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Sony (NYSE:SNE)

Q4 2014 Earnings Call

May 14, 2014 9:00 am ET

Executives

Casey Keister -

Kenichiro Yoshida - Chief Financial Officer, Corporate Executive Officer and Executive Vice President

Steven E. Kober - Chief Financial Officer and Executive Vice President

Kazuhiko Takeda -

Analysts

Richard Kramer - Arete Research Services LLP

Daniel Ernst - Hudson Square Research, Inc.

Kota Ezawa - Citigroup Inc, Research Division

Operator

Good morning, and welcome to the Sony Corporation Conference Call for overseas investors for the fiscal year ended March 31, 2014. My name is John, I will be your operator for today's call. [Operator Instructions] Please note that this conference is being recorded. And I will now turn the call over to your host, Casey Keister. You may begin, Casey.

Casey Keister

Thank you very much for that introduction, John, and thank you, all, for joining us today, May 14, 2014, for a discussion of Sony's results for the fiscal year ended March 31, 2014. We hope you all enjoyed Pharrell Williams new hit album, Girl, while you were on hold.

I'm Casey Keister in the Investor Relations department here in Tokyo. And with me on the conference call tonight is Kenichiro Yoshida, CFO of Sony Corporation; Hiroko Totoki, Senior Vice President; Kazuhiko Takeda, Vice President and Senior General Manager of Sony's Corporate Control Department; and Steven Kober, Executive Vice President and Chief Financial Officer of Sony Corporation of America. Thank you, all, very much for joining us.

In just a few moments, we will review today's announcement, and then we'll be available to answer questions.

Please be aware that statements made during the following remarks and Q&A session with respect to Sony's current plans, estimates, strategies, press release and other statements that are not historical facts are forward-looking statements about the future performance of Sony. These statements are based on management's assumptions in light of the information currently available to it, and therefore, you should not place undue reliance on them.

Sony cautions you that a number of important factors could cause actual results to differ materially from those discussed in the forward-looking statements. For additional information as to risks and uncertainties, as well as other factors that could cause actual results to differ, please refer to today's press release, which can be accessed by visiting www.sony.net/ir. Let me remind you that a webcast replay of the investor meeting held earlier today, along with the slides presented at that meeting and our detailed earnings release are available on our website for your access.

With that, I'm now going to turn the mic over to our CFO, Kenichiro Yoshida, to further explain the announcements made earlier today.

Kenichiro Yoshida

Thank you, Casey, and thank all of you for taking time to listen today and for showing interest in Sony. I know many of you have supported Sony for a long time either as shareholders or not. And I humbly appreciate your ownership and your concern for our future.

Some of you may know that I spent close to 9 years as President of So-net Corporation, an internet service provider in Japan which was majority owned by Sony. In December of last year, I came back to Sony Corporation where I started my career to become Chief Strategy Officer, and as of April of this year, assumed the role of CFO. I look forward to speaking with you on these calls every quarter and in other meetings going forward.

As I mentioned today at our earnings announcement in Tokyo, I deeply regret to have to report that we recorded a net loss of approximately JPY 130 billion in fiscal year '13, and that we expect to record a net loss of JPY 50 billion in fiscal year '14. This means that we would not achieve the financial targets for fiscal year '14 that we announced at our last corporate strategy meeting.

I want to emphasize, however, that both the loss in fiscal year '13 and the loss we project for fiscal year '14 are due to our aggressive efforts to restructure Sony and to position us for future bottom line growth. The total amount of cost we will incur over fiscal year '13 and fiscal year '14 to exit the PC business and implement a strategic management initiative is approximately JPY 300 billion.

Our decision to exit the PC business was not an easy one. It was also costly one. We recorded almost JPY 92 billion in total losses associated with the business in fiscal year '13. In fiscal year '14, we expect losses from this business to be approximately JPY 80 billion. But we feel that withdrawal from the PC business is an essential step in the transformation of Sony.

