Sega Sammy Holdings: Actual Results for the Third Quarter of the Year Ending March 2012

Sega Sammy Holdings’ financial performance for the third quarter of the fiscal year ending March 2012 reflects a period of divergence between its core gambling machine business and its consumer entertainment segments. The primary driver of growth during this period was the Pachislot and Pachinko Machines Business, which saw significant increases in sales and operating income fueled by high sales volumes and the success of the Pachislot Hokuto no Ken title. This segment’s expansion necessitated a substantial capital expenditure of 16.2 billion yen, directed toward the construction of a new plant and distribution center to bolster production capacity.

In contrast, the Consumer Business faced headwinds, reporting decreased sales and operating losses attributed to sluggish international game performance. While the company achieved a milestone of 2 million cumulative downloads for Kingdom Conquest, overall profitability in the consumer sector remained a challenge. Similarly, the Amusement Machine Sales Business experienced a decline in income due to a reduction in high-margin conversion kit titles and rising material costs, despite the strong market presence of StarHorse3. The Amusement Center Operations segment demonstrated resilience, achieving improved operating income through management efficiencies despite a reduction in the total number of centers.

Looking toward the final quarter, the company is navigating supply chain disruptions caused by flooding in Thailand, which necessitated material substitutions and revised release schedules for certain pachislot titles. Strategic focus remains on stabilizing the Consumer Business through new title releases and expanding the footprint of social and smartphone games. While domestic amusement centers have performed steadily, the company anticipates operating losses in that segment due to increased depreciation expenses associated with new title installations.