It is now time for us to start the Sony Corporation Consolidated Financial Results Briefing for Fiscal Year 2019. I am acting as the moderator. My name is Kato from the Corporate Communications department. This briefing is being held for the media analysts and institutional investors who have been informed in advance. And the audio and presentation will be posted on our company's website. Today, first of all, we will hear from Hiroki Totoki, who is our CFO and Senior Executive Vice President. He will be explaining the consolidated financial results for fiscal year 2019 and the forecast for fiscal year 2020 using the briefing materials that are posted on our website. And then after that there will be a Q&A period. We expect that it will take about 60 minutes in total. This time, we are going to accept questions any time by e-mail. Those of you who have a question, please send them in according to the method that we have informed you in advance, and it will be up to two questions per person. And our time is limited therefore, it may be that we may not be able to answer all your questions. Now Mr. Totoki, please.

Thank you very much. We are holding this results briefing via webcast in order to prevent the spread of the new coronavirus infection. We apologize for any inconvenience and ask for your understanding. As we continue to conduct business at Sony, we are prioritizing the safety of all our stakeholders, including our employees and their families as well as our customers. Today, I will explain the consolidated results for the fiscal year ended March 31, 2020, and the recent impact of the coronavirus. At the corporate strategy meeting that we will be holding on May 19, our President, Mr. Yoshida, will explain our strategy for managing Sony with a longer-term view. For fiscal year 2019, consolidated sales decreased 5% compared to the previous year to JPY 8,259.9 trillion and operating income decreased JPY 48.8 billion year-on-year to JPY 845.5 billion. Net income attributable to Sony Corporation stockholders decreased JPY 334.1 billion to JPY 582.2 billion. Excluding extraordinary items, operating income would have increased JPY 4.6 billion year-on-year to JPY 814 billion and net income attributable to Sony's shareholders would have decreased JPY 28.2 billion year-on-year to JPY 550.3 billion. The extraordinary items that impacted net income are shown here. The operating cash flow excluding the Financial Services segment for the fiscal '19 was an inflow of JPY 762.9 billion, slightly higher than the previous fiscal year. And investing cash flow excluding the Financial Services was an outflow of JPY 363.1 billion. Cash flow for each business segment is shown on this slide. The free cash flow was positive in all segments. The fiscal '19 results for each business segment are shown on this slide. Now I will discuss the estimated impact of the spread of the disease -- of the virus on the operating income of each segment for fiscal…

Thank you very much. So consolidated finance results -- financial results briefing and the forecast for fiscal year 2020 were explained. Now let us go on to the Q&A session. In the first half, 20 minutes, there will be questions from the media. And in the latter half, 20 minutes, there will be questions from analysts and our institutional investors. Questions can be asked at any time using e-mail. So can we follow the method that has been informed to in advance. And the questions that we have received will be read as submitted.

If the question is in English, then the interpreter will translate into Japanese, and we will reply in Japanese. So now we would like to entertain questions from the media.

We have Mr. Totoki, Senior Executive Vice President, Chief Financial Officer; and Naomi Matsuoka, the Senior Vice President and General Manager, Finance Department, Finance Department and Corporate Planning & Control Department; and Mami Imada, Senior General Manager, Corporate Communications, to answer your questions. The first question was received from [ Mr. Shimizu ] of Nikkei. About novel coronavirus, the Game, Pictures and Music businesses, how do you think the consumer demand will change because of the various impact and creative entertainment on the strength of technology of Sony? You are an entertainment company. How are you going to overcome the difficulties such as delay in productions? The second question is about PlayStation 5. What is your forecast for the demand of PlayStation 5 and actual number of deliveries? Will there be any quantitative impact due to the COVID-19?

Thank you, and this is Mr. Totoki speaking. I will answer two questions. Firstly, the demand on digital entertainment actually has been increasing. That's the behavior of the consumer currently. And I think this trend is likely to continue for some time and also the creative entertainment on the strength of Sony's technology. As far as we're concerned, times being as such, I believe we have to support the entertainment business earlier in April. We created a relief fund amounting to JPY 100 million to fight against the impact of the virus for pictures and music because of the [ sales issue ] with live entertainment or the delay and suspension of the productions, they are affecting the lives of the creators and our partners. And with the creation of this fund, we've decided to help support their well-being going forward. And also about the PlayStation 5, as I mentioned in the speech, the production is proceeding basically according to our schedule. In the meantime, the actual delivery and actual demand, I'd like to refrain from commenting on that as of this time. So that's the extent of what I can say at this particular moment. Thank you.

