On Feb. 3, Konica Minolta announced its financial results for the third quarter of its 2019 fiscal year, which ends March 31, 2020, as well as the nine-month period ending Dec. 31.
For the nine-month period, revenue of ¥747 billion ($6.9 billion) was down 3.9% from the previous-year period, while gross profit of ¥354.5 billion ($3.3 billion) was down 6.1%, operating profit of ¥10.5 billion ($96.8 million) was down 79.1% and earnings per share of ¥4.39 billion was down 93.6%.
In its financial statement, KM noted that shrinking capital investments by customers affected by the United States-China trade friction, a slowdown in the Chinese economy, continuing uncertainties in the European economy, and the strong yen led to a decline in revenue in the Office Business and the Professional Print Business. With respect to the Industrial Business, revenue from the field of optical systems for industrial use fell due to the effects of a shift in demand, while revenue from the field of materials and components fell slightly due to the effects of the adjustment of supply and demand. Meanwhile, revenue increased in the Healthcare Business and in the new businesses primarily in the field of bio-healthcare, where a new genetic diagnostic service is delivering strong performance.
The decrease in gross profit margin was due to the effects of a decline in revenue and other factors, such as additional tariffs that came into effect in September 2019 linked to the United States-China trade friction, delay in reduction of manufacturing costs in the Office Business and the Professional Print Business, and a temporary change in the sales composition ratio shifting to low- and medium-speed models. In addition, a temporary gain of 20.2 billion yen generated from the liquidation of assets through sale and leaseback arrangements was recorded in the same period in the previous fiscal year, resulting in a significant decrease in operating profit for the current period.
Results by segment
The Office Business segment recorded revenue of ¥412.1 billion ($3.8 billion), a decrease of 5.6% year-on-year, and operating profit of ¥22.5 billion ($207.3 million), a decrease of 34.3% year-on-year.
Konica Minolta noted that in the office products business unit, the sales volume of A3 MFPs declined year on year in both color and monochrome models. Regarding the low- and medium-speed color models, the company commenced the sales of bizhub i-series with a newly designed engine for the first time in seven years, as well as some industry-first robust security features. However, since a switch from the old model to the new model took time and demand of high-speed models showed stagnant growth as a new product launch was scheduled in January 2020, overall sales volume declined. During the three months ended December 31, 2019, the sales volume of color models returned to an increase due to the effects of sales of new products. In the IT services solution business unit, sales growth plateaued temporarily due to optimization of some of the IT services offered in an effort to increase profit, but measures are undertaken to further enhance profitability through standardization and automation of support services.
The Professional Print Business segment recorded revenue of ¥158.7 billion yen ($1.46 billion), a decrease of 3.9% year-on-year, and operating profit of ¥5 billion ($46 million), a year-on-year decrease of 42.4%.
According to Konica Minolta, the sales volume of both color and monochrome models decreased year on year. However, the sales volume of the color models returned to an increase during the three months ended December 31, 2019, reflecting the results of emphasized values of the IQ-501 Intelligent Quality Optimizer with an automated color and registration adjustment and recovery of sales in North America. In particular, low- and medium-speed models, major drivers of the unit, recorded solid sales in the United States and Europe. In growth countries, there was a considerable increase in the sales volume in the ASEAN region, but the sales volume of medium-speed models decreased in China and India. The sales volume of monochrome equipment decreased by a reactionary fall following the large-scale transactions corresponding to demand from customers in Europe seen in the same period in the previous year and a slowdown in demand in China. In the industrial printing business unit, sales of the AccurioJet KM-1 digital inkjet press through direct sales showed significant growth. The sales of label printers and digital decoration printing equipment showed substantial growth, reflecting the effects of new products and reinforced sales capacity, and maintaining the highest market share in the targeted markets, which drove an increase in revenue. In the marketing services business unit, despite the continuing efforts into transition as a business that provides high value-added solutions and expanding sales driven by the United States and Asia, revenue fell due to the strong yen.
The Healthcare Business segment recorded revenue of ¥63.1 billion ($581.4 million), an increase of 3.4% year-on-year, and operating profit of 0.5 billion yen, a decrease of 50% year-on-year, mainly due to the recognition of valuation loss on property, plant and equipment of ¥0.5 billion yen related to a sale of subsidiaries’ business bases.
In the new businesses where the group continues to invest to develop its future revenue pillars as initiatives for sustainable growth over the medium to long term, the sales area of the Workplace Hub, an edge IoT platform provided by the Company, has expanded from 9 countries to 23 countries during the current period, and measures have been implemented to reinforce sales activities, leading to an expansion of the number of customers.
The overall forecast remained the same for the full FY 2019 at ¥1,045 billion, although breakdowns for some business segments were revised slightly — the Professional Print forecast was revised upward, from ¥215 billion to ¥220 billion, “new business” and “others” (which includes the Workplace Hub) were slightly lowered.