Ricoh reported its year-end financials for its 2019 fiscal year ending March 31, 2020.
Like most OEMs, its numbers for the most recent quarter were adversely affected by the COVID-19 pandemic, but faced other hurdles as well.
Consolidated sales for fiscal 2019 declined 0.2%, to ¥2,008.5 billion. Although sales rose in the Office Service and Industrial Printing segments, they were down in the Office Printing, Commercial Printing, and Thermal segments. The Office Printing revenue downturn reflected lower hardware and consumables demand owing to the COVID-19 pandemic.
Gross profit decreased 5.9%, to ¥721.5 billion. The drop was despite an earnings contribution from the Office Service business, and reflected a downturn in the Office Printing business. Key factors here were an ongoing emphasis on more profitable business deal sales, which led to a reduction in the number of machines in field, lower hardware sales owing to the pandemic, and lockdowns and requests to voluntarily constrain activities that restricted customer business activities and dampened sales of highly profitable related consumables.
Sales in the Americas were down 5.9% from a year earlier. Although Industrial Printing sales grew, this reflected a focus on profitable deals and lower Office Printing revenues owing to the COVID-19 pandemic.
Sales in Europe, the Middle East, and Africa were off 4.9% but were up 1.0% after stripping out the foreign exchange impact. The principal factors here were, as in the Americas, a focus on profitable deals and lower Office Printing revenues owing to the pandemic. These factors outstripped Office Service growth from the acquisitions of DocuWare GmbH and other IT services sales firms to expand in the promising digital business area. Sales in Other regions were down 8.6%. This was due to an Office Printing decline that overshadowed growth in Industrial Printing sales.
Ricoh noted that the outlook in FY 2019 became increasingly uncertain owing to intensifying trade friction and rising geopolitical tensions. The economic climate deteriorated rapidly toward the end of the term, particularly overseas, with a global spread of COVID-19 infections from the start of 2020 prompting governments in numerous countries to impose lockdowns or requests to voluntarily constrain activities.
It was against that backdrop, says Ricoh, that demand for office equipment was again down slightly in developed nations but expanded in emerging markets. In March 2020, however, demand plummeted in response to the COVID-19 pandemic.
In the fourth quarter, corporate demand for consumables fell, although demand for office IT services continued to grow during the year. Ricoh expects the collaboration services and contents market is expected to grow around 10% annually, and noted that even amid the pandemic, demand for IT services continued to expand steadily, reflecting greater IT demand relating to teleworking and other aspects of business continuity.
Ricoh noted a narrowing down of deals in keeping with a strategic focus on profitable sales and a reduction in the number of machines in field from ongoing contract reviews. In Office Service, sales surged, particularly in Japan, for solutions packages that integrate IT equipment, software, and services to support small and medium-sized enterprises by resolving industry- and business-specific issues and help streamline business processes.
Ricoh declined to announce a forecast for FY 2020, noting “the COVID-19 pandemic has affected Ricoh’s business activities in various ways since becoming a pandemic in February 2020. We have stepped up our use of email, teleconferencing, telemarketing, and other tools in response to expanded teleworking and halts in visits to customers. It has become difficult, however, to expand sales of new products and services owing to such factors as declining purchasing demand and an inability to install machines in field. On top of that, lower business activity in offices reduced the usage of mainstay multifunctional printers (MFPs), cutting sales of consumables and other offerings. The pandemic will affect our fiscal 2020 performance until an end is in sight for the COVID-19 pandemic. The forecast for the fiscal year ending March 31, 2021 has yet to be determined, because it is difficult to reasonably estimate the impact of the COVID-19. We will carefully assess the impact and announce it promptly when we can disclose reasonable forecast.”