Nintendo Q3 Results Bring Net Profit, But Warnings of Projected Losses Remain
Posted by Thomas Whitehead
3DS hardware surpassed 40 million lifetime sales
Following its revised projections from earlier in the month, Nintendo left little scope for surprise in its financial results. Overall there was a net profit, but warnings remain that typically slow Q4 sales would contribute to end of year losses like those projected; there were also some landmarks passed for both hardware and software.
In terms of financial numbers for the nine months of 1st April to 31st December 2013, there was a net income profit (which represents the final 'result') of 10,195 million Yen (approximately $98.7 million / £59.5 million / €72.2 million). The key figure, which represents the nuts and bolts of the company's business of making and selling games and systems, is the operating income — this brought a loss for the nine months of 1,578 million Yen ($15.3 million / £9.2 million / €11.2 million). Nintendo is projecting this operating loss to increase to 35 billion Yen by the end of Q4, which converts to roughly £205 million / €246 million / $335 million. The following is from the financial report explaining why these losses will grow in the next three months.
In the fourth quarter, we expect sales to decrease significantly due to seasonal factors as the year-end sales season concludes. Total selling, general and administrative expenses, which include fixed costs, are expected to exceed gross profit, leading to a bigger operating loss. Also, we expect the yen to rise from the end of the third quarter to the end of the fiscal year, reducing exchange gains and ordinary income. We expect an annual net loss primarily due to the reversal of deferred tax assetsin the third quarter in relation to the losses carried over from the previous fiscal years mainly in the United States. Exchange rate assumptions for the fourth quarter as well as the end of the fiscal year are 100 yen per U.S. dollar and 140 yen per euro.
In terms of hardware and software sales, the statement refers to positive 3DS landmarks but "limited growth" in the Holiday season for the portable, leading to its reduced target for the year. As for the Wii U, despite some positives it's been unable to "recover fully". Another interesting statistic is that 31.9% of all sales were in Japan, with the remaining 68.1% elsewhere around the world.
Hardware Sales (financial year) — 2.41 million units
Hardware Sales (life to date) — 5.86 million units
Software Sales (financial year) - 15.96 million units
Hardware Sales (financial year) — 11.65 million units
Hardware Sales (life to date) — 42.74 million units
Software Sales (financial year) — 57.25 million units
Hardware Sales (financial year) — 1.07 million units
Hardware Sales (life to date) — 100.9 million units
Software Sales (financial year) — 23.27 million units
Hardware Sales (financial year) — 0.11 million units
Hardware Sales (life to date) — 153.98 million units
Software Sales (financial year) — 8.63 million units
Overall, the results have few surprises due to Nintendo laying the groundwork in its previous projection announcement. We'll report on some other details in subsequent articles, while keeping our eyes peeled for officially translated details of the investor briefing.
That's the main summary, and paints the expected picture; the accounts show Nintendo has plenty of financial assets with which it can work, however. Let us know your thoughts in the comments below.