Fundamentally altering the cost structure of our sales companies and headquarters is another important step in our transformation. The data is clear. The sales of our legacy electronics businesses have come down by almost half from their peak in fiscal year '07. The majority of our headquarters and sales companies costs are related to these legacy businesses and we must alter our cost structure to adapt to this new operating environment. We are targeting a 20% reduction in fixed costs at our sales companies by fiscal year '15 from the approximately JPY 290 billion in fiscal year '13. And we are targeting a 30% reduction of fixed costs at headquarters by fiscal year '15 from the approximately JPY 145 in fiscal year '13. One of the reasons why we recorded a net loss in fiscal year '13 was because we recorded impairments of assets in business such as battery and disk manufacturing. We undertook these impairments, not only because we want to ensure that our balance sheet properly reflects the value of our assets, but also because we want to increase flexibility regarding these businesses going forward.

You have probably noticed that we have increased our disclosure from the fiscal year end, providing a forecast for each of our business segments and outlining our long lead assets and goodwill by segment. By doing so, we hope to increase transparency, enhance accountability, and augment our credibility with investors. I believe -- we believe in the simple principle that as these metrics improve, our company's performance will also improve.

Fiscal '14 will be yet another year of restructuring for Sony, but I believe it will be the last and that we can turn toward a bright future in fiscal year '15. Thank you for your kind attention. I would now pass it back to Casey.

Casey Keister

Thank you, Yoshida san. Before we turn to questions, I would like to briefly touch on our results and forecast. First, I would like to summarize the consolidated results for Sony in fiscal year '13.

Consolidated sales for the year increased 14% year-on-year. The launch of the PS4 and higher sales of smartphones contributed to this increase, but the primary reason for this increase was the depreciation of the yen. Operating income was JPY 26.5 billion, down approximately JPY 200 billion year-on-year. The primary reasons for the significant decrease in operating income was a recording in the previous fiscal year of nearly JPY 240 billion in assets sales remeasurement gains, a JPY 38.6 billion loss in fiscal year '12 related to the PC business, including restructuring charges, compared to a JPY 91.7 billion loss in the same areas in fiscal year '13; and a recording in fiscal year '13 of JPY 32.1 billion in impairment charges related to the battery business, and JPY 25.6 billion related to disk manufacturing business. Net loss was JPY 128.4 billion, due to the impact of income taxes and net income attributable to noncontrolling interests. I encourage you to reference today's earnings release for a discussion of the actual results of each of our business segment. Now I will touch on the forecast for FY '14.

We expect a slight increase in consolidated sales to JPY 7,800,000,000,000. We also expect operating income and income before income taxes to increase to JPY 140 billion and JPY 130 billion, respectively. However, due to the relatively low level of profitability, we expect to record a net loss of JPY 50 billion, as Yoshida san mentioned.

In keeping with our theme of enhanced transparency, from this earnings announcement, we have begun to disclose the sales and operating income forecast for each of our business segments. We have also made some slight revisions to our reported segments, which are described in the release. In order for you to be able to compare our fiscal year '14 forecast to our previous results, we have restated the results of fiscal '12 and fiscal '13 based on our new segments.

Each of our segments forecast is based on Sony's internal budget and has been disclosed without any top line adjustments. Costs related to Sony's exit from the PC business and other strategic initiatives in FY '13, which Yoshida san mentioned, amounted to JPY 177.4 billion. In fiscal '14, we expect such costs to amount to approximately JPY 135 billion, and it will be primarily included in all other, corporate and elimination. In conclusion, let me touch on some key points regarding the forecast for each of our segments.

In the Mobile Communications segment, which is now made up predominantly of our smartphone business, we plan on expanding our geographical and carrier footprints in fiscal '14. Profits are expected to grow but not significantly, due to an increasing developing and marketing cost resulting from an expansion in our product portfolio. We view the smartphone business as a B2B business, with the telecom carriers as our customers, and therefore, we are working hard to enhance our relationships with them. We also focused on managing operational risks.

