Sony's sensor business slows even as cost cuts lift profit

By Makiko Yamazaki

TOKYO (Reuters) - Japan's Sony Corp on Thursday reported an annual loss in its image sensors business, raising fears the firm's revival of recent years may be losing momentum, even though cost cuts helped it book its biggest operating profit in eight years.

Annual operating profit more than quadrupled to 294.2 billion yen (1.85 billion pounds) for the year ended March due to cost cuts in its struggling smartphone business and brisk demand for PlayStation 4 videogames.

But the electronics maker said its devices business, including image sensors which have been central to its recovery, swung to a loss of 29 billion yen from a profit of 89 billion yen the previous year.

Sony has been shifting attention over the past two years to higher-margin products such as sensors from consumer electronics such as televisions and mobile phones, under an overhaul led by Chief Financial Officer Kenichiro Yoshida.

But a global slowdown since late last year in the market for high-end smartphones - which feature high-spec cameras - has dented sensor sales.

Its major clients include Apple Inc (AAPL.O), which on Tuesday reported its first-ever decline in iPhone sales as it struggles with an increasingly saturated market.

"We have placed image sensors at the core of our growth story, so we take the deterioration in results there very seriously," Yoshida told a news conference on Thursday. "The smartphone market has entered a stage of slow growth."

As it had previously flagged, Sony did not issue any earnings guidance for this business year as it continued to assess the impact of earthquakes this month that halted production at its image sensor plant in southern Japan.

On Thursday, it said it expected production to resume around the end of May. The disruption, it said, could cause "major" opportunity losses.

Canon Inc and Nikon Corp (7731.T) have said Sony's plant halt would affect their camera production.

Yoshida warned at the news conference that quake-related damage could exceed 20 billion yen, the upper limit of its insurance coverage.

In another worrying sign for the country's recovering tech names, Panasonic Corp forecast profit to fall in the current business year while growth in emerging markets slows and as it spends on increasingly lucrative automotive technologies and housing businesses.

The company said it expects operating profit of 375 billion yen, down from 416 billion yen in the previous year under U.S. accounting standards.

It had flagged the weaker outlook last month, showing that even one of the strongest of Japan's consumer electronics companies is struggling to grow amid a global economic slowdown.

(Writing by Ritsuko Ando; Editing by Christopher Cushing and David Clarke)