SEGA Sammy Holdings Q3 report: Group posts healthy profit

Hello and welcome one and all! As many, or perhaps some, or maybe even very little know, the SEGA Sammy Holdings released their financial statement for 9 months ended December 31^st 2009 and for once in quite sometime managed to get themselves out of the red and back into the black. So let’s find out how they did, shall we?

Of course being a Japanese company has some perks, actually I do not know what those perks were, but SEGA definitely did not enjoy any. Citing a slow economy affecting several businesses (Ironically the Pachislot and Pachinko was not one of them) as well as a rather rapid appreciation of the yen, affecting how less revenue’s they could get from American sales in particular. Anyone who imports goods from Japan would know the dollar currently is severely weak at the moment, which unfortunately affects quite a large amount of revenue SEGA can generate from the American dollar. Now let us get down to how each division broke down their profits/losses.

 Amusement Machine Sales

Whilst sales of their major titles, in particular the new hot arcade game Border Break was quite strong with sales of 2,988 units, the group believed that the market was still waiting for a game that could lead the market by making a title for both families and casual players. Going back to Border Break, followers of SEGA news would know recently SEGA has started a new scheme that allows for amusement centre owners to pay for less for an arcade title so long as SEGA gets a cut of the share and in relations to Border Break, this seems to be quite popular. Other big sellers for SEGA include another AM2 developed game, Shining Force Cross which managed a decent number at 2,389 units and being a reskin of an older game The Quest for D, I imagine it’s been quite profitable for them. SEGA’s biggest seller though was a medal collecting game, being all the range now in Japan, Star Horse 2: The Fifth Expansion, totaling to sales of 10,657 and continues to prove to be a valuable amusement title for SEGA.

Despite some good sellers for SEGA, less major products being released meant that from the previous year, SEGA made less money and thus profit. Despite this, the net sales posted was still $393 million (Of that, just around $50 million was overseas sales!) and operating income was at $52 million.

Consumer Business (Video Games, toys and animation)

SEGA managed to shift quite a few units to retailers of the sequel to Mario & Sonic at the Winter Olympic Games, 5.67 million to be precise, putting it well on it’s way to perhaps matching the original’s impressive sales figure. The other big seller and I am sure would make quite a few people happy, is Bayonetta which managed to get 1.1 million units sold, keep in mind this is global sales and not just Japan. I am sure it’s quite impressive but one must keep in mind this is shipped numbers and not sold to the consumers. Hopefully Bayonetta can prove to be a hit and this number continue to rise. Football Manager 2010 was another big seller for SEGA at 740,000 units, now those who know of the series know it resides in charts for quite sometime, especially the British one, so expect that number to continue to rise and surpass a million. Phantasy Star Portable 2 was the last game SEGA disclosed numbers for at 540,000 units. Not entirely sure how SEGA would feel about that one, there was some noise it would become a million seller in Japan alone but I’m sure that is well and truly squashed now.

And it seems now more than likely, that Europe will continue for a third year straight, being SEGA’s strongest region. SEGA managed to ship 8.16 million units over there, whilst America came up with 6.09 million. Japan came last, with sales of 2.47 million, a rather small number although with Valkyria Chronicles 2, Yakuza 4 and End of Eternity all coming out in the next quarter, that number ought to rise, as should all regions especially in no doubt with the release of Sonic and SEGA Allstars Racing.

In SEGA Toy’s side of things, Bakugan enjoyed strong sales overseas whilst generally domestic sales were rather weak. Bakugan is unfortunately a title SEGA decided not to publish in Western territories, with Activision picking up the rights, which is a downright shame considering how popular it seems to be not only as a toy but as a video game too, no doubt SEGA would be kicking themselves over this one. The group confirmed they enjoyed rather brisk sales of downloadable games on PC mainly. Finally, SEGA’s animated film business, namely TMS (Lupin films and did Sonic X) despite sales declining, they still remained strong in particular Bakugan for the overseas market (Kids actually watch this stuff?)