In the Game & Network Services business, the PS4 has gotten off to a strong start, and we expect the loss we incurred in the fiscal '13 to change to a profit in fiscal '14. We view one of the short-term challenges of this business to be the management of the infrastructure cost of our Network Services system.

The Imaging Products & Solutions segment is also projected to see an increase in profit in fiscal '14 as we focus more on high value-added products in the face of a shrinking market.

In the Home Entertainment & Sound segment, the profitability of the TV business is expected to improve, pulling the segment from a loss in fiscal '13, to an expected profit in fiscal '14.

We made progress on our initiatives to reduce fixed cost in the TV business in fiscal '13, but we did not reduce sales company costs fast enough, and the economic and foreign exchange rate conditions in emerging markets hurt performance. We will move the TV business into a new subsidiary in July so as optimize cost and strengthen our ability to adapt swiftly to changes in the market.

In the Devices segment, we expect to generate a profit in fiscal '14, compared to a loss in fiscal '13. Included in the loss from the Devices segment in fiscal '13 is JPY 32.1 billion in impairment charges related to the battery business. We believe that this impairment and other efforts have put us back on a path to rebuilding this business.

In the Pictures segment, sales are expected to increase primarily due to increased sales in Media Networks, while operating income is expected to increase primarily due to a stronger Motion Pictures film slate and from increased Media Networks sales. Sales for the Music segment are expected to be essentially flat year-on-year, and operating income is expected to slightly decrease, primarily due to an increase in restructuring charges, as well as the negative impact from the contraction of the recorded music market in Japan.

In the Financial Services segment, financial services revenue is expected to be essentially flat and operating income is expected to decrease year-on-year. However, if the favorable impact of market performance on the operating results for fiscal '13 is excluded, Financial Services revenue and operating income are expected to increase in fiscal '14 due to the continued steady expansion of the financial services business.

That concludes our review. And now, we'd like to turn it over to you and answer any questions which you might have. John, would you please queue up the questions?

Question-and-Answer Session

Operator

[Operator Instructions] And our first question comes from Richard Kramer from Arete Research.

Richard Kramer - Arete Research Services LLP

I've got 2 related questions on Mobile, to start with. On the last call, Kazuo Hirai said he would double down in the U.S. and China on sales. But it doesn't seem that any U.S. carrier has adopted the Z2. So can you go through what drives the acceleration to a higher sort of 28% unit growth implied in your guidance? And what does placing the Mobile business in a separate subsidiary or splitting it out as a separate stock company say about the goal of One Sony in integrating Mobile more closely with other Sony operations? And then I'll add a next question after that.

Casey Keister

One moment, please.

Kenichiro Yoshida

Okay, thank you very much for the question. As for the U.S., we are currently providing our mobile phone to the T-Mobile. And as you know, relatively, T-Mobile market share is small. And currently, we are talking with other telecom carriers in United States. Also, in China and also in Brazil, this year is a challenge year to expand our business domain. And as for the entity, because the nature of the business of our Mobile business is quite different from other audiovisual companies. So far, we have no intention to integrate the mobile company into our Sony Corporation headquarters. Thank you.

Richard Kramer - Arete Research Services LLP

Okay. And my next question, and maybe you'll be discussing this more next week. But if I look at your guidance as a whole for the various electronics businesses, even excluding TVs, you're still looking at your guidance is for roughly JPY 100 billion or so of profits on about JPY 4.7 billion -- trillion of sales. Should we just imagine that the 5% margin guidance for electronics is now something we should put in the past? And if so, how should we think about your statement about having no further restructuring? I.e. will you take further restructuring perhaps in FY '15 to reach this 5% goal, or should investors now no longer expect that the 5% margin target holds for electronics?

