SoftBank Group Corp posts USD6.5bn quarterly operating loss on WeWork, Vision Fund write-downs

7 Nov 2019

Japan-based multinational conglomerate holding company SoftBank Group Corp booked an operating loss of JPY704.368 billion (USD6.5 billion) for its fiscal second quarter to 30 September 2019, reversing a profit of JPY705.723 billion in the year-ago quarter, as it was slammed by a JPY497 billion investment write-down in failing start-up WeWork and a near JPY970 billion loss for its flagship Vision Fund. In a setback for Masayoshi Son’s ambitions to launch a second Vision Fund, the CEO and chairman apologised for SoftBank Group Corp’s poor performance: ‘There was a problem with my own judgement, that’s something I have to reflect on,’ he told investors, according to press reports. Nevertheless, Son remained bullish that WeWork was still a solid business, suggesting there would be a ‘hockey stick’ recovery in its profits at some point.

In the July-September 2019 quarter, SoftBank reported net sales of JPY2.315 trillion, compared to JPY2.381 trillion in Q2 FY2018, as operating income declined to JPY265.901 billion from JPY313.233 billion. Earnings before income tax, meanwhile, fell to a loss of JPY565.447 billion, from a profit of JPY829.785 billion and net income (attributable to shareholders of the parent) also plunged into the red, to JPY700.167 billion from a profit of JPY526.416 billion previously.

The Group did not release a forecast for the current business year, saying there were too many ‘uncertain factors’ but the results will cast even more scrutiny on SoftBank’s sizeable debt pile. Son’s holding company currently has more than USD51 billion in outstanding bonds, and a further USD36 billion in bank loans, with Refinitiv noting its weighted average cost of debt is 3.7%, the seventh-highest among all companies on the Nikkei 225 Stock Average. In addition, both Moody’s and S&P rate its debt as ‘junk’.

Japan, SoftBank Group Corp