We will put the finishing touches on our current mid range plan in order to address any negative factors before the next fiscal year, that's all for the explanation.
Thank you for waiting note, we'd like to entertain questions from the media.
As far as the case of that presentation that people, who will be responding to questions as shown on the slide.
Now we'd like to begin the Q&A session I'd like to ask each one of you to limit your questions to two if you have any question. Please press a strict followed by number one on your telephone.
The first question Toyo Keizai umiak assemblies.
Omega can your question please.
We had actually from Toyo Keizai can you hear me yes. Please.
I have two questions about the games segment.
Page 11 hardware loss increases shown can you elaborate upon this more.
So another point.
Yes, I am there says.
In the press explanation and share in the society will be increased by FY 2025 in a major way and if you look at the appendix that current situation is not that good and in your presentation in Adas, It's progress there's not as much as expected about the target you are not going to change the target.
These are my two questions. Thank you.
Thank you for your questions.
First game <unk> network services hardware loss and increase sounds lost lots of your question second quarter results. I think you are referring to in the second quarter results.
There's some technical aspect to this.
Last year, there was a temporary effects.
Gains occurred on the yen.
Basis as compared to that a the year before that there was an increase in loss in the same period last year.
Put yourself with parts to the complexion. The lead time is long and in the meantime yen depreciated rapidly. So there was such a special factor that is a fast that's my answer to the second question. The first question second one eye in there says at the beginning to identify 25.
Automotive share is going to be increased according to plan and what is the current situation. What's your question.
In the automotive market itself. It is getting more normalized so in the medium to long term growth target remains unchanged.
In.
Some Oems the circumstances those specific Oems and changes of US here are the factors and it doesn't change the medium to long term trend that concludes my response. Thank you.
Alright, So next question.
Nikkei newspaper Mr. Sami please.
Yeah.
Yes, so semi of Nikkei newspaper.
D M D.
So I have two questions.
So at least five.
So the our target.
And.
So the figure is.
Our target is a rather high but.
I'd like to ask.
In this quarter.
Yes.
About the attainment of our 70.
17 million, how do you think that you can attain to school.
The unit terms and.
The small models.
Well the size actually.
It's been the bottleneck here, but the Sky AMA.
And how do you see this.
Going forward can you elaborate on that the spiderman and the second one is.
Maybe not so related but.
The current.
Fear.
The game subsidiaries.
And studios.
And I think I have seen this in the mass media reporting but that labor cuts has been.
Talked about cut.
Cutting personnel so in the game.
Yeah.
The cost control.
Have you changed the.
Management policy for cost control or are you being more severe about cost control. So if you have any particular thoughts on this can you share with us.
And then related to this.
In mid to long term that I've service games.
So that Ive service games, well I had heard last year about this but two if I 26 that it is going to be.
12 to 12 treaty, but have you ever change the policy.
Or.
Thinking about changing the policy.
So if you have any thoughts on this please tell us okay. So from myself.
As you have questions about the first question.
Yes.
So P S. Five about the target appears five well.
And 250.
Me, a 25 million. So it is rather a high target. So it's not something that we can attain very easily.
And.
We think that.
The year end sales is our most important sales period and to assist our year end sales we want to have holiday sales season, we want to have the new models for the holiday sales. So the Spider Man is also aim for the year end holiday sales. So a 25.
Yeah, It's we want to keep a set target but in this holiday season. When you take a look at how much. So it's not that we want to increase the installed bases, but we want to have the profitability bonus herself.
So that's for the first question answer and the second question.
Yeah.
Here.
So this is based on the reporting in the media, but I think it's about bungie and.
Last year July we acquired dispensing and its I E. The Banshee management and distinct franchise to be strengthened and our new game titles to be developed and studios that ive saves games to support the development and also the studios.
To have the Competitivity increased and made more efficient so those have been attempts and initiatives and as part of that bungie.
To have the efficiency throughout the company. So the indirect divisions, we had about 100 people.
We had called cut as the neighbor so percent cut and the impact on the.
Profitability is already incorporated into the.
Our current forecast so Playstation studios so the.
It.
Indirect system, we have reviewed on this and so we had had the personnel cuts regarding this in the live service.
Last year.
And if we if we're at 25, we have 12 titles.
But this.
Is that a serious serious question I think about the 12 titles and then.
We are reviewing this so the titles.
Who are the gamers expectations, we have not being able to meet the game is expectations, but me are trying as much as possible that this would be played by the gamers and liked by gave us for a long time. So the two titles so six titles would be.
