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Finance

Nintendo expects wider full-year loss of 65 billion

Thu 26 Jan 2012 7:34am GMT / 2:34am EST / 11:34pm PST
BusinessFinance

Company swings to loss in 9 month results; 3DS sales expected to be below estimates at 14m

Nintendo has recorded a net loss of 48.3 billion ($623.4m) for the nine months ended December 2011, compared to a profit of 49.5 billion for the previous year.

Net sales for the period were 556.1 billion ($7.1bn), down from the 807.9 billion. Nintendo said sales were down due to the early 3DS price cut and reduction in price of the Wii console, with the impact of strong yen against foreign currencies hitting overall profits.

As a result, the company now expects a full year net loss of 65 billion compared to previous estimates of a 20 billion loss. Profit for the previous financial year was 77.6 billion.

Sales are expected to be down from 790 billion to 660 billion.

During the nine months Nintendo sold 11.43 million 3DS units, with worldwide lifetime sales now at over 15 million. Software sales were 28.04 million units with the company acknowledging "slows sales in the first half" of the year.

It expects to finish the financial year with 14 million 3DS units sold, down from estimates of 16 million. Wii forecasts were also lowered, from 12 million to 10 million units.

Sales of DS hardware during the nine months was 4.64 million units with 51.2 million games sold worldwide.

The Wii home console sold 8.96 million units and 89.06 million games with the company noting success for The Legend of Zelda: Skyward Sword "especially in the United States."

9 Comments

I found this these numbers surprising, so I dug into the financial report a bit:

[link url=http://www.nintendo.co.jp/ir/pdf/2012/120126e.pdf
]http://www.nintendo.co.jp/ir/pdf/2012/12...[/link]

Seems the main culprits were the continued strength of the yen (exchange losses cost $500m-$1bn), devaluation of stock (as 3DS & Wii prices dropped - trade prices?).

Additionally, over the same period (all 9 month figures I think) "Property, plant & equipment" was up 10% (around $100m), and "Investments and other assets" increased around 40%(!) by around $500m (overall assets remained about the same, as this was offset by the drop in inventory values).

The fact the couldn't make their 3DS forecast is disappointing though (even after the price drop).

The other killer fact, is that although their net sales dropped 30% (approx), their cost of sales barely budged. Reflecting that the majority of their costs are "fixed" (development, non-per-unit production). A 10% increase in sales, would have turned a (net) loss of $200m into a profit of $350m.

A lot now lies on the shoulders of the WiiU ... lets see if they can avoid the mistakes of the 3DS launch.

Posted:2 years ago

#1

Bruce Everiss Marketing Consultant

1,692 594 0.4
Weren't Nintendo recently the most valuable company in Japan?

btw this is 0.53 billion.

Posted:2 years ago

#2

Jim Webb Executive Editor/Community Director, E-mpire Ltd. Co.

2,283 2,491 1.1
Bruce, if you mean by market cap, they were 2nd behind Toyota.

Posted:2 years ago

#3

Patrick Frost QA Project Monitor

407 205 0.5
They must be in such a difficult position at the moment with the Yen. I'm guessing that doing good business overseas will make them lose money overall but they can't afford to lose their advantage in terms of market penetration and share can they?

Posted:2 years ago

#4

Jim Webb Executive Editor/Community Director, E-mpire Ltd. Co.

2,283 2,491 1.1
Patrick, currency exchange rates have indeed been a bigger factor than reduced sales. From April to Sept they had a 70.2 billion Yen loss with 52.4 billion of that coming from the currency exchange.

In fact, looking at the numbers, they actually had a good profit in the 3rd quarter. If their Q1 and Q2 loss was 70.2 billion Yen and their Q1, Q2 and Q3 total is just $48.3 billion Yen loss, they had to make a profit of 21.9 billion Yen in the 3rd quarter. So they made about $280 million for the quarter. Not a bad turnaround.

Hey Matt, any chance you can toss that nugget of info in to the story?

Posted:2 years ago

#5
A currency adjusted profit/loss would certainly be appreciated.

Posted:2 years ago

#6

Andrzej Wroblewski Localization Generalist, Albion Localisations

103 78 0.8
Strong Yen is a double-edged weapon. It also means that Nintendo can invest more in product value-adding product elements and services abroad.

Posted:2 years ago

#7
Its more than just the exchange rate issues - Im sure that based on "just" revenue and cost-of-sales, they had a really good quarter. Write-down in inventory cost them dearly, as did write-downs in assets, as did lower than expected OS sales (due to the higher yen).

It would be nice if they issued cleaner "raw" figures for pure sales/profit, then issued overall financial results.

Hopefully, the yen is about as strong as its going to get: and yes, Nintendo could definitely use the strength in the yen to buy assets (and invest) in the US - which is probably what is happening, given the huge jump "Investments..." just in the last 9 months. This will help isolate the company from further currency swings.

Posted:2 years ago

#8

Jim Webb Executive Editor/Community Director, E-mpire Ltd. Co.

2,283 2,491 1.1
The full breakdown is available on their investor relations web site.

Investments are likely to include the new $212 million R&D facility.

Posted:2 years ago

#9

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