Now the rather worrying part, net sales declined to $931 million but that is quite not the worry, the rather strange thing to consider is despite having two games selling over a million (In particular one that sold over 5 million) the consumer division on managed to post a rather minute operating income of $15.86 million. With income like that you’ve got to be wondering where SEGA’s consumer division is burning their money, yes they do have quite a few games planned for Q4 (Yakuza 3 and 4, Sonic and SEGA Allstars Racing, AvP, Super Monkey Ball: Step and Roll, End of Eternity, Napoleon and Valkyria Chronicles 2) but quite how they can only post that much with such a big seller is quite a surprise. Hopefully though with the sellers they have coming up in the next quarter, sales and profit will increase, as SEGA is predicting to sell close to 30 million units to retailers, almost double of what they’ve sold so far!

Pachislot and Pachinko Machines

It’s been quite a good year for Sammy’s side of the business, slowly grabbing back some of the rather large market share they once had, they’ve also returned to profitability. One of Sammy’s biggest sellers was a licensed Pachislot machine based on Eureka Seven which they managed to shift out a cool 49,000 units throughout Japan. The other big Pachislot machine that sold rather well was Urusei Yatsura with a respectable sale of 16,000 units. So far from April 1^st to December 31^st 2009, Sammy has managed to sell 79,243 units, although they plan a rather ambitious 180,000 units sold for the year ending 2010, double the units they have sold, quite the task to achieve.

But that wasn’t all as Sammy managed to do well in Pachinko Machine sales too, in particular their biggest seller, Soten no Ken, got 94,000 unit sales, another firm driver of sales for them was Sengoku Ranbu Aoki Dokugan, totally at 53,000 units sold. In total, Sammy managed to sell 329,850, an increase of over 90,000 in sales compared to the same period last year and they aim to sell 450,000 units for the year ending 2010. With predicted continued strong sales of Pachinko machines, a reasonable expectation one would say.

The division also emerged, for another year running, as the group’s biggest earner, with net sales totaling ¥125,864 million or $1.41 billion and posted a hefty operating income of ¥26,950 million or $301 million. No doubt at current moment, the Pachislot and Pachinko Machine side of the business is doing extremely well for the group.

Amusement Centre Operations

It wasn’t good news on all fonts though and unfortunately SEGA’s Amusement Centres continue to suffer due to the economic trouble in Japan. SEGA have thus closed 22 of them so far, with closure of another 25 planned by the year ending 2010, with only 3 more opening in response. This will bring the total number of Japan based arcades for SEGA to 274. It was bad news overseas as well, with SEGA planning to 2 outside of Japan, brining their overseas owned Amusement Centres to just 20 in total.

Net sales for the division also saw decline going to ¥41,458 million or $464 million and posted an operating loss of ¥644 million or $7.2 million. It could be worse though, SEGA posted even bigger losses from this division last year, which amounted to ¥4,970 million or $55 million, so the plan to close less profitable arcades seems to be working, although obviously further work and a recovery in the Japanese economy is needed if this division is to post profits for the year ending for 2011, as SEGA sees this division with ¥1,000 million or $11 million loss by the end of this fiscal year.

Overall Group Performance

The group had a decline in net sales to ¥285,336 million or $3.1 billion, mainly due to less titles being sold in several division (In particular, the arcade and consumer division had less titles developed for the market) the group saw a rather nice operating income of ¥28,863 million or $323 million, compared to a loss upto this point of Q3 2008 which saw loss of around $30 million, a good step forward. Altogether the group posted a rather healthy net income of ¥16,945 million or $189 million. Good times to see the group back in the black, let’s hope they stay there.

By the end of the year, the SEGA Sammy group hope to produce net sales of ¥420 billion or $4.7 billion, with the Pachinko/Pachislot business being the group’s largest revenue generator at ¥186 billion or $2.08 billion, with consumer business being second at ¥136 billion or $1.5 billion. The rest of total sales is taken amongst amusement centres and amusement machines.

And that about almost wraps it up for this report, I hope you enjoyed reading it and have a better understanding at how the SEGA Sammy group has been doing. If interested, click on the following links to read more about the group’s performance.

Sources:
http://www.segasammy.co.jp/english/pdf/release/201003_3qhosoku_e_final.pdf
http://www.segasammy.co.jp/english/pdf/release/201003_3qhosoku_e_final.pdf

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