Released by FY 'twenty five that's our current plan and then remaining six data's as for Moody's we are still working on that and the live service games and multi play titles. That's the total of that so in mid to long term we want to.
And does this kind of service and that's the unchanged policy of our company, but it's.
It's not that we stick to certain titles, but for the gamers and gaming titles a quality you should be.
Most important that's how I feel about it thank you.
Next we'd like to thank the next question.
Yeah.
The weekly Diamond in mind Hassan please.
Hello, I Hope you can hear me, yes, we can hear you. Please go ahead. Thank you I have two questions.
First question is about E T N S.
Earlier in your presentation, you said that the demand on T V is going down and as a result, you are working on the cost reduction effort. So we too kind of post are you trying to reduce please talk about this initiative. The second question is about the imaging <unk> sensing solution on the slide 15.
FY2023 forecast says that at the additional cost reduction.
So more specifically what is your cost reduction effort like.
Thank you very much for your question first on the E T S.
So the sales and market condition will continue to be difficult. So sells close to will be reduced and operation close to will also be cut down.
So we have moved down that moved up this initiative the cells amount will go probably go down slightly but in terms of profitability. We believe that we can maintain the same level. So with that in mind, we will work on the cost reduction.
That's where I N S S.
On this the additional cost reduction that we are mentioning here we have several points included here.
He.
Equipment.
We are reviewing the equipment condition. So we are also reviewing the situation for next year and we are reviewing deep outsourced work as well.
Is are the main things that we're working on that's all.
Yeah.
I'd like to move on to the next question.
Yes.
If you have any question. Please present estrich followed by number one.
Yeah.
Are there any questions.
Yeah.
Yeah.
Yes.
There seems to be none.
So with this I'd like to conclude in Q and a session for the media.
Q&A for investors analysts.
Well start.
At 442.
Yeah.
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Ooh begins in Q and a session for investors and analysts shortly.
Would you kind of weight on to the Q&A session begins.
Thank you very much for waiting knows who like to entertain questions from the investors and analysts.
I am Condor or finance and I agree it be serving guests master ceremonies.
The people and so.
On the slide three persons on this slide will be responding to your questions as is case of media session.
As for the operation of telephone effect and attention points Foundation. Please look at the invitation letter in advance I would like to ask you to limit your questions to two per person.
We set aside about 20 minutes for Q&A session now I'd like to begin the question and answer session. If you have any question. Please press the <unk> followed by one.
[noise] Morgan Stanley <unk> Securities honest someplace.
No no from Imago Sunday.
<unk>.
One question of a game and one for the films first game network.
FY 'twenty four.
So the factors for increase or a decrease of our revenue and profit can.
Can you explain the fact that for example, the smaller die divergent will be launched and they will have an impact upon the result, the price increase of the hard way and the planned change of the Playstation plus.
Okay.
About <unk>.
Half of the year there'll be impact simply calculated.
And it'll be in the latter half of 20 billion yen. What is your view on this and Bunge is a great addition costs will be significantly decreased you said.
If you can comment on the size.
Of the impact.
And first party titles.
A number of our titles are pushed out to the next fiscal year is that those are a factor for increasing profit.
Any other factors, which might be impacted decreasing the profit for the gaming sector.
As far as the pictures.
Long last strikes are about to be completed to be ended and where they feel relieved.
To add next year after year.
Yeah pipelines and together with its release depreciation cost that might occur as well.
Maybe pluses and minuses for this year and next fiscal year.
In the <unk>.
Pictures. The segment is it possible that you may increase the income and increased profit or is that going to be difficult for next fiscal year. These are my questions.
Thank you for your questions.
First game and network services.
Next fiscal year.
What other factors for pushing up pushing down the income and profit.
First.
Yes, starting from PS plus.
Pointed out you do have full year impact from FY 'twenty five.
Two year package, then that's how the impact would be.
True mass package, which means about 60% of their users.
You can think in that way and then.
Acquisition related cost.
Not only bungie, but a.
Number of acquisition related cost soaker. It costs peaked in FY2023 in FY 'twenty for on a dollar basis as compared to this year about 20% of decrease.
Moving to the level of acquisition cost.
That is about the acquisition and then hardware related costs.
This fiscal year.
In terms of the sell in unit volume it is going to be the peak this year shows promotional related cost and logistics related costs.
It will be reduced.