Next from NHK, [ Inomata-san ]. New coronavirus, what kind of effect would it have on the performance in terms of monetary value? You mentioned the impact so far, but what's the forecast of the impact on this fiscal year as much as you can? Second question, the impact of the coronavirus in order to contain or minimize the effect in order to protect the employees, many companies are changing the way to manage business work lifestyle. And there may be 4-day work week and other new ideas, but does Sony have new ideas initiatives as a new way to -- for work?

Allow me to answer these two questions. First, this -- the impact of the coronavirus are in monetary value to the performance. FY '19, for FY '19, the outbreak of the coronavirus and others, it's difficult to delineate these two. But for the consolidated results, JPY 68 billion negative impact was felt. For this fiscal year, the impact on this fiscal year, it's so difficult to project or forecast any impact. But including that, we came up with the estimate. As I showed you earlier, I would like to take a look at that again. Your second question, the impact of the coronavirus, how to minimize it? Any new measures to minimize the impact? I would like to invite Imada-san to answer.

The measures for the new work style, I do not have any specific measures precisely for that. But we prioritize the safety of the employees. The telework is one way to do that. And the work from home, regardless of where you stay, they can work. And through this measure, new way of work is being promoted. And I'm sure it will proceed. At this moment, pursuant to the government policy, we try to put highest priority to the safety and the health of the employees. Thank you.

Let's go on. From Reuters, Yamazaki-san. We have a question.

First a question about PS5. The impact -- if there is an impact on the supply chain, I'd like to know what it is. Second, about -- not limited to games, after this coronavirus, do you have a plan to review the supply chain? That's the two questions.

First question about PS5, the supply chain, impact on supply chain. Basically, we have work from home and the restrictions on international travel, those are constraints. So some testing process and the qualification of production lines may be constrained. But necessary measures are being taken for this. So towards the end of the year, we believe that we can prepare without problem for the launch. And review of the supply chain, do we have any plans for the review? From before, for the manufacturing sites, there has been consideration of various business risks and we have made study. And so for this expansion of new coronavirus, this is a global issue. And so changing the production sites at this present time is not being considered. Thank you.

Thank you. Let us continue with the next question. Let me read this next question. [ Nishida-san ], a freelancer, asked this question. Firstly about Game, Pictures and Music, the Contents business and also the Electronics business, has there been an impact in terms of the delivery and the supply is delayed due to the COVID-19? And also do you think the impact of COVID is limited? What would the outlook of impact after next year? Second question is about the Game business. Hardware sales, are they according to your plans or will there be impact of the COVID-19? Is it larger or less than last year? And under the current situation, it's even lower than your expectations.

Mr. Totoki speaking. Regarding your first question, in most of our businesses, the impact of COVID-19, what is the delay situation that we are suffering? And also after this year, what will be the outlook? Will there be an impact? Speaking about the Game business, for instance, for the first-party and third-party games in terms of game development, currently, there are no problems that are manifest as of now. But still, development activity is underway with a lot of restrictions. So efficiency may be lower, which means that there's going to be a delay in scheduling. There's a risk as such, and we have to monitor that risk very carefully. About the Contents business, Pictures and Music, they have suspended all shooting activities. And therefore, the contents production in pictures or music, particularly music where the digital contents -- producing them now is very difficult. So that's what we're already observing. And during this year, as I said before, we will continue to feel some impact going forward. As far as the Game business is concerned, hardware sales. As far as the unit sales of hardware is concerned, the PS4, the existing model, the sales are smooth going, I would say. Doing very well, particularly, the year just ended in the fourth quarter of last fiscal year, the results were basically exactly as we'd expected. And more recently, demand is rather very strong, we are informed. Thank you.

Well, the time is running out. So this concludes the Q&A session for media people. In order to change the participants, we will take a break -- short break before we start the sessions for analysts and institutional investors. [Break]

Thank you for your patience. From now for about 20 minutes, we will entertain questions from analysts and institutional investors. The respondents are Hiroki Totoki, Senior Executive Vice President and CFO; we also have Naomi Matsuoka, Senior General Manager of Finance Department and Corporate Planning & Control Department; and we have Hirotoshi Korenaga who is VP, Senior General Manager of Global Accounting Division. Now first question, please. From Morgan Stanley MUFG Securities.