Kenichiro Yoshida

Again, thank you for the question. Yes, the 5% target for the electronics business is no longer feasible, I have to admit. And in the next fiscal year, we see, of course, much less restructuring cost being cut. But if the market situation or our business situation will change, we have to do the kind of restructuring. Again, the 5% will be not such a big scale, I expect.

Operator

And our next question is from Daniel Ernst from Hudson Square.

Daniel Ernst - Hudson Square Research, Inc.

I have a couple of questions on the Game division and 1 question on the Pictures division. In Game, given the success of the PS4 to date, which you previously announced as 7 million units have sold through, it seems that your forecast for growth in the PlayStation hardware business seems a bit conservative. I wonder if can you talk about the moving parts there. Second, on the flip side, the PS Vita, while it has a niche group of fans, you're projecting JPY 3.5 million sales for next fiscal year, which in the greater scheme of Sony's global scale, almost seems like it's not worth the effort. I wonder if you can comment on that. And then last question on Game. You're projecting roughly 1.6% operating profit margin for the coming fiscal year. In the past in sort of the height of PlayStation 2 cycle, you had operating margins closer to 10%. I'm wondering, do you think that in this cycle, given how well you're doing, we can see an operating margin similar or at least closer to what we had in those PS2 days? And then switching to the Entertainment business. When we were in Los Angeles for the Entertainment Day in September, there was a lot of discussion about the cost cuts going on there. I wonder if you could update us on to where they -- where that process stands? Is it done for now or is that still ongoing?

Kenichiro Yoshida

Thank you very much for the question. First of all, as we've said, PS4 is doing very good. And actually, more than half of PS4 purchaser are engaged in the PS Plus Network Services. And as for the PS Vita, the -- this particular platform is actually less than -- doing less than our expectation. As for the current fiscal year's expectation for margin smaller than you expected is -- one reason is because of the relatively high network cost of SMEI. Currently, more and more, the portion of that content delivery through network is getting large. And in case of SMEI, Sony Network Entertainment, cost increases, resulting from the increasing numbers of sessions and traffic are feeding our expectation actually, especially data center and backbone and the CDN, content delivery network. [Japanese]. So that is the basic, the reason of the lower margin. But we expect Network Services eventually, margin will exceed the threshold. So I also think PS4 has a good potential to achieve the level of profit, which appears to achieve in fact. And second -- as for the second question. Steve, could you?

Steven E. Kober

Sure. Let me respond to the Entertainment question. In November, we announced the multiyear program that would take through March of '16 to implement. So far, we're right on target. Of the $300 million in targeted annual savings at Sony Pictures, approximately $130 million of that was realized in the year ending March 31, 2014. For our fiscal '14, which has just started, all of our Entertainment units budgets are consistent with the program that was implemented and announced last November during the Entertainment investor meetings. So everything is on target as of right now, and we're very optimistic that we will meet the targets we promised.

Operator

Our next question is from Kota Ezawa from Citigroup.

Kota Ezawa - Citigroup Inc, Research Division

I have 2 questions. The market has already started to be worried about the new guidance. On the TV, 60 million units and mobile handsets, 50 million units, and a favorable weaker yen assumption on the U.S. dollar and euro. I'd like to know what is Yoshida san's contingency plan and if those numbers shortfall against guidance. For example, TV. If it is almost flattish from the previous year, you will lose JPY 110 billion in revenue, and mobile handset could be the same. In the currency also, you could lose a couple of billion yen. So how we can cover this, the potential loss in the sales if it happens, in this, if it is the worst case, cutting further fixed costs by adding up more restructuring? Or you could say some other procedure that you can take on the varying cost or marginal profit measure aside. This is question #1. The #2 is about R&D cost. You said that the further R&D cost increase into the fiscal year, which is -- which actually surprised the market, again. And just curious why the R&D cost is increasing after you disposed the PC business, and it's almost reaching 8.5% over. You had mentioned JPY 5.4 trillion electronics business overall sales. This is probably very high ratio over the sales. So I'd like -- I also like to know what's the long term Sony's electronics business R&D cost spending level.

