H1 FY2017 Headlines (Apr 1, 2016 to Sep 30,2016)
- Overall company Operating Income falls -31%
- Overall company Net Sales fall -12%
- Imaging Business segment Net Sales fall -28%
- Imaging Business segment Operating Income loses ¥1.4b
Overall Company Results
Olympus released the first half results for the FY2017 on the same day it formally announce the new flagship mirrorless camera, the OM-D E-M1 Mark II. The new camera carries a hefty price tag and Olympus will be hoping it can help stem the loses in the Imaging Business in the second half of the year.
Overall, the business sales have been flat when the effects of unfavourable exchange rate have been taken out of the equation. Operating Income would also look much better without the forex issues of a strong ¥en. The problem is the exchange rate issues just don't go away and hence the results are, whilst better than previous forecasts, quite poor. Operating Income has been improved by 18% from the previous forecast by reducing SG&A expenses.
At the end of FY2016 forecasts for the FY2017 were to maintain overall sales and profits by reducing costs, despite the negative impact of a strong ¥en. Sales were to be down just -1% year-on-year and operating income down -14% year-on-year whilst Net Income would rise by +4% to ¥65B. The exchange rate forecast was for ¥/$ at 108/1 and ¥/€ at 120/1.
In the imaging segment of the business things were not so 'rosy'. In line with expectations of the market continuing to decline, Net Sales were set to decline by 11% but Operating Income would improve to wipe out any further losses. Most of the pain was due in the first half of the year but the second half would see an improvement as new products hit the market. The impact of a major earthquake was not factored in at this stage. So how did things work out in the first quarter of FY2017, April to June 2016?
Q1 FY2017 Results
At the end of Q3 FY2016 forecasts were still good despite uncertainties over slowing China and possible litigations. Sales were to be up +7% year-on-year and operating income up +10% year-on-year. The dollar exchange rate was favorable whilst the Euro had turned down slightly.
In the imaging segment of the business, sales were up 1% and previous operating income losses had been wiped out. So all in all expectations for the full year were to maintain this position and move into FY2017 in good shape. So how did things work out in the final quarter.
Full Year and Q4 FY2016 Results
In the first part of this report, I looked at the results for Olympus from 2012 to 2015 and what they were looking to achieve in FY2016. With three-quarters of the year have been accounted for, how are they getting on so far. I will look at the aspects of Net Sales Income, Gross Profit, SG&A Expenses and Operating Income.
Total Net Sales up to Q3 2016
While Q3 has been a steady quarter for Olympus if we look at the year for the 9 months so far, for the whole company things have improved significantly.
Net Sales have increased year-on-year by 8%. Gross Profit has had a bigger improvement by 12% year-on-year. This, however, was offset by an 11% rise in SG&A leaving the Operating Income up 19% year-on-year.
The first of an ongoing series of articles looking at the financial results of Olympus Corporation and how it is performing in the Digital Camera Market. In the first part, I will look at the company up to the end of FY2015.
Olympus Corporation the Company
It's a matter of record that Olympus is a troubled company with a recent history of financial irregularities that have been well documented so I won't dwell on that here. Rather, I will be looking specifically at its Imaging Business but also how healthy the overall business is in supporting that aspect.
In terms of the digital camera market, it is worth noting that Olympus is partly owned by Sony and Mitsubishi (who own Nikon) who both have about 5% shareholding. Sony is a major image sensor supplier but Olympus use other manufacturers as well.
The Company Plan
Back in 2012, a new 5-year plan was drawn up with 'Back to Basics' as a slogan. In the Imaging Business the stated aim was to:
"focus on mirrorless interchangeable-lens cameras and high-end compact cameras while improving profitability...we will strive to achieve profitability in fiscal year ending March 2013 and establish a revenue structure that will enable us to continue generating a steady income stream in the following years...reduction of SG&A expenses"
Therefore, we expected to see advancements in unit sales of mirrorless interchangeable-lens cameras (MILCs) and higher unit values in both MILCs and high-end compact cameras (HECCs). A reduction in the cost of sales (SG&A) and a return to profitability.