Ricoh has Another Rough Quarter for Revenue and Operating Profit

Ricoh Company, Ltd. reported its Q116 results on Friday, August 5, 2016 (please see Figures 1, 2, and 3 below).

  • Q1 Sales of ¥487.7 billion (B), declined 2.5 percent (YTY)
  • Q1 Operating Profit of ¥10.9B, declined 47 percent (YTY)
  • Q1 Imaging & Solutions Sales of ¥430.5B, declined 11 percent
  • Q1 Imaging & Solutions Operating Profit of ¥19.5B declined 39 percent
  • Q1 Operating Margin of 2.2 percent declined 1.6 points
  • R&D expenditures of ¥26.8B, a decrease of ¥0.1B
  • Disclosed it had appointed a new Ricoh India CEO in April and in July 2016 announced an estimate of the unaudited loss for Ricoh India

2016 0808 Fig 1 Ricoh earnings

 

2016 0808 Fig 2 Ricoh earnings

 

2016 0808 Fig 3 Ricoh earnings

Our View

As can be seen in Figure 3 above, Ricoh’s operating profit margin for the Company and for its Imaging and Solutions business unit has been in a downward trend since Q4 2014. Another point of interest is the overall trend of the first quarter’s operating profit margin for the last three years – it is usually the lowest point for that particular year except for the end of 2015. This is similar to other imaging OEMs that have reported. The first quarter of any new fiscal year appears to be lower due to the incentives and sales that are done in the previous fourth quarter in regards to imaging consumables.

Overall, Ricoh’s revenue has been stable except for the Q1 2016 where it dropped below Q1 2014 revenue. Ricoh blamed this on the “impact of lower sales ahead of new multifunction printer launches and changes in the product mix.”

Ricoh was quick to respond to this less than stellar quarter by explaining its progress with its key initiatives for this fiscal year:

  1. Reinforce profitability of core processes – the Company is launching MFPs to expand sales of high-value-added offering by rolling out six color (MP C3003, C3504, C2504, C4504, C5504, and C6004) and three monochrome models (MP 6503, 7503, and 9003).
  2. Accelerate profit contributions through new businesses – the Company participated in drupa 2016 and reinforced its lineup of inkjet heads for industrial printing.
  3. Improve companywide structure – the Company has begun to review it business processes to shift personnel into growth fields.

Looking specifically at Ricoh’s Imaging and Solutions business unit almost all segment sales are forecasted down:

FY13 Forecasted Products sales (YTY) (Value, excluding Forex)

                                             Black & White            Color

MFP                                                    -11%              -3%

Office printer                                     – 6%               -7%

PP (Cut sheet type)                          -14%              +18%

The only positive segment is Color Production Print.

Similar to Canon and Konica Minolta, Ricoh has decided to reduce its forecast for FY2017:

                       FY2017          Revision from          Year-on-year

                                                Prior forecast          Change

Sales               ¥ 2,040.0B     – ¥130.0B                   –  7.7%

Op Profit        ¥ 55.0B           – ¥ 22.0B                   -46.2%

R&D expend  ¥ 120.0B        – ¥   8.5B                    +¥ 1.4B

Ricoh is estimating an increase in Japan sales of 4+ percent and a decrease of 173 percent in overseas sales for a total of 7.7 percent decrease from now until March 2017. Operating profit will also take a 46 percent hit as well.

Forex has been playing havoc with the Japanese imaging OEMs. Based on a recent article, it appears that Japan’s prime minister, Shinzo Abe, had unveiled a huge $265B stimulus package. If this is approved, the Bank of Japan expects inflation to hit their 2 percent target. A stimulus package would provide incentives and tax rebates in Japan and could improve Japan’s sales, however, the direct impact on overseas sales would depend on the package presented.

 

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