Slow Sales, But Higher Profits for Ricoh’s First-Quarter

A man walks in front of the headquarters of Ricoh Co in Tokyo May 26, 2011. REUTERS/Toru Hanai

Ricoh Company of Japan posted generally positive fiscal results for its first quarter that ran from April 1 to June 30, 2019.

Sales for the first quarter decreased by 2.7 percent year-over-year  to ¥477.6 billion. Ricoh says this decline was despite gains in its Office Services group, and reflected reduced hardware and related consumables revenues, mainly overseas’ unprofitable sales and a decrease in MIF (machine in the field). Other factors that resulted in lower sales included Ricoh’s adoption of equity method accounting for consolidated logistics subsidiaries whose shares Ricoh transferred, and the removal
of Ricoh India Limited from consolidated results.

Ricoh says that consolidated sales would have risen 0.2 percent year-over-year after excluding the equity method adoption, consolidation removal, and foreign exchange impacts.

In Japan, sales were up by 0.1 percent year-over-year, with steady growth, particularly in Office Services, reflecting expanded demand for IT equipment as companies overhauled work practices, and due to higher revenues in such areas as industry solutions services.

Sales in the Americas decreased by 2.3 percent year-over-year due to the decline of sales in the Office Printing group, although sales in the Commercial Printing group were up (a decrease of 3.2 percent excluding foreign currency exchange fluctuations).

Sales in Europe, the Middle East, and Africa decreased by 7.5 percent year-over-year, due to lower sales generated by the Office Printing group, although sales in the Office Service group were up (a decrease of 2.6 percent year-over-year excluding foreign currency exchange fluctuations).

Sales in other regions were down by 3.9 percent year-over-year, also due to the decline of sales generated by the Office Printing group (a decrease of 0.9 percent year-over-year  excluding foreign currency exchange fluctuations).

As a result, sales generated in Ricoh’s overseas market decreased by 4.6 percent year-over-year. Excluding the effects of foreign currency fluctuations, overseas’ sales would have decreased by 2.6 percent year-over-year.

Ricoh’s gross profit for the quarter was down 5.2 percent year-over-year to ¥184.4 billion. This was despite an improvement in its Office Services group. A prime factor was a decrease in Office Printing because of the impact of lower sales resulting from Ricoh emphasizing more profitable business sales, as well as from lower consumables revenues. Ricoh says its adoption of equity method accounting for consolidated logistics subsidiaries and the removal from consolidation detracted from earnings in other areas.

Selling, general, and administrative expenses fell 8.4 percent year-over-year to ¥161.0 billion. This stemmed from Ricoh’s progress in containing expenditure through structural and business process reforms.

Other Income increased primarily due to a gain on the sale of land, buildings and structures related to Ricoh Industry’s former Saitama plant.

Operating profit advanced 39.8 percent year-over-year to ¥27.5 billion. After excluding structural reform expenses, one-time income, and other transient factors, operating income would have been ¥25.5 billion, up ¥0.7 billion year-over-year.

Profit before income tax expenses increased by 45.5 percent.

Profit attributable to owners of the parent increased by 68.3 percent  year-over-year as compared to the previous corresponding period, to ¥15.6 billion.

Office Printing Group

Office Printing sales totaled ¥256.2 billion and decreased by 6.4 percent year-over-year, due to a decrease in the volume of hardware and consumables revenues, particularly overseas. Ricoh says this was largely because it strategically prioritized profits over gross revenue in negotiating deals. Another factor was a decrease in MIF (machine in the field) by reconsidering contracts to emphasize profitability.

Office Printing operating profit was ¥31.5 billion and increased by 4.5 percent year-over-year, due to improvement profitability, pricing adjustment, new products, and a gain on that sale of land, buildings, and structures related to Ricoh Industry’s former Saitama plant.

Office Service Group

Office Service sales were ¥115.7 billion and increased by 7.2 percent year-over-year. This growth reflected gains in Japan, where demand expanded for IT equipment in line with enterprise work practice reforms and revenues grew for industry and
business solutions and IT services.

Overseas, Ricoh says it expanded IT services in Europe. Office Service operating profit was ¥4.0 billion and  increased by 81.0 percent year-over-year. This improvement was due to higher sales and profitability improvements.

Commercial Printing Group

Commercial Printing sales were ¥43.0 billion and increased by 1.5 percent year-over-year, due to growing demand for new products and an increase in hardware revenues, particularly overseas.

Commercial Printing operating profit was ¥6.1 billion and increased by 24.2 percent year-over-year, due to higher sales and selling, general and administrative expenses efficiency.

Industrial Printing Group

Industrial Printing sales were ¥5.9 billion and increased by 2.3 percent year-over-year. While sales increased slightly due recovering of inkjet print-head demand in the Chinese market, Ricoh posted an operating loss of ¥0.4 billion. (Industrial Printing
operating profit decreased by ¥0.3 billion as compared to the previous corresponding period.)

Thermal Media Group

Thermal Media sales were ¥16.1 billion and decreased by 0.8 percent year-over-year. Thermal Media operating profit was ¥0.9 billion and increased by 45.7 percent year-over-year, due to a reduction in expenses, while sales decreased slightly both in Japan and overseas.

Other

Other segment sales were ¥40.4 billion and decreased by 9.5 percent year-over-year.

Ricoh says this reflected its adoption of equity method accounting for consolidated logistics subsidiaries. Other segment operating profit was ¥1.9 billion and increased by ¥1.4 billion year-over-year, due to profit improvement in the field of Smart Vision business.

Forecast

For its fiscal year that will end on March 31, 2020, Ricoh is forecasting that sales will be down slightly (-0.2 percent) to ¥2,010.0 billion, and profits will be up 25.2 percent ¥62.0 billion, with both versus the previous fiscal year.

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