SEGA-Sammy Net Sales Down But Reduces Operating Loss News

With the release of its latest financial reports for the nine-month period ended December 31st 2008, SEGA-Sammy became the latest Japanese publisher to suffer from the global credit crunch and the impact of the strong Yen.

Despite posting a 15.4% decrease in net sales to 309.02 billion yen (£2.29 billion) from 342.09 billion yen (£2.54 billion) in the previous year and a resulting operating loss of 2.76 billion yen (£20.47 million), SEGA-Sammy managed to reduce its overall net loss to 10.84 billion yen (£80.39 million) from 15.77 billion yen (£116.95 million) in the nine-month period from the previous year.

As a result SEGA-Sammy expects net sales projections for the full year ending March 31st 2009 to stand at 435 billion yen (£3.23 billion), representing a 5.2% decrease compared to the previous year.  Operating income for the full year is expected to reach 2.5 billion yen (£18.54 million), leading to a net loss of 21.50 billion yen (£159.44 million).

Focussing on SEGA-Sammy's various divisions; the Japanese company is expecting recent revisions to regulations surrounding its Pachinko and Pachislot business to buoy the market, which remained strong throughout the period.  Net sales for the division stood at 106.95 billion yen (£793.11 million) with an operating income of 5.29 billion yen (£39.23 million).

The arcades continued to perform well for SEGA-Sammy strengthened by the release of WORLD CLUB Champion Football Intercontinental Clubs 2006-2007 and GALILEO FACTORY.  Net sales for the division stood at 52.80 billion yen (£391.55 million), with an operating income of 6.22 billion yen (£46.13 million).

The amusement centre industry faced tough times during the economic uncertainty and an increasingly harsh business environment, posting net sales of 54.42 billion yen (£403.56 million) but an operating loss of 4.97 billion yen (£36.86 million).

Home video game software saw demand level off across Japan, but reported firm demand throughout Europe and North America with strong sales of Sonic Unleashed, Football Manager 2009 and the continued success of Mario & Sonic at the Olympic Games.  For the nine-month period SEGA recorded worldwide sales of 21 million units, split across North America (8.8 million units), Europe (9.1 million units), and Japan (3.1 million units).  Net sales for the division totalled 96.22 billion yen (£713.54 million) with an operating loss of 5.65 billion yen (£41.90 million).

Of concern for SEGA is the fact that the video games division posted a significant loss - the largest of any division - which is at odds with their robust performance in the Pachinko/Pachislot and Arcade division.  On a slightly more positive outlook, the video games division did manage to reduce its operating loss compared to the 9.62 billion yen (£71.34 million) deficit it incurred in the nine-month period for the previous year.

As a result of the revision to the full year forecast SEGA-Sammy has confirmed plans to close or shut all of its 110 remaining amusement centres.  In the arcades and video games divisions SEGA will reduce R&D costs by 20% while consolidating titles.  It seems safe to assume we'll see a leaner catalogue of titles from SEGA in the near-future.  In addition SEGA is seeking voluntary retirement of 560 employees, leading to a reduction in labour costs of 5 billion yen (£37.08 million) for the year ending March 31st 2010.