Kenichiro Yoshida

Thank you for the question. As for the first question about television, it is true. We are expecting growth. But at the same time, we already fixed the fixed cost of the business side, as well as fixed cost of the sales company that helps the [indiscernible] risk. As for the upside risk or downside risk of the top line, we are currently carefully monitoring. And actually, we set monthly operation meetings, including myself, as well as top management of TV and Hirai san as well. So I think the current television management team is capable to flexibly respond to the change in the marketplace. So I myself have a less concern that -- than the Mobile business. But in case of the Mobile business, as we said that we are expanding the total variance [ph] and country and also telecom carriers. So as for the Mobile, we have to even closely look at the day-to-day operations, particularly the delivery of the product is key to watch. That's my answer. And as for the R&D, why it is going up. There are 2 reasons: One is the going up in Mobile business based on the increase in variance [ph]. And secondly, the increase in the Device business, mainly for Semiconductors [indiscernible] made sensors.

Operator

[Operator Instructions] And we have a question from Samuel Lau [ph] from ICO Research[ph].

Unknown Analyst

If I may, can I ask, following up on your answers on the Television business, you mentioned that your fixed cost is pretty much fixed now. In that case, I wonder whether that 16 million units target that you set, whether it was actually simply set because that equals to your breakeven point? And then how do you plan to achieve that figure? I mean, do you -- is that -- basically, are you counting on market share gain? That's my first question. I've got a second question.

Casey Keister

One moment, please.

Kenichiro Yoshida

Well, as you may know, the 4K markets where we have our strength is now expanding and we are actually doing good, particularly in Japan. And we started the 4K business in China as well. So we are estimating the decline in average price in 4K. But still, 4K is much higher in price. So that is one of the reason why we are expecting sales volume growth. And we are currently doing very good in emerging countries, particularly in India as well. [indiscernible]

Unknown Analyst

Okay. Sorry, just to follow-up on that. What proportion of the market at the moment is 4K? And roughly, for your company as well. I mean, do you have a rough figure, I mean, as a proportion of your sales? I mean, what proportion is 4K, please?

Kenichiro Yoshida

As for the unit base, it's approximately 5%. But varies [ph] basis is much, much higher than that.

Unknown Analyst

Is that for your company, as well as for the market?

Kenichiro Yoshida

That's Sony.

Unknown Analyst

That's Sony. Okay. My second question is about your forecast. You provide on Page 11 of your presentation materials, the segment sales and operating income split for the current year, which is very useful. I just noticed that there is a rather big JPY 262 billion of all other corporate and elimination. Would you be able to perhaps give us a little bit more details in terms of the breakdown? And within that, how much of it is one-off? Do you think -- well, in next year, it would potentially return to the JPY 83 billion seen in fiscal year 2012?

Kenichiro Yoshida

Thank you for the question. Mr. Takeda is going to answer the question.

Kazuhiko Takeda

Thank you for asking. So I understand that your question is that we put the large portion of the amount in the other segment. Then you're asking what the proportion of that. Then -- but to answer the question, I think Yoshida mentioned that we will spend JPY 135 billion in the -- in those total transformation cost, including the reforming the -- our sales companies and also the overhead as a function, as well as we have incorporate some risk associated the transformation activity. So that represents approximately half of that total portion. On top of that, we put some portion of the VAIO business a loss from -- previously, we recorded that into our mobile product, Mobile Communication Product segment, which we reclassified into the other segment in this fiscal year. So those 2 big items represents, I think, a large portion of the other segment in fiscal '14. Does it answer your question?

Unknown Analyst

Yes. I guess, that JPY 135 billion, I suspect you expect that to be a one-off for the current year. Is that correct? And also, the final business loss, how much -- roughly how much is it? And do you expect it to be recurring? I mean, will it continue over the next few years?

