Sony dropped to a grade above junk by Moody’s

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Sony dropped to a grade above junk by Moody’s

Moody’s downgraded Sony’s credit rating for the second time in a month on Friday, the latest blow to Japan’s electronics sector where embattled Sharp has seen its own credit rating slashed to junk status.

The global ratings agency lowered Sony one notch to Baa3 with a negative outlook, just above junk grade, citing ongoing struggles in the consumer electronics giant’s TV business.

Moody’s last cut its rating on Sony on Oct. 12, pointing to the once-iconic firm’s weak profitability and cash flow as it struggles to move past a whopping $5.7 billion loss in the last fiscal year.

Sony’s main domestic rivals, Sharp and Panasonic, have warned they are on track to book a combined annual loss topping $15 billion amid huge restructurings, which include tens of thousands of job cuts.

In contrast, Song said it had shrunk its latest quarterly loss but was on track to eke out a small annual profit after four years in the red.

But Moody’s warned that the PlayStation and Bravia TV maker would continue to suffer amid weakening demand for LCD TVs and the soaring popularity of smartphones, a lucrative market in which Apple and Samsung have sailed past Japan’s electronics giants.

“The rating actions reflect Moody’s concern that an increasingly rapid deterioration in demand in the digital [audio-visual] market due to sluggish economic conditions and fast structural changes will weigh more heavily on Sony’s earnings than was previously expected,” it said in a statement.

The agency added that Sony would see stable earnings in some businesses including its music unit, but would struggle in TVs, mobile phones, cameras and video games.

Sony “is not expected to reduce debt significantly without resorting to cuts in capital expenditure or the sale of non-core assets,” it added.



AFP

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