At the time of the Lehman shock, for 6 quarters, more than JPY 100 billion of restructuring expenses was planned. Are you going to take any measures from the first quarter of FY '20 or are you going to wait out until the coronavirus outbreak subsides? Now the risk of EPS going negative and the review of the business portfolio as a possibility, is there any possibility of a positioning change?

Now after Lehman, this time, it's so different from Lehman shock. Number of people and effects to cost now is so different from where it was at the time of the Lehman shock. In any case, under these circumstances, the demand itself has declined than originally expected. So we reviewed the marketing expenses and then the overhead reduction for the indirect costs and cost control, while we will not wait out until the coronavirus subsides to do this in order to secure the level of profitability.

Next question. From Merrill Lynch, Hirakawa-san.

First question, Sony's next-generation game console marketing, compared to Microsoft, software lineup introduction is a bit inferior. Some people say it's lacking. So towards the launch of PS5, do you think that you have a passing grade? And if it is a passing grade, then what is going well? Also the -- towards the launch at the end of the year, going forward, what is the theme for your advertising activity? Second question, for Pictures, Media Networks, the portfolio review expense will be the same as previous fiscal year. That is for fiscal year '20.

Yes, so PS5 right now, we have to think strategically right now. Therefore, unfortunately, I cannot really make a comment. Is it a passing grade or not? Well, on that point, I think results will be everything. So after the launch, it will become clear. And so we are going to do our utmost -- make our utmost effort. Now about Pictures and Media Networks, the portfolio review expense on a continuous basis, this is going to be studied. At the present time, we haven't made major decisions.

Thank you. Next question. Mr. Nakane at Mizuho Securities asks this question. Firstly, the sales and the operating income forecast for March '21 year, I think you've agreed to the budget as of end of February. At that time, what was your forecast by different businesses segment? And also the second question is post-corona or to be with corona in Game and Music and Pictures, what do you think will be the business environment? Will there be a structural change in the business environment? And with that effect, how will that affect the profitability of Sony and other peer companies? What will be the strategy of Sony to deal with such a change?

Thank you, Mr. Totoki speaking. So year ending March 21st, what would be our forecast on sales was the first question. And we created a budget in February and what was viewed at that time, I think, was the question. And currently, everything has changed. Assumptions have changed. So discussing what might have been the situation without impact of the virus would be -- discussing that will be very difficult, but impossible. But as far as we're concerned, this year -- based on the results for this year, we will make efforts to go one step further in the year after that and that's always a practice in creating the budget based on the results of the current year trying to do better. And also about the change in the business environment, how is a business environment going to change? I think people are discussing a lot of things. But at least, people will stay home, spend more time or less spending this time outdoors, and a lot of activities are done in the remote network basis. So that will be for part of the change. And so as we're concerned, we have a lot of businesses related to networking and remote operations. With PlayStation Network, for instance, it's a large online community, so I'd like to step this business up. And there's a possibility and I think there's room for the growth of this particular business. And the use of 5G, for instance, production of video content, for instance, instead of [ physical ] contents, it can be done online. And also in medical business field, we have real-time technologies, but there's a lot of fields where our technologies will be useful. So those areas and opportunities that we'll be focusing going forward. And speaking of pictures, theatrical release is always very important. And because of the coronavirus negative impact, we are currently suffering. But once the situation settles and if we restart the theatrical operations, the people may not come to theaters to view pictures. So it may take some time. If that happens, then we have to discuss with the business concerns to create a new way of releasing Sony Pictures. And also we can use online and remote technologies for the live performances going forward. Thank you.

Next question. From JPMorgan, Mr. Ayada.

First question. For I&SS, about the inventory of supply chain. For smartphones, depending on the customers, some models do not sell well. But depending on the future trend, the evaluation loss, which happened in the past of PS inventory, are you thinking about that? And then the image sensors price trend, larger size, multisensor trend, what is your opinion or view on this trend?

