Sony edges 1% Q2 profit rise as PS5 costs squeeze margins

FILE PHOTO: A man walks past the Sony brand logo outside the headquarters of Sony Corp in Tokyo, Japan, May 24, 2016. REUTERS/Thomas Peter

By Sam Nussey

TOKYO (Reuters) -Japan's Sony Group Corp on Thursday squeezed out a surprise 1% rise in operating profit for its second quarter though costs from growing sales of its PlayStation 5 (PS5) console pressed on margins.

Weaker profitability in the key games segment could also not stop the group hiking its full-year operating forecast by 6% to 1 trillion yen ($8.81 billion) from its August forecast, driven by expected profit growth in areas including movies, music and electronics.

Sony said it has sold a cumulative 13.4 million units PS5 units since launch last November. That contributed to a 27% year-on-year jump in sales at its gaming unit, though profit was less robust as the conglomerate sold hardware below cost.

Game console makers frequently sell new devices below manufacturing cost as they build an install base for software sales. Sony said sales of first-party titles fell, though sales from other developers grew.

Sony aims to sell 14.8 million PS5 consoles this financial year - a target that takes into account the global semiconductor shortage.

Sony reported group profit of 318.5 billion yen for July-September. That compared with the 222 billion yen average of six analyst estimates compiled by Refinitiv.

The conglomerate - spanning areas such as entertainment, sensors and financial services - switched to IFRS accounting standards from U.S. GAAP in the current financial year.

To meet long-term demand, Taiwan Semiconductor Manufacturing Co Ltd plans to build a chip plant in Japan. Sony is considering being a partner in the factory, Nikkei reported earlier this month.

Across its business, Sony is enmeshed in a global battle for consumer attention as entertainment giants look beyond the United States for growth and mine non-English-language creators for content.

In a blow to Sony's pop culture credentials, South Korea's top cultural export, boy band BTS, said last week it has dropped its Columbia Records label for a deal with Universal Music Group NV.

Other challenges include an investor attempt to oust the management of India's Zee Entertainment Enterprises Ltd, casting a shadow over merger talks with Sony's local unit.

($1 = 113.5300 yen)

(Reporting by Sam Nussey; Editing by Christopher Cushing)

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