SoftBank Group net profit soars to $11.1b in third quarter

by AFP

TOKYO – SoftBank Group on Monday said net profit rocketed to $11.1 billion in the third quarter as stock rallies and asset sales helped it solidify its recovery.

Net profit for October-December hit 1,171.9 billion yen, more than 21 times higher than the 55.0 billion yen reported a year earlier, the conglomerate said.

Despite the results, it said it would not provide “forecasts of consolidated results of operations as they are difficult to project due to numerous uncertainties affecting earnings”.

But the economic crisis that has accompanied the coronavirus pandemic has worked largely in SoftBank’s favour, with rallies in tech stocks it owns and rising valuations for firms in its portfolio suited to the era, including food delivery.

SoftBank reported a nearly $9 billion net loss in the previous full fiscal year, but has quickly returned to the black.

Founder Masayoshi Son, who has transformed the telecoms company into an investment and tech behemoth, has battled critics of his commitment to sometimes-troubled start-ups, and brushed aside doubts over a massive asset sale programme.

SoftBank has stakes in some of Silicon Valley’s hottest start-ups through its $100 billion Vision Fund.

And Son has consistently backed the firm’s worth, insisting its stock has been undervalued and its fundamentals remain strong despite wobbles including over office-sharing start-up WeWork.

Government stimulus designed to combat the economic effects of the pandemic have helped bolster stock markets, to SoftBank’s benefit, said Masahiko Ishino, an analyst at Tokai Tokyo Research Institute.

The firm and its SoftBank Vision Fund “took full advantage of monetary easing”, he told AFP before the results were released.

The value of the Fund’s stake in US food delivery app DoorDash rose massively following its initial public offering in December.

SoftBank has invested heavily in ride-hailing platforms worldwide in recent years, from California-based Uber to Didi Chuxing in China, Singapore’s Grab and India’s Ola.

Last month, SoftBank Group announced the sale of $2 billion-worth of stocks in Uber following a surge in the US ride-hailing giant’s value, though it still remains the firm’s main shareholder.

The results come after SoftBank launched an aggressive plan to sell up assets to finance a stock buy-back and reduce its debt, which has so far raised around 5.6 trillion yen.

In December it sold an 80 percent stake in robotics firm Boston Dynamics to Hyundai in a deal that values the US company at $1.1 billion.

And in September, it announced an agreement to sell British chip designer Arm to US firm NVIDIA for up to $40 billion, potentially creating a new giant in the industry.

If approved, the deal will be one of the largest acquisitions in the world this year and propel NVIDIA to the forefront of the semiconductor sector.

But the sale faces challenges — including securing approval from regulators in Britain, Europe, the United States and China.

Paired with the recent recovery in tech stocks, SoftBank’s asset-sale strategy appears to be paying off, but analysts warned the firm may need more risk-management and to keep reviewing its portfolio.

“The impact of monetary easing is likely to be weaker” if another global equity rout strikes the market, Ishino warned.

“SoftBank Group needs to consider such scenarios by rebuilding its corporate structure, and we will pay attention to how it will transform itself in preparation for the future.”