Allow me to answer for the inventory. In December last year, the end of December last year, the inventory was in tight situation in the fourth quarter. Because of the outbreak of the coronavirus, sales decreased. And then compared to that, inventory size increased as of the end of March. The inventory level is approaching the appropriate level. In the FY '20, this inventory will be shipped out. So we are not planning any evaluation loss. That's the first point. At this point in time, on the business negotiation level, from -- as a bird's eye view, the impact of the outbreak of the coronavirus are threefold. One, smartphone markets deceleration and the negative impact on the sales -- unit sales. And in the supply chain, the inventory is increasing over -- across the supply chain. The sales volume itself compared to the FY '19, if it increases, the increase percentage -- the speed of the increase will be slower than FY '19. Basically, the market itself is decelerating. From the high-end smartphones to mid to low, there's a shift from high end to mid to low. That can be triggered because of the decelerating market. And then the image sensors product mix may deteriorate compared to FY '19. In FY '19, the larger-sized demand increased sharply. This speed may slow down. This is a big possibility. For more details, 0.58 microns product, we are in the second year of producing it. So the mass production started 2 years ago, and the market will proceed accordingly.

Going on to the next question, SMBC Nikko Securities, Katsura-san.

First question, semiconductor inventory and the utilization and production capacity, this kind of results and your forecast plan, if you could let me know. Second question, cash position, present status and under the present environment, what is your stance on the view of allocation?

Yes, image sensor capacity on an installed basis, if I can answer in that way, fourth quarter of FY '19, in the master process, 123,000 per month. And 124,000 was the previous assumption. So it's a bit of a drop. But with the process mix there is some fluctuation and it's not that the installation is delayed. And for fiscal '20, at the end of first quarter, 133,000 per month. So over 3 months, capacity will go up gradually. And in the fourth quarter of last year, 3-month simple average, 122,000 full operation. And the first quarter of fiscal year '20, 3-month average, 127,000. So for mobile and for digital, there is slight production adjustment for the digital camera. I would say that's about it. And if I may talk a little more, at the end of fiscal '20, master process output will be 138,000. It is going to be -- -- the output will be increased. And basically, there is no change to that plan. And for the cash position and allocation that you asked about, first of all, for fiscal '20 as of the end of the previous year, March, it is JPY 962.3 million. And the commitment line, JPY 570 billion, and this commitment line of JPY 570 billion is not used. And in addition to that, commercial paper facility, JPY 1 trillion, and bank uncommitted line is JPY 230 billion. So we haven't used any of this. And therefore, if you have that kind of allowance, even if the environment of the economy worsens, we believe that we can continue to be liquid. As for allocation stance, naturally as we have been saying from before, strategic investment, M&A and stock repurchase. Well, we are going to have an optimal utilization and our stance has not changed as for convertible bonds. Right now, we are not thinking so proactively. Thank you.

Thank you. We'll proceed to the next question. Nishimura-san from Crédit Suisse.

Firstly, I ask this question. For fiscal '20, operating income estimates, the impact of the virus on each of the segments and also other impacts, can you separate the various impacts? So a direction in terms of increase or decrease in fixed costs, can you also refer to that as well? Second question would be about image sensors. They're getting larger so that unit price is increasing. And also because of multilenses, volume is increasing, that has been the trend. Will there be a change in that trend? Not so decline in end result and demand of smartphones will be changed in your plans to increase your production capacity?

Firstly, our estimates for the operating income for the fiscal '20, the coronavirus impact and other type of impact, we have not estimated those separating the two. And whatever I would say is -- but for the impact of corona, not separating the two, corona versus noncorona, so allow me now to make a reference to that. But when time comes for us to announce the results of the first quarter, we will be able to give you more solid pictures. So please bear with that. About the image sensors production, the future direction was your question. Logically speaking, our midterm direction is not likely to change going forward, logically speaking. But having said that, looking at the demand for smartphones currently, yes, there's an impact of the virus so that smartphone demand is somewhat lower now. That's a matter of fact. So as I've been explaining, the impact will be felt from the declining demand and also the negative impact due to product mix changes. For fiscal '20, yes, these are situations that we have to serve very carefully. And with that, we will be impacted that on our schedule, we plan to increase our production capacity. Well, as I said in the speech, for 3 years now, 80% of the investment plan has been decided already. The remaining 20-or-so percent, we have the option of deferring the remaining investments. So we'll look at the current demand and we'll make investments at appropriate timing. Thank you.

Now it is time to close the briefing session. Thank you very much for your attendance. [Statements in English on this transcript were spoken by an interpreter present on the live call.]