Epson Q3 Revenues Up Sequentially, Lower YTY

FY16 Outlook Improves, Lower than FY15

Seiko Epson (hereafter Epson) announced its third quarter and nine months 2016 results on January 31, 2017 (see Figure 1, Figure 2, and Figure 3).

  • Epson Q3 sales of ¥ 278.3 billion (B) ($2.6B), down 6% year-to-year (YTY)
  • Printing Solutions Q3 sales of ¥ 192.4B ($1.8B), a decline of 6% YTY
  • Operating Profit of ¥ 29.5B ($277M), a decline of 12.9% YTY
  • Epson 9 month sales of ¥ 765.8B ($7.18B), down 9% YTY
  • FY16 full-year revenue outlook revised upward to ¥ 1.02 trillion (T) vs. ¥1.0T based on an exchange rate assumption of: USD: ¥107.0

Our View

This is our first installment of a review of Epson’s results since Lexmark has been sold to Apex Technology and is now a private firm. Epson is one of the last major inkjet providers and since inkjet hardware makes up about two-thirds of global office hardware shipments, Photizo chose to include them in our quarterly earnings report.

As can be seen in Figure 2 and Figure 3, Epson has developed a trend toward higher revenues and operating profit margins in the third quarter of the past three years. This is understandable from a seasonality standpoint for its Printing Solutions unit, which carries Epson today.

Epson reported that total inkjet printer revenue declined YTY, but as shown in Figure 2, the Printing Solutions unit showed an increase sequentially. High-cap ink tank printer revenue improved despite the concern by Epson that competition might hinder its sales growth. In effect, the recognition of high-cap ink tank printers through competitors’ advertising has seemed to spur Epson’s demand for these printers in all regions, especially growth in Latin America. Unfortunately, the unit sales of ink cartridge printers declined in North America. Epson said the promotions by one of its competitors for low-end home inkjet printers was the main reason for this decline.

In professional printing, revenue dropped YTY. Once again there was steady growth in signage, label, and textile printers, but demand for Point-of-sale and photo and graphics printers were hurt by a sluggish market with some impact from currency fluctuations.

Outside of the printer realm, Epson is known for its robotics solutions. Although revenue was flat YTY, it did report that it had experienced improvement in its robots being used for mobile device and electronic machinery parts assembly in the China region, as well as, robots for auto parts assembly in the U.S. and Europe. Revenues were up 3% YTY.

Epson revised its revenue and operating profit forecast for the year. Revenue is now projected at ¥1.02T (from ¥1.0T) and operating profit is now ¥64.0B (from ¥60.0). The main reason for the increase is foreign exchange rates.

For Epson’s Printing Solutions unit, it expects stable performance through the rest of the fiscal year with a decline is sale of ink cartridge printers (mainly home-use models) and a decline in unit sales of serial impact dot-matrix printers. Sales of large-cap ink tank models are expected to exceed its previous assumptions. It is too early to look at FY17, but the positive trends with the global economy, except for Europe, seem to be encouraging for Epson.

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