Konica Minolta Reports Q4 Revenue Decrease, FY15 Revenue Growth

Yen appreciation and price competition make for a difficult Q4

 

Konica Minolta, Inc. (KMI) reported 4Q15 and FY15 results on Thursday, May 12, 2016 (see Figures 1, 2, and 3 below).

  • Q4 Sales of ¥269.4 billion (B), declined 2 percent (YTY)
  • Q4 Operating Profit of ¥5B, declined 1 percent (YTY)
  • 2015 Fiscal Year Revenue of ¥1,031.8B, increased 2.9 percent
  • 2015 Operating Profit of ¥60.0B, declined 8.7 percent
  • 2015 Operating Profit margin of 5.8 percent, declined 0.8 percent
  • FY16 Revenue Forecast of ¥1,060B, increase of 3 percent
  • FY16 Operating Profit Forecast of ¥66B, increase of 10 percent

2016 0513 Fig 1 KMI 4q15 earnings

(Click each Figure to Expand)

2016 0513 Fig 2 KMI & BTB

2016 0513 Fig 3 KMI & BTB OP

KMI saw the effect of competition in its Business Technologies Business (BTB) and the yen’s appreciation in Q4. Operating profit for KMI was flat YTY caused by a ¥2.5B increase in structural reform cost, lower revenue, and yen appreciation.

For FY15 revenue did increase due to sales of main products, consolidation aspects of its acquisitions, and the yen’s depreciation against the dollar. The lower operating profit was due to a rather harsh market environment.

BTB displayed strong sales in Europe with increased momentum in medium-speed (bizhub C287 series, A3, 28/28ppm) and high-speed color printers (bizhub C368, A3, 36/36ppm). Price competition in North America resulted in flat sales and Japan sales were down mainly due to the market conditions and price competition.

Once again, BTB’s ‘hybrid-type’ sales (combination of IT services and hardware equipment) saw improvement and its Office Services team under BTB has been providing digital workflow proposals where paper documents are scanned using its MFPs, information is extracted, and sent to the proper databases. Similar to Ricoh, KMI’s is providing “Managed IT” services where they take over a customer’s IT environment.

In the Commercial and industrial printing segment, KMI’s top-of-the-line bizhub PRESS C1100 grew sales in the U.S. and Europe. KMI’s Marketing Production Management (MPM) continues to expand and the company pushed initiatives to expand its range of services for existing clients.

KMI’s new product, the KM-1 (co-developed with KOMORI Corporation) is a B2+ UV inkjet press. It will officially be launched at drupa 2016 (May 31-June 10, 2016). KMI expects it to make inroads into the label and packaging sectors in fiscal 2016.

KMI is somewhat concerned on what FY16 will bring. It states the employment environment is improving in the U.S. with some moderate growth in Europe. Japan will see real wage increase and capital investments to support business expansion. There is still overcapacity in China and emerging markets have not shown a tendency toward decent growth. As such, the company expects color MFPs to trend up in overseas markets but not so much domestically. KMI has forecast ¥1,060B revenue, an increase of 3 percent and a whopping 10 percent increase in operating profit of ¥66.0B.

 Our View

Most Japanese firms have had difficulty in sales and revenue in Q4 due to the appreciation of the yen versus the dollar and euro. This comes after two good years where the yen depreciated against the dollar and sales and revenue were moving up nicely. Most Japanese OEMs have sought to cut back on corporate investment caused by the sluggish worldwide economy and competition brought on by North American and European competition.

Cycles are a part of life. One year a region may become very profitable and the next year a currency fluctuations will cause cost problems. It is good that KMI continues to view its roadmap and make adjustments along the way to ensure it is providing value-add to its customers. So far, its strategy is working and where it is not, it appears the local country economy can be blamed.

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