Nintendo cuts full year projections to 6bn despite slowing losses

Poor overseas sales of 3DS and crippling appreciation of yen blamed

Nintendo has cut its full-year profit predictions to ¥6bn from ¥20bn after a six month financial report which highlights poorer than expected overseas sales of the 3DS and a staggering ¥23.2bn (£182m/$290m/€224m) loss from exchange rates unfavourable to the strong yen.

For the six month period ending on September 30, 2012, Nintendo recorded global sales of ¥201bn (£1.58bn/$2.52bn/€1.94bn), down 6.8 per cent on the same period for the year previous, recording a loss of ¥28bn (£220m/$350.7m/€270.2m).

Despite that shrinkage, the company is still turning in the right direction, recovering from the ¥70.2bn loss it made for the first six months of the last financial year, which saw sales shrink by just over forty per cent from the year prior to that.

"Sales of the Nintendo 3DS hardware and software were weaker in overseas markets than expected. [losses from]Yen appreciation...totaled ¥23.2bn."

Nintendo half-year fiscal statement.

Net income per share stabilised from a loss of ¥549.53 for the first six months of last year to a loss of ¥218.93 for the period just ended.

The results were slightly below target for the Japanese publisher, which had predicted losses of just ¥20bn rather than ¥28. Predicted figures for the full year have been adjusted accordingly, from a profit of ¥20bn to a smaller target of ¥6bn. For the last financial year, the company's books registered a loss of ¥43.2bn.

"The Company continues to focus on selling Nintendo 3DS during the second half of the fiscal year ending March 31, 2013 and aims to expand its business by launching the Wii U system as the successor of Wii in the year-end sales season in the main regions of the world," reads an accompanying statement.

Nintendo hardware sales to date worldwide.

Nintendo hardware sales to date worldwide.

"The earnings forecast has been modified to reflect a yen appreciation stronger than expected at the beginning of the fiscal year, the actual sales result for the six-month period ended September 30, 2012 and a change in the outlook for the following six-month period from October 2012 through March 2013 by reviewing the mix of each hardware and software sales unit forecast.

"During the second half of this fiscal year, the assumed exchange rate of the yen to the U.S. dollar has remained at 80 yen per U.S. dollar, while that of the yen to the euro has been revised from 105 yen to 100 yen per euro."

In the first quarter of FY 2012, Nintendo recorded a record loss of ¥17.2 billion ($220.4m/£142m), just after its first ever full-year loss for the entirety of 2011.

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Latest comments (4)

Tony Johns7 years ago
With sales records for their consoles and handhelds with the DS and the Wii, I just hope that the 3DS and the WiiU are able to sell just over half or maybe 3/4 of those figures.

Maybe they will get lucky and have the 3DS and the WiiU sell more than the DS and Wii?

But that is more like wishful thinking of wanting lightning to strike twice, nothing related to FF XIII Lightning of course.
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Daniel Hughes Studying PhD Literary Modernism, Bangor University7 years ago
The real problem is that even if Nintendo post similar, or indeed higher sales than Wii/DS in the near term, they are still going to make less money than they did. They get perhaps half as much yen now, per euro/dollar, as they did during the transition to, and peak of, the Wii and DS. Indeed, over a 19 month time frame, 3DS tracks slightly above the DS, and now sells at a profit, but this isn't enough to offset the incredibly strong yen and the weak euro/dollar--and Nintendo's shrunken Wii business is still healthier than the GameCube business at the end of its lifespan. So long as this currency imbalance continues, Nintendo's finances will be very turbulent.

They are, however, clearly heading in the right direction. 3DS sales are picking up, despite "weaker than expected" Western sales, and losses are being cut down to the point a small profit can be ground out. Nintendo also don't have the tail-end of a profitable third system (GBA) to guide them through this current transition. That Nintendo can recover from their first ever loss, with currency markets the way they are, during a very difficult console transition, within twelve months, speaks volumes about the strength of their core business, their leadership and their reaction to such difficult times. That they must still grapple so fiercely with currency issues, however, does make you wonder just how strong Nintendo's finances can remain if this continues for another couple of years.
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The solution for companies like Nintendo is simple IMO - they have significant savings in Yen, and while the exchange rate is positive, leverage this to purchase assets and revenue generators in $US. It should also be a good time for them to invest/use non-Japanese development, as it will be very cost effective.

On top of all this, they are still spending on building their new R&D facility (due for completion in a year or two?).

So even if they are cashflow negative, their asset base is increasing.
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Jim Webb Executive Editor/Community Director, E-mpire Ltd. Co.7 years ago
Michael, I believe they hold much of their savings in USD, not Yen. This is why they were able to stay so strong even during the GC days.
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