Sony says annual earnings will be hurt by last month’s Kumamoto earthquake

Sony warned that its annual earnings will be lower than expected as it recovers from an earthquake that struck the south of Japan last month. The company had previously delayed its forecast for fiscal year 2017 as it assessed the impact of damages.

The quake struck Kumamoto Prefecture, where Sony’s main facility for the manufacturer of image sensors used in digital cameras and smartphones is located. Sony’s image sensors, which are used in smartphones by Apple and other manufacturers, are one of its most important sources of profit. The unit was spun off into a separate company last year.

The company also said it expects slower smartphone sales because demand for its mid-range devices has slowed in key geographical markets.

Sony forecast operating profit of 300 billion yen (about $2.75 billion) for fiscal 2017, a two percent increase from a year earlier. This includes a negative impact of about 115 billion yen ($1.04 billion) resulting from the earthquake.

Its smartphone division is expected to see profit of just 5 billion yen, thanks to decreased sales of mid-range devices and Sony’s decision to downsize in markets with slowing demand, including China and India.

Sony’s game unit is expected to fare better, however, thanks to an increase in demand for PlayStation 4 consoles and titles. The company said profit will grow to 135 billion yen.