Nintendo's Return to Profit Thanks to Currency Changes
But decline in sales is slowing...
Nintendo has released its financials for the nine months from April 1st to to December 31st 2012 and the company is quoting a very uplifting set of figures, which indicate that it has - year on year - returned to profit.
The figure being quoted by much of the media is the one for "Net income". This shows a positive of ¥14,545 million compared to the previous period of - ¥48,351 million (yes, minus). Excellent, but then we note the official statement by the company and match this to the trend of actual sales since 2008...
The statement from Nintendo reads, "While Nintendo saw year-on-year increases in the sales of Nintendo 3DS hardware (up 11 percent YOY) and software (up 41 percent YOY), those gains were not enough to offset decreased sales of Wii and Nintendo DS hardware and software.
"Furthermore, the strength of the yen averaged against the euro in the first nine months of Nintendo’s fiscal year contributed to an overall 2.4 percent year-on-year decrease in sales."
Bad news on sales in fact. In fact, let's look more closely at sales using the figures given to us by Nintendo.
Net Sales in millions of yen
FY3/2009 - (Apr.-Dec.'08) - ¥1,536,348 (-)
FY3/2010 - (Apr.-Dec.'09) - ¥1,182,177 (-￥354,171)
FY3/2011 - (Apr.-Dec.'10) - ¥807,990 (-￥374,187)
FY3/2012 - (Apr.-Dec.'11) - ¥556,166 (-￥251,824)
FY3/2013 - (Apr.-Dec.'12) - ¥543,033 (-￥13,133)
So, sales have consistently been down. That, for a company that makes money by making and selling physical things is not a good sign. However, the last nine month period has shown that the downward trend has eased significantly. But still not enough to show a rise on profit.
So where did the return to profit come from? Nintendo points out that, "the company has returned to profitability in ordinary income and net income levels, driven primarily by foreign currency exchange gains."
Our italics. Yes, fluctuations in currency exchanges which, as we're all aware can fluctuate negatively as well as positively, are by Nintendo's own admission, primarily responsible for its return to profitability. It further reinforces this and points out that:
"Owing to the fact that the 'Wii U' hardware sales have a negative impact on Nintendo’s profits, the operating loss was 5.8 billion yen. As a result of exchange gains totaling 22.2 billion yen due to the depreciation of the yen at the end of calendar year 2012, however, ordinary income was 22.7billion yen and net income was 14.5 billion yen."
So, on the one hand while Nintendo's figures and statements indicate a return to profit based on the notoriously flaky basis of foreign currency. On the other hand, the sales trend, while still downward, is significantly less steep in decline than previous periods.
Before we go... some essential figures for hardware sales that can be used in future fanboy arguments.
Apr-Dec 2012 vs Lifetime
Nintendo DS
- Hardware - 2.15 vs 153.67
- Software - 30.24 vs 930.55
Nintendo 3DS
- Hardware - 12.71 vs 29.84
- Software - 39.56 vs 84.99
Wii
- Hardware - 3.53 vs 99.38
- Software - 45.08 vs 863.53
Wii U
- Hardware - 3.06 vs 3.06
- Software - 11.69 vs 11.69
The figure being quoted by much of the media is the one for "Net income". This shows a positive of ¥14,545 million compared to the previous period of - ¥48,351 million (yes, minus). Excellent, but then we note the official statement by the company and match this to the trend of actual sales since 2008...
The statement from Nintendo reads, "While Nintendo saw year-on-year increases in the sales of Nintendo 3DS hardware (up 11 percent YOY) and software (up 41 percent YOY), those gains were not enough to offset decreased sales of Wii and Nintendo DS hardware and software.
"Furthermore, the strength of the yen averaged against the euro in the first nine months of Nintendo’s fiscal year contributed to an overall 2.4 percent year-on-year decrease in sales."
Bad news on sales in fact. In fact, let's look more closely at sales using the figures given to us by Nintendo.
Net Sales in millions of yen
FY3/2009 - (Apr.-Dec.'08) - ¥1,536,348 (-)
FY3/2010 - (Apr.-Dec.'09) - ¥1,182,177 (-￥354,171)
FY3/2011 - (Apr.-Dec.'10) - ¥807,990 (-￥374,187)
FY3/2012 - (Apr.-Dec.'11) - ¥556,166 (-￥251,824)
FY3/2013 - (Apr.-Dec.'12) - ¥543,033 (-￥13,133)
So, sales have consistently been down. That, for a company that makes money by making and selling physical things is not a good sign. However, the last nine month period has shown that the downward trend has eased significantly. But still not enough to show a rise on profit.
So where did the return to profit come from? Nintendo points out that, "the company has returned to profitability in ordinary income and net income levels, driven primarily by foreign currency exchange gains."
Our italics. Yes, fluctuations in currency exchanges which, as we're all aware can fluctuate negatively as well as positively, are by Nintendo's own admission, primarily responsible for its return to profitability. It further reinforces this and points out that:
"Owing to the fact that the 'Wii U' hardware sales have a negative impact on Nintendo’s profits, the operating loss was 5.8 billion yen. As a result of exchange gains totaling 22.2 billion yen due to the depreciation of the yen at the end of calendar year 2012, however, ordinary income was 22.7billion yen and net income was 14.5 billion yen."
So, on the one hand while Nintendo's figures and statements indicate a return to profit based on the notoriously flaky basis of foreign currency. On the other hand, the sales trend, while still downward, is significantly less steep in decline than previous periods.
Before we go... some essential figures for hardware sales that can be used in future fanboy arguments.
Apr-Dec 2012 vs Lifetime
Nintendo DS
- Hardware - 2.15 vs 153.67
- Software - 30.24 vs 930.55
Nintendo 3DS
- Hardware - 12.71 vs 29.84
- Software - 39.56 vs 84.99
Wii
- Hardware - 3.53 vs 99.38
- Software - 45.08 vs 863.53
Wii U
- Hardware - 3.06 vs 3.06
- Software - 11.69 vs 11.69
Companies:
Nintendo
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