Fujifilm Posts Upbeat Financial Results; Will Pursue Xerox Take-Over in Court

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Fujifilm of Japan – which last year failed in a complicated deal to acquire Xerox – reported results for its fiscal year that ended on March 31, 2019.

Sales for the year were down by 0.1 percent year-over-year, but the company’s pre-tax profit increased by 7.6 percent versus the previous fiscal year’s ¥197.8 billion.

Operating income and net income also increased. Operating income was ¥209.8 billion, up 70.1 percent year-over-year. Net income was ¥157.1 billion, up 8.9 percent year-over-year.

Fujifilm’s Document Solutions segment recorded revenue of ¥1.006 trillion, down 4 percent year-over-year. Operating income was ¥96.4 billion, 11.5 times the level of the previous fiscal year.

Fujifilm Holdings Director and Corporate Vice President Junji Okada told investors: “Major contributions to the record-high [operating income] figure came from a large increase of operating income in the healthcare business, including the medical systems and bio CDMO, and in the electronic materials business, and good progress with improvements of profitability and structural reforms in the document business.”

In the Document Solutions group’s production-printer business, Okada said sales were strong for the Fuji Xerox Iridesse, mostly in the United States and Europe.

Komori Comments on Fujifilm’s Xerox Takover

In a statement, Fujifilm  Chief Executive Shigetaka Komori commented on Fujifilm’s aborted take-over of Xerox last year:

“Our approach to this issue has consistently remained unchanged. If the scheme approved by both companies (in January 2018) is accepted, I believe that we will be able to strengthen business in an ideal manner for both parties.”

Fujfilm Chief Operating Officer Kenji Sukeno also stated: “As we are fundamentally strengthening Fuji Xerox’s business, a combination with Xerox is preferable but not a necessity. Since we still believe the proposal for a business combination structured as announced on 31 January 2018 would be best for both companies and their shareholders, we will thoroughly explain its validity and legitimacy in the courts.”

(Fuji Xerox is a joint venture with Fujiflm and Xerox, with Fujifilm holding a 75-percent stake in Fuji Xerox, and Xerox, which sources much of its printer and copier hardware from Fuji Xerox, holding a 25-percent stake.)

In February 2019, a New York federal judge rejected Xerox’s request to dismiss Fujifilm’s $1 billion lawsuit against Xerox, stating that one of Xerox’s arguments was “thoroughly unpersuasive” and another “flies in the face” of the terms of the now terminated merger agreement. In May 2018, Fujifilm  had sued Xerox for more than $1 billion for ending the agreement, accusing Xerox of  “intentional and egregious conduct.”

Fujifilm Australia and New Zealand

Fujfilm’s Okada also commented on Fujifilm’s reform of Fuji Xerox, which was plagued by inaccurate accounting practices at its Australia and New Zealand operations in 2017. At one point, Xerox management cited the accounting scandal as a reason for not following through with Fujifilm’s takeover of Xerox.

According to Okada: “One-time expenses including structural reform costs in the fiscal year ended March 2019 totaled ¥16.1 billion, as some measures were carried over to the fiscal year ending March 2020 onwards.

“A positive impact from the structural reforms was ¥31 billion, as contributions from some measures realized ahead of the schedule.”

He added: “By executing structural reforms, we aim to establish a business base where sustainable growth can be realized by reducing expenses and maintaining profitability and productivity to withstand market changes and competition, while reinvesting in new growth areas.”

Forecast

For its fiscal year that will end on March 31, 2020, Fujifilm is increasing its forecasts for revenue and operating profit, as well as a “record high” for operating income. The company is forecasting revenue of ¥2.48 trillion, and operating income of ¥240 billion.

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