Profits Down for Konica Minolta's First Quarter, but Business Technologies' Revenue Up
Konica Minolta of Japan has reported results for its first fiscal quarter (the three months ending on June 30, 2015), with net sales of ¥248.6 billion for the quarter, an increase of 9.7 percent year-over-year. According to the firm, higher revenue from its Business Technologies Business and Healthcare Business compensated for lower revenue for its Industrial Business, while the effect of the weak Japanese yen against the U.S. the dollar also contributed to sales growth.
Operating profit totaled ¥10 billion for the quarter, down 30.3 percent year-over-year. Although higher sales of “mainstay” products in Konica Minolta’s Business Technologies Business and Healthcare Business resulted in higher profit, gross profit fell along with lower sales in the Industrial Business and, as a result, profit declined. The effect of the stronger yen against the euro in the first half of this quarter also pushed down profit.
The firm says the ¥4.3 billion decline in operating profit reflects ¥3.5 billion in special factors, namely ¥2.0 billion in one‐off expenses for structural reforms carried out in this quarter, and ¥1.5 billion in gains on sales of assets posted in the first quarter of the previous fiscal year.
Profit before tax totaled ¥10.3 billion for the first quarter, down 28.2 percent year-over-year. As a result, profit attributable to owners of the company was down 29.6 percent year-over-year to ¥6.5 billion.
Business Technologies Business
In Konica Minolta’s office-technology business, A3 color MFPs sustained their momentum, with sales volume increasing in all regions compared to the previous fiscal year. Sales volume increased for monochrome MFPs in Europe and China, and in Konica Minolta’s OEM business over the previous year. Hybrid‐type sales that combine MFPs with IT services achieved further success, mainly in Europe and the United States. With the aim of strengthening this sales system even more, Konica Minolta acquired SymQuest Group, a dealer that it says has a strong track record in hybrid‐type sales in the United States.
In the commercial- and industrial-printing market, Konica Minolta reported a significant increase in sales, primarily in Europe and the United States, of the bizhub PRESS C1100, a flagship digital color printer that the company launched last summer. It says this helped shift its sales mix towards high‐end models. With the aim of expanding its business substantially in India, where growth has stood out among emerging countries, Konica Minolta also acquired the production-print business of Monotech Systems Limited, a major dealer headquartered in Chennai in India.
Konica Minolta also reports that sales of MPM (Marketing Print Management) services, which support the optimization of printing material costs and the improvement of business processes in a company’s marketing department, increased significantly, partly due to its acquisition of Ergo Asia (headquartered in Australia) as a consolidated subsidiary in the second quarter of the previous fiscal year. In Konica Minolta’s industrial-inkjet business, sales of inkjet print heads and other components for large‐format printers were strong.
As a result, revenue for the Business Technologies Business was ¥201.7 billion, up 12.3 percent year-over-year, and operating profit was ¥13.2 billion, up 2.6 percent year-over-year. Konica Minolta says, however, that profitability came under pressure from higher selling, general and administrative expenses resulting from efforts to reinforce sales, as well as negative effects from the stronger yen relative to the euro. These and other factors were offset by cost reductions and by the impact of increased sales volume, resulting in higher sales and profit.
Structural Reforms Carried out in the First Quarter
In line with its Medium Term Business Plan, TRANSFORM 2016, Konica Minolta says it’s working to establish a “stronger” corporate structure, to improve its earning power as a manufacturing company, and to bolster its human resources. In particular, it views reducing selling, general and administrative expenses company‐wide as an “urgent” management issue, and has set up special early-retirement program for general employees and managers as part of this effort. As a result, it posted ¥2.0 billion in special extra-retirement payments in the first quarter.
Konica Minolta’s full‐year forecast for its fiscal year ending on March 31, 2016 remains unchanged from its initial forecasts announced on May 13, 2015, as it says its core businesses have been generally strong. Exchange rates used as the basis for performance forecasts for the remaining period of the fiscal year ending on March 31, 2016 are unchanged from the initially assumed 120 yen against the U.S. dollar and 130 yen against the euro.
In order to achieve its targets, the company says it’s working to enhance its earning power as a manufacturer in pursuing high‐value‐added businesses through a shift in the focus of its business and establishing a strong corporate structure through manufacturing and corporate innovation under its Medium Term Business Plan.