Kazuhiko Takeda

No, that is one-off in fiscal '14 as well because we are closing down the VAIO business in fiscal '14. So that could be a one-off I would say.

Unknown Analyst

Right. And -- okay. So the JPY 135 billion restructuring cost, that's one-off as well. Is that right?

Kazuhiko Takeda

That is true.

Unknown Analyst

Okay. And the VAIO, can you perhaps give us some idea. I mean, does it -- should we expect like -- because the remaining...

Kazuhiko Takeda

JPY 44 billion as a loss from the PC business in fiscal '14 on top of the JPY 135 billion.

Unknown Analyst

Okay. And so the remainder should be recurring. So we should perhaps expect a similar scale?

Kazuhiko Takeda

That's right. That is [indiscernible] overhead expenses for the headquarter and some, the common expense for the corporation.

Unknown Analyst

Okay, which you are hoping to reduce anyhow over time.

Operator

[Operator Instructions] We have a question from John Litschke [ph] from CREF.

Unknown Analyst

Yes, I have a couple of questions. First of all, the JPY 262 billion on the others, I'm still a little bit confused on the mechanics there. Could you maybe give us a better breakdown of what that JPY 262 billion entails, including what the residual headquarter expense allocation is expected to be on a go-forward standardized basis? That's the first question, and I'll follow up.

Kenichiro Yoshida

Thank you for asking. However, I want to say we would not be able to give you a further breakdown of headquarter expense at this point in time.

Unknown Analyst

Okay. And in the asset sales, it includes JPY 20 billion of assets sales. So if we strip that out, the total cost would be JPY 282 billion. So can you give me kind of a better -- I mean, of that JPY 282 billion, JPY 135 billion is related to restructuring? Or are there other items that are sort of considered one-off like the PC losses are higher than the simple JPY 35 billion stated in the restructuring?

Kenichiro Yoshida

So is your question that how much loss associated VAIO was incorporated in the [indiscernible]...

Unknown Analyst

Well, yes, I guess so. Again, I'm seeing this.

Kenichiro Yoshida

Okay, okay. okay. I'm sorry...

Unknown Analyst

I'm seeing this JPY 135 billion, and it says JPY 35 billion. But at the beginning of the conversation, you said negative JPY 80 billion, I thought, was for fiscal '14. So I'm a little confused there.

Kenichiro Yoshida

Okay. For the first question, of JPY 135 billion, JPY 36 billion is associated to the VAIO exit costs. So if you add up the other losses from the operating from the VAIO business in 2014, you could sum up, up to the JPY 80 billion. That is associated to VAIO business.

Unknown Analyst

Okay. So -- okay, got you. So in fiscal '13, it looked like some -- a couple of charges were accelerated, I guess, mostly the ODD [ph] business, which might have been on the deck for fiscal '14 anyway. And this year, in fiscal '14, the restructuring, stripping out the PC, JPY 35 billion, you're at JPY 100 billion. And previously, you were looking at JPY 70 billion. So if we add back sort of the supposed ODD [ph] and then look at the increase from 70 to 100, the plan for restructuring and impairments, I mean, you're probably looking at real number fiscal '14 of around 125 million or 130 billion. That's substantially larger than previous. What incremental efforts are you doing? Should we read this as an accelerated larger restructuring effort? And regarding the benefit, I have not seen, I guess, any detail on whether the JPY 100 billion benefit to accrue from these efforts has also been likewise increased? And do you have a rough estimate of the additional positive impact that might come from the increased restructuring?

Kenichiro Yoshida

Thank you for -- yes, I think...

Unknown Analyst

Does that make sense?

