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.
Bloomberg noted that Nikon has the attention of Hedge funds but for all the wrong reasons. Evidently they are the prime target for 'shorters', that is investors that bet on a company share price going down. Nikon is not alone in this and other technology companies like Casio are also targets.
Why the negativity towards these companies?
- Overall sales increase by 2% on 2014
- Operating profit down by -2.3%
- Digital Camera sales fall by -9.1% by value
Canon Inc post their full year results up to 31st Dec each year. Overall sales are fairly flat with Office and Imaging Systems falling whilst Industrial activity is filling the gap. Investment in new businesses will be the key to growth in the near future.
The company is organised into 3 segments, Office, Imaging System and Industry and others. Digital Cameras are part of the imaging segment along with Ink Jet Printers. Sales of Imaging Systems account for 33% of all sales. Of these sales Digital Cameras account for 60% and Ink Jet Printers 31%. So Digital Cameras account for less than 20% of all Canon sales.
Sony have released their results for the 3 months ending 31 December 2015. This being their third quarter for the current financial year. Sales for the whole corporation are up just 0.5% from the same period in 2014 but operating income is up 11%. Interim results for the year to date see a rise of 0.1% for sales and a 132.7% rise in operating income.
During this review a thing to note is the change in Yen value with a rise of 5% in the Dollar and fall of 7.5% against the Euro compared with 2014.
Sony is a major technology business who split there results into 10 sectors. The sectors that interest us here are Imaging Products and Solutions (IP&S) and Devices. The IP&S accounts for the Cameras whilst the Devices account for imaging sensors and camera components. The devices are an important part of Sony’s business as they provide many sensors for both own brand cameras, other brand cameras as well as smartphones.
An article in the UK Amateur Photographer caught my attention in the last few weeks. The article entitled, DSLR price wars make dent in CSC sales (update), quotes Futuresource market analyst Arun Gill. In the report about the UK market for cameras he says
We believe that a more rapid uptake of CSCs is likely to be inhibited by a positive perception and preference towards the DSLR format and the key brands in this segment, respectively, particularly among entry-level users
This is clearly aimed at Canon and Nikon and their unwillingness to launch CSC's that will will compete with their Professional level DSLR's. My question is, Why should they? If lack of Pro level CSC's give the perception that they are inferior, maybe they are. Perhaps it's just that photographers in general don't share the current photo press infatuation with Mirroless CSC's.