We are expecting that there'll be a reduction and this will be effective for increase in our profit on the other hand for content continuing on additional investment to be made and this will be partially offsetting the increase in profit that's a.
My response to the first question with regards to pictures.
That news out there about the <unk>.
Strike has come to a close in the morning of Japan time. So you know how it is coming to a close we do not know the specifics yet.
But no doubt that there is going to come to an end.
So for the fiscal year's forecast, what we are showing now.
We are likely to come very close to that or there may be a bit more upside opportunities, but we have to examine in more detail.
This year, the launching pad and comparing this with FY 'twenty four and is it possible just to increase the revenue and increased profit is not that simple calculation strike and then there'll be a resumption of the theatrical release and the windowing.
In FY 'twenty four there are more windows, then for that marketing and promotion costs will be incurred to be prepared for that so we cannot just simply compare fiscal year <unk> fiscal.
Fiscal year to another fiscal year, and say, whether it's possible to see increasing both revenue and profit, but the fact that the strike has come down and is indeed, a positive factor in the medium to long term and we like to increase the profit accordingly.
Thank you alright.
Alright, So next question.
Yeah.
From the Citigroup.
Mrs <unk>. Please.
Yes. So my name's is over from a Citigroup Securities can you hear me.
Yes. Thank you.
And I want to ask one on game and one on semiconductors and about games. This period, Playstation five hardware so to <unk> 5 million units a target so according to what extend through at US. So thank you 5 million unit.
Kept but the.
Our profitability, we shouldn't look at the balance with the profitability and you said 25 million target. So.
Specifically.
How do you see it how much profitability change there'll be so that.
25 million units would not be kept or two.
To what extent can we.
Try to aim for 25 million.
Objective, so the sitting cost how much more there would be necessary.
So how much profit would you like to see.
So can you elaborate on that and tell us how you think about it and the second question is about semiconductors.
So the ear.
And.
Next true so.
There is going to be food so are the new products.
And there's going to be having issues of our yield I think so.
About the yield can you.
Elaborate on this so that the what's happening in the yield of a saving.
Semiconductor so much not going quite well so are now in the improvement phase you say, but that improvement is it a structural improvement that's happening or that.
Because you are changing to the.
Different kind of products. So is it some kind of a more.
Of Ah Ah.
One time kind of a treatment so just by changing the product so and another additional question if I may but the impact of our profit so.
If you can review this so 15% Inc. Imp.
Impact on the.
Perfect. So.
35 billion yen in our numbers is that right. So can you.
Tell us about it okay. Thank you for your question. So first of all on the game <unk> Network services.
So 25 million units and about a fifth of profitability so well.
Well, if I split it sucks, Inc. Today as a company.
Having the guidance for this year.
So this guidance.
The operating profit.
To keep this operating profit according to the guidance for this year and the profitability, it's not going to be.
Too much of a downside from the current estimated profitability. So we don't do such a drastic discount D. C also of the promotion.
That's my assets. The first question and I and this is about the ear.
Well.
Technical content, it's really the competitivity social competitivity, so it's going to be a quite a detailed discussion so I would like to refrain from going into the detailed discussion.
At this point, but that generally speaking for the semiconductor Susan you refer the new product and then the yield to stabilize we'll do quite a certain amount of time. So it starts from though yield and then we see improvement than the targeted level can be achieved that's how the new <unk>.
Product of a semiconductor goes so I think it's taking more time than we first initially.
Thought so we are challenging you technology here and is that just one new technology, but we have a several issues here so that's keeping us.
From addressing and.
Our semiconductor is a with a non cat so the wafer in so the improvement situation, we cannot see the total picture very easily because if that is quite long and that is causing this a yield issue.
And that's at the bottom of the yield issue. So the improvement is not the structure, but we have to look at our <unk>.
H phenomena, and we have to accumulate the solutions and to make it optimal.
And.
If we have changed to a new <unk>.
But no that's not what we're doing that's my answer and the impact on the profit at 15%.
How much would that translate into a amount is that just as you said 35 billion.
<unk>.
Thank you we'd like to entertain the next question F N B C.
After the song please F N B C N equals Securities got Stefan <unk>. Please go ahead. This is cluttered up from Smbs any securities and I have two questions as well.
G N F N I N S S first on game.
Next year in much Ryan Sun is going to leave and to the extent youre going to have this raw concurrently.
So the background has already been explained in the press release, but.
In the mid to long term.
John and N S top management.
What is your vision.
That is what I'd like to ask the first question and then a second question on the I N S. S.