Kenichiro Yoshida

Yes, in -- I think you [indiscernible] that in the previous conversation that we said that restructuring cost could be amount to the -- amounting to JPY 70 billion. Then today, we would increase that amount up to JPY 80 billion. That's correct. Then on top of that, we put some risk associated that there is transformation or business risk into that other segment. So yes, that is all about the risk assessment, what we get once run through in headquarter.

Unknown Analyst

Right. But you also took more charges last year, which probably would've been necessary to take this year. So I guess, I'm just wondering, the charges seem higher, the restructuring effort seems probably a bit larger, will the benefit be more than the JPY 100 billion that you had previously targeted?

Kenichiro Yoshida

Yes, I think the -- we would expect some more benefit than the JPY 100 billion, which we announced in the previous announcement.

Unknown Analyst

Okay. And as far as the new restructuring plan, are there any details on incremental efforts that you're making that you can share? Is there a higher headcount reduction target? Or what is the incremental change from a few months ago?

Casey Keister

One moment, please.

Kenichiro Yoshida

Yes, I think you are not in [indiscernible] in previous announcement. We said approximately the 5,000 headcount. Then, of course, if you did anticipation of some restructuring activity for pulling forward restructuring activity from fiscal '15. So amount of headcount could be increased.

Unknown Analyst

Okay. And as far as the speed of the restructuring and the benefits that are accruing, I can't imagine that the restructuring is static. That's going to happen all in the last day of this fiscal year. So I'm hoping to hear that the restructuring will be the timing. I mean, can you give us some sort of sense as the timing of the restructuring? Are you looking to pull forward much of the efforts so that it's accruing more in the first half of the year? Or is it pretty steady throughout the year? And as far as the benefits, JPY 100 billion benefits, how much do you think actually accrues this year? And is that already in the budget or -- because if it is, then I guess, the net that would flow through next year would be much less than 100. So I'm just trying to understand how much have you baked in on the benefits. Because as you're doing there restructuring, you should see some immediate impacts relatively quickly, no?

Kenichiro Yoshida

Thank you for the question. I'd assume the major benefit will occur in the fiscal year '15. Some benefit may occur in the latter half of this fiscal year, but majority would be the fiscal year '15.

Unknown Analyst

Can you walk through why that is?

Kenichiro Yoshida

Yes. As for the restructuring, I think the personnel issues takes some -- needs some time and some steps. So it will take some time.

Unknown Analyst

But much of it's in the sales company, which is overseas and non-Japanese, no? That doesn't sound like it takes us much time usually overseas to restructure.

Kenichiro Yoshida

Well, in case for U.S., it doesn't take so much time. But in case for Europe and Japan, it takes time. Particularly in Japan. So labor law is quite strict. So we have to take some steps to do that.

Unknown Analyst

Okay. And when do you think the company would be comfortable giving a longer-term view on what you said the sustainable profit level would be post the restructuring, as well as the sustainable tax rate over the next several years, normalized tax rate as well?

Kenichiro Yoshida

Well, at this time, it's -- we are not ready to make any forecast for the fiscal year '15 or after. However, what I can say is today, we can reduce the amount of restructuring cost and at least we can expect the diminish of the exit cost of PC. And thirdly, we can expect almost JPY 100 billion benefit from the ongoing restructuring beginning from fiscal year '15.

Steven E. Kober

Let me just add one comment on taxes. As you know, we have recorded large valuation reserves in prior years. Therefore, we will get the benefit of that as we start earning back money. So it's hard to determine a run rate tax rate until we get good forecast and we -- eat into our valuation allowances.

Operator

And as we're running out of time, I'd like to hand the call back over to Casey Keister for closing remarks.

Casey Keister

Thank you very much, John. We'd like to thank all of you for joining us today to discuss the announcement. Please feel free to contact our London, New York or Tokyo Investor Relations offices if you have any further questions. Thank you, all, for joining us, and good night from Tokyo.

Operator

Thank you, ladies and gentlemen, that concludes today's call. Thank you for participating. You may now disconnect at this time.

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