Weak yen helps Nintendo lift annual net profit forecast

Weak yen helps Nintendo lift annual net profit forecast

on November 8, 2022

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by Natsuko FUKUE
Agence France Presse

Tokyo, Japan (AFP) — Nintendo raised its full-year net profit forecast on Tuesday, with the weak yen and a solid performance by new games helping compensate for falling sales of its Switch console.

This picture taken on November 7, 2022 shows people visiting a store of game giant Nintendo in Tokyo. – Nintendo were expected to announce their second quarter results later in the day on November 8. (Photo by Yuichi YAMAZAKI / AFP)

The Kyoto-based Japanese gaming giant estimated net profit for the year to March 2023 at 400 billion yen ($2.7 billion), up from a previous projection of 340 billion yen.

Net profit for the half-year from April to September was also up 34.1 percent to 230 billion yen, the firm said.

“For software, sales for titles such as Splatoon 3 and Nintendo Switch Sports that were released during this fiscal year have continued to grow steadily,” it said.

“Titles released in previous fiscal years as well as titles from other software publishers have also performed well.”

Nintendo also saw a significant boost to its bottom line from foreign exchange gains driven by the depreciation of the yen, which has tumbled against the dollar this year to lows not seen since the 1990s.

In early October, it dropped beyond 151 to the greenback for the first time in 32 years, as Japan’s central bank sticks to its ultra-loose monetary policy while the Federal Reserve hikes rates to tackle inflation.

In 2020-21, Nintendo’s profits soared to an annual record of 480 billion yen due to soaring demand for indoor entertainment during pandemic lockdowns.

The firm nearly matched that figure in the last financial year, with its blockbuster Switch console continuing to perform well and software sales staying strong.

But sales of the Switch have been slowing, and Nintendo said it now expects to sell 19 million units this fiscal year, two million units less than previously expected.

– Joint venture with DeNA –

Nintendo sold 6.68 million units of the various types of Switch consoles it offers in the first half of the fiscal year, down over 19 percent from a year earlier.

The slowing sales were due to a range of factors, including an ongoing global chip shortage, the firm said.

The revised forecast for Switch sales had been expected by some analysts, with Hideki Yasuda, senior analyst at Toyo Securities, telling AFP before the earnings estimate that Nintendo would “have a tough time” reaching its previous goal of 21 million unit sales.

But he said profits were expected to jump on the yen and the strong performance particularly by Splatoon 3, which had the fastest sales in the first three days of its release in Japan of any Switch title.

“A new Pokemon title will be launched in November and the company is seeing strong pre-orders in Japan,” Yasuda added.

The firm left its full-year operating profit forecast unchanged at 500 billion yen. Its sales forecast was revised up to 1.65 trillion yen from 1.60 trillion yen.

Nintendo on Tuesday also announced a joint venture with Tokyo-based mobile gaming company DeNA intended to “strengthen the digitalisation of Nintendo’s business”.

In a statement, Nintendo said the joint venture would research, develop and create “value-added services”, without giving further details.

The two firms announced an initial partnership in 2015 to develop games for smartphones.

Nintendo also bought a stake in DeNA as part of a deal to develop smartphone games based on its host of popular characters, possibly including Super Mario and Donkey Kong.

Nintendo said Tuesday’s joint venture announcement would have no effect on the company’s results for the current fiscal year.

The Switch manufacturer will hold 80 percent of the joint venture, to be called Nintendo Systems.