- Overall company Operating Income falls -44.9%
- Overall company Revenue falls -10.8%
- Imaging Products & Solutions segment Revenue fall -25.5%
- Imaging Products & Solutions segment Operating Income falls -45%
Overall Company Results
Sony released the first half results for the FY2016 a day after lowering its full-year profit forecast by 10% percent to ¥270b. Given todays results for the first half that turns out to be positive news. Operating Income or profit for H1 FY2016 has fallen by -44.9% from the same period the previous year. It will take a major recovery in the second half to claw back to the new forecast for full-year profits.
It has been difficult for Sony to maintain their profit margins in recent years but at least they can look forward to Q3 that has been their best historically. The problems of earthquakes and rising ¥en appear to be behind them now, for the moment.
H1 FY2017 Headlines (Apr 1, 2016 to Sep 30,2016)
- Overall company Operating Income falls -21.3%
- Overall company Revenue falls -8.6%
- Imaging Solutions segment Revenue fall -11.5%
- Imaging Solutions segment Operating Income falls -28.5%
The headline figures overshadow what has been a reasonable first half of the year for Fujifilm. The figures are spoiled by the negative impact from the strengthening of the ¥en. Take out that factor and Revenues would be about on par with the previous year but Operating Income would be ahead by 7.5%. What is more difficult to understand is why forex should have such a big impact when over 40% of revenue is credited to the home market.
Previously, the forecast for the full year saw Revenues rising by 2.3% and Operating Income rising by a substantial 15.1%. Overviewing the global economy over this first half the trend is of gradual economic recovery with signs of weakness in Asia. So even given the problems with exchange rates, some more growth was expected.
Q3 FY2016 Headlines
- Overall company Operating Profit fall -48.2%
- Overall company Net Sales fall -15.9%
- Imaging System segment year-on-year Net Sales fall -17.9%
- Imaging System segment Operating Profit fall -28.4%
The headline figures look bad but despite the reduced sales and profits, at least all of the 3 main business segments are running a positive operating profit. The previous outlook for Q3 was clear that the markets were deteriorating and the forecast was revised down. The specific challenges were a slowdown of the global economy, post-Brexit uncertainty, rising value of the ¥en and production issues due to the Kumamoto earthquake. All of these continued to have a negative impact on sales in the third quarter results.
Todays consolidated results for Q3 FY2016 give a further insight into just how difficult conditions are for camera manufacturers. In Q2 FY2016 year-on-year net sales for the Imaging System segment fell -13.5%. Would Q3 see a deterioration or would the business bounce back?
At the beginning of FY2016 projections for the full year 2016 were for a fall of -8% Gross Sales Value and -16% in Total Units in the Imaging System segment. This fall was to be mainly due to the demise of the Fixed Lens Compact Camera that was expected to fall -24% by Units in 2016 under intense competition from the Smart Phone.
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.