Ricoh 9 month results cause amended forecast for sales

Lowered its year-end dividend payment forecast


Ricoh Company, Ltd. reported its Q316 results on January 31, 2017 (please see Figures 1, 2, and 3).

  • Q3 Sales of ¥497.9 billion (B), declined 9.2% year-to-year (YTY)
  • Q3 operating profit of ¥12.0B, declined 59% YTY
  • Q3 Imaging & Solutions sales of ¥439.1B, declined 10.4% YTY
  • Q3 Imaging & Solutions operating profit of ¥24.1B declined 41% YTY
  • Disclosed it had amended its full-year sales forecasts, not operating profit

Our View

With two months to go in the quarter, Ricoh forecasted FY16 sales of ¥2,000.0B with a reduction of ¥10B, or a 9.5% revision from its previous forecast. Its forecasted operating profit remained the same at ¥40B, a 60.9% reduction YTY. This is based on a 106.21 ¥/USD ratio. Additionally, Ricoh lowered its year-end dividend payment forecast in view of its earnings amendment.

The main cause of this can be summarized in Figure 4:

Figure 4: April-December Products and Services sales (YTY)

 Black and WhiteColor
Office Printer(4)%(1)%
Plain Paper (Cut Sheet)(17)%10%

After nine months of effort, impact of India-related expenses, and forex, this is not much to write home about. Ricoh mentioned this decline (corresponding to its prior April-December period) was due to “groupwide structural reforms in preparation for the next medium-term plan.”

It is interesting comparing comments made by Ricoh in its quarterly earnings report versus other Japanese hardcopy vendors. Where most other OEMs state there is a gradual improvement in most economies across the globe, Ricoh reports:

  • Japanese economy – future of the Japanese economy has been unpredictable,
  • U.S. economy – has become uncertain because of the result of president election,
  • European economy – remains uncertain with the Brexit,
  • China and other developing countries in Asia – showing signs of economic slowdown.

Could it be that management is seeing through “jade colored glasses” and not “rose colored glasses?” If Ricoh is looking for structural reform the company may want to consider deeper expense cuts in its next medium-term plan.

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