Next fiscal year.
We're looking at the supplementary.
Seat wafer capacity is.
154, K already in next fiscal year, the number of models will be expanded.
So I think that that's one of the reasons.
But on the other hand, you will be reviewing in lines and also reducing the number of lines. So next fiscal year.
Depreciation of a D.
Investment, but is going to be a scale.
And depending on that will it impact the improvement of profitability and to what extent that is what I'd like to understand thank you.
<unk> you very much for your question first on G N N S.
At this time.
Starting October 1st I became chairperson and then.
In April on April 1st I will be D provisional CEO for interim and.
And this has already been published but it will be for a maximum one year I will be enacting a C.
C O and during this time.
My most important mission will be two.
Find D success thing.
C O and assigning the person and transitioning to their presence, mainly so game and networking services.
Yes.
Strategically important business for Sony.
So.
Of course employees and other stakeholders have high expectation toward this business. So we want to address the need the expectation by selecting the appropriate C O and.
Transition to the person as soon as possible that is a the answer to the first question and second question.
On I N S S FY 'twenty for.
Our view.
The investment has been continuing and depreciation expenses will increase next fiscal year as well because we are moving to die size.
Large size.
Equipment and as a result, the demand will be increasing but D and we will be discerning the market condition and recovery and so next fiscal year onward, we like to make a decision on investments I believe that next fiscal year.
For the next the midrange plan.
I believe that we can talk about our next mid range plan thoroughly to use so as we talk about that I think that we can talk about the size of investments that we will be making in the next three years that is all thank you.
Thank you.
The time is running short.
So from now I'd like to ask two questions be limited to one question per person.
<unk>.
J P Morgan Securities <unk> San please.
Thank you.
Ida from J P. Morgan.
One question.
[noise] game.
I have a question regarding game second quarter operating.
Profit and increase and decrease in I think in behind that can you explain in a quantitative fashion, excluding FX impacts $8 5 billion decrease in profit on a year on year basis. The factors for this hardware negative it was large and software was.
An increase in promotion and others.
As a G. S. N G was a large so what is the impact for each of these factors and if it is difficult to say in a quantitative manner.
The profitability of software remains.
The profitability of software is not changing from them before.
Thank you.
Quantitatively, we are not disclosing so I would like to highlight an important point.
First operating.
Profit and the factors for the increase.
The largest contributor is software.
Simply software yourselves was good.
Part D.
Slightly weak.
Third party is a strong.
On a net basis there'll be contribution positive contribution and then the second is.
The positive impact of the exchange rate and next is network service.
Simply net.
Network service revenue increased.
And then negative factors are the following there are two factors one is hardware.
P S five.
Sell in.
He is increasing and related to that and then sales.
He is increasing this much and SG&A is increasing accordingly. So these are the positive and negative factors. Thank you.
Thank you.
Alright, So next Chris.
Christian and distribute it ask question.
So from Mizuho Securities now can assemblies.
Yes. Thank you.
I'm not going to be from Mizuho securities the cashflow I'd like to ask.
And.
1.16 trillion.
Little over 1.16 trillion, so at the ear and the inventory level and the G. N. This and I missed this.
That's kind of a level would that be and for the next year on list. So the.
Working capital would be a more pressurized so obs you'd be a better so for the game and I I I and assess would you tell us how it's going to be or how do you view. This is thank you for the question and.
As for the question, So Oh gosh I would answer this question, yes, thinking theyre going to sell for your question and.
This.
Issue that you raised so.
90 billion yen for the cash flow is because of the foreign exchange impact and also the inventory and the working capital sorry, not the inventory, but working capital for the year.
That we have and the Playstation five and also the semiconductor is that second quarter and the third quarter.
The sales.
To be increasingly have more inventory on hand and as of.
Much and it's going to be normalized and especially game.
Inventory it would be a much less and much okay and for the next year.
So it's going to be a compressed inventory. So how is the operating cash flow would be so our mid term.
Plan, we are reviewing this now kersey and about the working capital is going to come back.
And.
Here.
The cash flow would be positively impacted and.
But you have to ask the inventory level as of year end G edition, I and assess how different so about the game Playstation five so in would be increased so that the inventory would be dusty decreased and I and it says.
As has been explained that revenue is increasing quite rapidly in that case, the inventory is going to be.
At a.
Level, that's appropriate to that thank you and that's all for me.
<unk>.
As such we would like to close the Sony.
Our Q2.
2023 consolidated results meeting thank you so much.
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