Sony Group(SONY) - 2023 Q4 - Annual Report

Financial Performance - Sony's total consolidated sales to external customers increased from ¥9,921,513 million in fiscal year 2022 to ¥11,539,837 million in fiscal year 2023, representing a growth of approximately 16.3%[165]. - Sales in the United States rose significantly from ¥2,766,021 million in 2022 to ¥3,401,402 million in 2023, marking an increase of about 22.9%[165]. - Sales in Europe also saw growth, increasing from ¥1,870,091 million in 2022 to ¥2,190,311 million in 2023, which is an increase of approximately 17.1%[165]. - The Asia-Pacific region experienced a notable increase in sales from ¥1,149,261 million in 2022 to ¥1,563,414 million in 2023, reflecting a growth of around 36.0%[165]. - For the fiscal year ended March 31, 2023, Sony's sales increased by ¥1,618.3 billion year-on-year to ¥11,539.8 billion, driven by significant growth in the G&NS, I&SS, Music, and Pictures segments[248][249]. - Operating income for the fiscal year ended March 31, 2023, was ¥1,208.2 billion, a slight increase from ¥1,202.3 billion in the previous year[248]. - Net income attributable to Sony Group Corporation's stockholders rose to ¥937.1 billion for the fiscal year ended March 31, 2023, compared to ¥882.2 billion in the prior year[248]. - Cost of sales increased by ¥1,328.9 billion year-on-year to ¥7,174.7 billion, with the ratio of cost of sales to sales deteriorating from 69.6% to 71.1%[251]. - R&D costs rose to ¥735.7 billion, representing 7.3% of sales, a slight decrease from 7.4% in the previous fiscal year[252]. - Selling, general and administrative (SGA) expenses increased by ¥380.7 billion year-on-year to ¥1,969.2 billion, with the ratio of SGA expenses to sales worsening from 18.9% to 19.5%[252]. Capital Expenditures and Investments - In the fiscal year ended March 31, 2023, Sony's capital expenditures were 809.6 billion yen, an increase from 697.2 billion yen in the previous fiscal year[120]. - Sony invested approximately 381.1 billion yen in the Imaging & Sensing Solutions segment, including 355.9 billion yen to increase image sensor production capacity[121]. - Sony's stake in the joint venture Sony Honda Mobility is 50%, established in September 2022[117]. - In July 2022, Sony Interactive Entertainment acquired Bungie, an independent video game developer[117]. - Sony plans to enhance its business structure focusing on profitability and growth, aiming to create new business models and expand into new markets[281]. - The company intends to invest in virtual production and software solutions to enable new creative expressions and enhance its entertainment offerings[282]. Business Segments - Sony Interactive Entertainment LLC is responsible for the development and marketing of PlayStation hardware, software, and network services[124]. - Sony Music Entertainment (SME) focuses on the development, production, and distribution of recorded music globally, excluding Japan[126]. - Sony Pictures Entertainment (SPE) includes production and distribution of live-action and animated motion pictures, with various production organizations under its umbrella[129]. - Sony's Media Networks segment operates television networks and direct-to-consumer streaming services, including Crunchyroll and SonyLIV[132]. - The Entertainment, Technology & Services (ET&S) segment was renamed from Electronics Products & Solutions effective April 2022, without reclassification of businesses[122]. Financial Services - Sony's financial services include life and non-life insurance operations through its Japanese subsidiaries[123]. - Sony's financial services segment includes life insurance, non-life insurance, and banking operations, contributing to its diversified revenue streams[137][161][162]. - Sony Life employed 5,402 Lifeplanner® sales specialists as of March 31, 2023, indicating a strong sales force for its life insurance products[159]. - Sony Assurance's direct marketing model has enabled it to lower costs and offer competitively priced premiums, enhancing its market position in Japan[161]. - Sony Bank focuses on asset management and borrowing needs, providing a range of products including yen and foreign currency deposits, investment trusts, and mortgages[162]. - Sony's Financial Services segment maintains a high solvency margin ratio, exceeding Japanese domestic minimum requirements[180]. - Sony Bank has sustained a sufficient capital adequacy ratio in line with Japanese domestic criteria, ensuring financial stability[180]. - The company faces significant competition in Japan's retail financial services market, including traditional banks and online financial institutions[179]. - Sony's insurance businesses are subject to the Insurance Business Act, which mandates maintaining specified reserves and a minimum solvency margin ratio[183]. Sustainability Initiatives - The Sustainability Department promotes initiatives across Sony's business units, focusing on sustainability KPIs that are integrated into performance evaluations[198]. - For the fiscal year ended March 31, 2023, Sony's sustainability KPIs included reducing virgin oil-based plastic use and implementing renewable energy at manufacturing facilities[200]. - Sony identified "Climate Change," "DE&I," "Respect for Human Rights," and "Technology for Sustainability" as priority topics for sustainability initiatives[204]. - The company acknowledges the critical issue of climate change and aims to reduce its environmental impact while leveraging its diverse technologies[207]. - Sony aims to achieve net-zero emissions across all scopes by 2040, with a target to reduce Scope 1 and 2 GHG emissions to net-zero by 2030 and Scope 3 emissions by 45% compared to FY 2019 by 2035[213]. - By 2030, Sony plans to use 100% renewable electricity at its business sites, with a target of 35% renewable energy usage by 2025[213]. - Sony's net-zero target for 2040 was approved by the Science Based Targets initiative (SBTi) in August 2022, reflecting its commitment to climate action[209]. - The company is exploring investments in start-ups focused on carbon removal and developing indices that integrate biodiversity and carbon fixation[213]. Employee Diversity and Inclusion - The ratio of employees with prior experience at other companies in Japan was 52.5% for the fiscal year ended March 31, 2023, indicating a strong focus on diverse talent acquisition[228]. - As of March 31, 2023, the ratio of women to men in the workforce at Sony Group was 34.0%, with 30.0% in management positions, highlighting ongoing efforts to improve gender diversity[230]. - Sony has committed to creating inclusive work environments, signing the Valuable 500 initiative focused on the inclusion of people with disabilities[236]. - The company has implemented various programs to foster employee diversity and inclusivity, aligning with its sustainable growth strategy[237]. - Sony's diverse businesses are supported by approximately 110,000 employees worldwide, emphasizing the importance of employee diversity for creative innovation[220]. Research and Development - Sony's imaging and sensing solutions segment primarily develops CMOS image sensors, which are widely used in smartphones and other applications[136]. - The company has established a strong competitive position through innovative product introductions and a focus on high-quality user experiences across its product lines[173]. - Sony's R&D includes the development of environmentally conscious materials and technologies aimed at reducing power consumption in products[216]. - Sony's initiatives for improving accessibility include employing inclusive design and participating in events like the CSUN Assistive Technology Conference[217]. - The company has established the Sony Group AI Ethics Committee to strengthen its framework for AI ethics and ensure responsible AI development[218].