Ricoh CEO Warns of Further Impairment Losses in Other Regions

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Ricoh CEO Yoshinori Yamashita

The Nikkei-Asia Review reports that Ricoh Company of Tokyo, Japan, which last week reported that it would a take an impairment loss of $1.72 billion for its fiscal year that ends on March 31st, is stating that its structural reform is succeeding and that next year will bring recovery.

Ricoh had previously forecast an operating profit of 20 billion yen, and had expected to break even for its fiscal year.

At an emergency press conference held on Friday, Ricoh CEO Yoshinori Yamashita told reporters that Ricoh is “taking the matter very seriously.”

The projected loss is said to stem from losses incurred by Ricoh USA and Ricoh’s Ikon Office Solutions, the latter of which is a U.S. distributor that Ricoh acquired in 2008 for $1.63 billion, as well as losses from Ricoh’s mindSHIFT IT-services company.

CEO Yamashita said that North America’s rapid transition from paper to digital-based office transactions, as well as difficult competition, was responsible for the Ikon’s poor performance and losses. Yamashita noted that the transition away from paper “exceeded expectations, and competition turned harsh” and that “North America faced a striking decline in unit prices.”

Under Yamashita, who was appointed Ricoh’s CEO in April 2017, Ricoh eliminated 5,000 jobs primarily in North America, and further job-trimming is said to  come. Ricoh also cut-off financial support to its money-losing Indian unit, and sold its stake in Coca-Cola Bottlers Japan Holdings.

At the press conference on Friday, Yamashita, however, said that although Ricoh has “made it over the mountain” of reform, further impairment losses may lurk beyond North America, as regions the world over shift from print to digital. Yamashita also said that Ricoh faces a steep path to recovery.

In a letter to its shareholders published last week, Ricoh also stated:

“This adjustment is coming mainly from the amortization caused by our acquisitions in North America. This is a matter of appropriate accounting, and doesn’t have any impact on our cash flow.

So, let me tell you what caused this. Under our 19th mid-term management plan, “RICOH Resurgent”, we strengthened our core business and undertook structural reforms in order for us to apply our management resources to growing the business.

With the support of all our stakeholders, our structural reforms are on schedule and we have succeeded in expanding our value proposition. We launched our growth strategy, “RICOH Ignite”, on February 6, with three main strategies. To ensure their execution we reset our business management units based on our current six business domains. Based on the profit we can expect from each unit we evaluated the business assets in each unit. Then we found that we needed to impair the value of some of these assets.

The assets that we needed to impair are mainly companies we acquired in the past, principally IKON Office Solutions (2008) and mindSHIFT Technologies (2014). With this impairment, our business P&L forecast will show a negative adjustment to our operating Income. To reiterate, this accounting action has been caused by the revaluation of our assets, and doesn’t have any impact on our cash flow.

This impairment is regrettably negatively impacting our business performance for this year but this is necessary in order to execute our growth strategy, change our business structure and move forward for the future.

In Fiscal 2017, we have been working on structural reforms to strengthen our profitability and modify our asset base. In 2018, my role is now to ensure we execute our growth strategy.”

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