SoftBank back to black with USD12B profit after record losses

TOKYO (AFP) – SoftBank Group yesterday reported a USD12 billion quarterly net profit to June, recovering from eye-watering losses as tech stocks rally and the firm sheds assets to shore up its finances.

The results will be a relief for chief Masayoshi Son, who has faced an increasing drumbeat of criticism after recent record losses for the firm.

Son transformed what began as a telecoms company into an investment and tech behemoth with stakes in some of Silicon Valley’s hottest start-ups through its USD100 billion Vision Fund.

But he has battled opposition to his strategy of pouring money into start-ups – including troubled office-sharing firm WeWork – which some analysts say are overvalued and lack clear profit models.

The 11.9 per cent rise in net profit to JPY1.26 trillion (USD12 billion) puts SoftBank back in the black after a turbulent financial year that saw its investment woes magnified by the coronavirus pandemic and plunges in global stock markets.

Son has insisted that his strategy is sound, and that SoftBank’s portfolio is broad enough to weather the storm, but acknowledged the challenges when the firm reported an eye-watering USD8.9 billion annual net loss in May, hit by the WeWork debacle and stock crashes.

People walk by a SoftBank shop in Tokyo. PHOTO: AP

The results come after SoftBank launched an aggressive plan to sell up to USD41 billion in assets to finance a stock buy-back, after Son said shares were undervalued. The fundraising was also intended to reduce the firm’s debts and increase cash reserves.

Paired with the recent recovery in tech stock prices, the strategy appears to be paying off, analysts said. “SoftBank has achieved a V-shape recovery,” said Tomoaki Kawasaki, an analyst at Iwai Cosmo Securities. Kawasaki told AFP that investor sentiment had been boosted by the firm’s decision to sell assets and buy back shares.

“But we still need to carefully watch SoftBank’s performance, which is heavily subject to stock markets,” he added.

SoftBank shares closed down 2.45 per cent to JPY6,361 shortly before the results were announced, up significantly from their March low of JPY2,687.

The massive monetisation programme announced earlier this year has already seen SoftBank sell off JPY4.3 trillion of the planned JPY4.5 trillion, Son said at a press conference after the earnings were released.

The CEO, whose earnings presentations are often characterised by colourful comparisons, described the pandemic as “like a war” and called the monetisation project a defence strategy.

“We the entrepreneurs are also fighting against various types of challenges… by having cash on hand, we will be able to enhance our defensive power.” The firm also reported JPY983 billion in investment gains for the quarter to June, including profit from its Vision Fund.

But it warned that the pandemic continued to cause uncertainty, bolstering its investments in e-commerce and food delivery firms, but hammering those in the hotel and hospitality sectors.

It said it would not offer a forecast “due to numerous uncertainties affecting earnings”.

Son has struggled to interest investors in a second round of the Vision Fund as he deals with the woes of some of his most high-profile investments, notably WeWork.