Kyocera Announces FY2019 Financial Results With Second Consecutive Year of Sales Growth

On April 26, Kyocera announced FY2019 financial results (fiscal year ending March 31, 2019). With the second consecutive year of sales growth, Kyocera reported sales revenue of $14.63 billion for FY2019, 3% growth over FY2018 sales results. Operating profit increased to $850 million in FY2019 which is 4.5% over FY2018 operating profit. Kyocera reported cash and cash equivalents rising by 21% to $4.62 billion for the year ended March 31, 2019.

Business segment (group) performance for FY2019:
Business Group Sales Rev
in B$
% change from FY2018 Business Profit in M$ % change from FY2018
Industrial & Automotive Components Group  $      2.99 up 9.3%  $ 370.00 up 22.5%
Semiconductor Components Group  $      2.37 down 3.1%  $ 100.00 down 64.8%
Electronics Devices Group  $      3.47 up 19.6%  $ 600.00 up 43.5%
Communications Group  $      2.40 down 1.4%  $    90.00 up 134.1%
Document Solutions Group  $      3.57 up 1.1%  $ 390.00 up 6.6%
Life & Environment Group  $      0.76 down 28.6%  $(600.00) down $100M

In a summary of the financial results, Hideo Tanimoto, president and representative director of Kyocera Corporation credited the increased sales and profits in “buoyant divisions due to proactive investment and cost reductions” for the FY2019 financial performance. He pointed out these “buoyant divisions” were the Industrial & Automotive Components, Electronic Devices, and Document Solutions groups.

Document Solutions Group

The Document Solutions Group of Kyocera Corporation represented 23.1% of total Kyocera consolidated revenue in FY2019 and approximately 25.5% of the positive business profit dollars generated (excludes $600 million loss in Life & Environment Group). The group was the largest contributor to sales revenue at $2.4 billion and second to the Electronics Devices Group in business profit. The FY2019 business profit margin for Document Solutions Group was 11.6%, an improvement of 6 basis points compared to FY2018 11% business profit margin.

During the fourth quarter of Kyocera’s FY2019, though sales revenue of $960 million was 2.8% below 4Q FY2018, Document Solutions Group continued to be the top revenue contributor and represented 23.1% of Kyocera’s total revenue for the quarter. This group revenue contribution was slightly under the 24% contribution during the same time last fiscal year. Kyocera reported business profit for this group during the 4Q FY2019 at $130 million, 14% above the business profit generated by Document Solutions Group during 4Q FY2018. The 4Q FY2019 business profit was 30% of the total positive business profit dollars generated for Kyocera Corporation (excluding 4Q losses in Life & Environment Group and Others). Quarterly business profit margin improved to 13.3% in 4Q FY2019 compared to 11.3% during the same time in FY2018.

“Solid sales volume of multifunctional products” and contributions from merger and acquisition activities were cited by Kyocera for the Document Solutions Group sales revenue growth during FY2019. Kyocera attributed business profit improvements to the sales revenue increases along with cost reductions and improved productivity. Kyocera emphasized the proactive M&A that has been done in Germany expanding their ECM position through the acquisition of Alos, along with expanding ECM services and their sales network through the acquisition of Janus Data Products in the Czech Republic and Slovakia.

In business strategy for FY2020, Kyocera said they will continue to expand the Document Solutions Group by enhancing the product lineup and strengthening the solutions business. Additionally, they expect to “bolster business through M&A.” With that strategy, Kyocera guided financial expectations for Document Solutions Group in FY2020 to a 6.6% increase in sales revenue but a 5.1% drop in business profit.

Our Take

With six business groups, the “buoyant” three business groups of Industrial & Automotive Components, Electronic Devices, and Document Solutions more than overcame revenue declines in the other three groups. In business profit, Communications Group joined these three “buoyant” sales groups to overcome profit challenges in the other two groups and provide Kyocera profit growth of 8.2% over FY2018. Kyocera has proclaimed their objective that FY2020 will be the third year in a row of record high sales.

Kyocera’s Document Solutions Group continued to see both revenue and profit rise in FY2019, a not-all-that-common occurrence in this industry. Kyocera invested a little over $279 million in capital expenditures and R&D in this group during FY2019 and said they are continuing their investment in FY2020 through the opening of a new MFP and printer plant in Vietnam to meet increasing demand, restructuring the R&D system to expand business in software, and increase productivity by adding and automating production lines. Additionally, they will continue their M&A activities to expand this group’s business.

Regionally, consolidated revenue results saw Japan decline by 3% compared to FY2018 with all other regions experiencing revenue growth. The U.S.A. region saw double-digit revenue growth of 10.7%. It’s difficult to determine how much of this growth is due to the Document Solutions Group since Kyocera did not report group revenue by region. However, with the introduction of new products during FY2019, particularly in the solutions-focused MFP and higher-speed production areas, it’s fair to assume that Document Solutions Group had a positive impact in helping the U.S.A. region achieve that consolidated revenue growth.

Kyocera is forecasting a 6.6% revenue growth for the Document Solutions Group during FY2020. However, business profit for the group is expected to decline by 5.1%. We expect the revenue forecast is due to anticipation of increased sales of higher speed and production level units with the profit forecast impacted by the continued decline in page volumes and perhaps increased price competition in the higher value production device space.

The continued challenge for Kyocera is distribution, particularly in the U.S. as dealer consolidation continues apace. Kyocera’s continued acquisitions of solutions companies is an attempt at positioning them to take advantage of the document workflow digitization trends happening, in order to buffer the effects of declining printed page volume in the office. Whatever decisions they make, it is hard to argue with their revenue and profit growth.