Nikon Financial Results Q1 FY2017 - Camera Business Loses Focus

Nikon has just released its Financial Results for Q1 FY2017/3 that cover sales to the 30th June 2016. Given the current difficulties the Camera Industry is going through it will be interesting to take a closer look at the data and comments.


NIKON CORPORATION is a major Japanese company that has built a reputation as a maker of very desirable cameras. During the latter part of the 20th century they became the Icon of the industry and for many they are still the ‘go to’ brand for Digital Cameras.

Nikon is an independent public company who are 'affiliated' to the large Mitsubishi Organization. Major shareholders are Japanese Banks and Institutions but also there are a high percentage of both Japanese and Foreign Private Investors.

The business is split into 4 sectors:

  • Precision Equipment
  • Imaging Products
  • Instruments
  • Medical

Looking back to last years results for the full year up to March 31, 2016 the business Net Sales and Operating Profits were split as follows:

Nikon Business Segment Net Sales and Operating Income FY2016

So looking at this charts it is obvious that Nikon are heavily reliant on the performance of the Imaging Segment that produces Cameras, Binoculars and Field Scopes. With 65% of Net Sales and 79% of Operating Income (discounting 'other income') coming from the Imaging Products Business.

Market Share of the Digital Camera and Lens Market FY2016

Given the results for FY2016 as above lets look at what was Nikons' previous forecast for the FY2017.

Previous Forecast

In the FY2016 end of year report it was forecast that the Precision Equipment Business would see strong sales and income into FY2017. The Instrument Business was also set to see growth in sales and especially operating income whilst the Medical Business would increase sales but see losses widen.

The Imaging Business, that is our primary concern here, was forecast to see sales fall by 15.5% and operating income down 23.4%. This was noted as being due to 'negative impacts caused by market shrinkage, exchange rates, and the earthquake'.

Overall the business was to see sales rise 2% and Operating Income rise by 25.3% over FY2016. Given the large fall forecast for the largest segment of its business, Imaging, it would see a major shift in the product mix for Nikon in FY2017. Q1 results will give a glimpse into this shift.

Overall Business Results

Overall Business 2016/Q1 2017/Q1 % Change
Net Sales ¥185.8B ¥169.3B -8.9%
Operating Income ¥5.1B ¥14.9B +192%

Despite overall sales slipping in the first quarter sales and operating income from the Precision Equipment segment has improved to produce some healthy profits. Investment in the Medical Business is taking investment whilst the Instrument Business in reasonably flat. So the big downturn is in the Imaging Business and that is what we will concentrate on next.

Imaging Segment

Well, the big downturn in Camera Sales had come with a vengeance. The drop in sales of -31.1% is due to three factors. Firstly, the ongoing general downturn in the market due to the use of other technology, disinterest and less expendable income. Secondly, adverse exchange rates causing profits to shrink and prices to rise. Lastly, the Kumamoto earthquake in mid April 2016 has severely disrupted production of some Cameras leading to stock shortages and lost sales across the industry.

Imaging Business 2016/Q1 2017/Q1 % Change
Net Sales ¥137.1 ¥94.4B -31.1%
Operating Income ¥13.4B ¥9.4B -29.8%

Looking at the unit sales these are also well down year-on-year.

Imaging Business - Unit Sales 2016/Q1 2017/Q1 % Change
Interchangeable Lens Cameras 1040K 710K -31.7%
Interchangeable Lenses 1490K 1030K -30.9%
Digital Compact Cameras 1530K 840K -45.1%

The unit sales are down by at least as much with Compact Cameras significantly worse. However, as the Nikon notes indicate, a better mix of higher value cameras has meant that the impact of Compact Cameras extra deteriorating sales has been covered for now.

Camera Market Share

Market Share of the Digital Camera and Lens Market Q1 FY2017

These total market figures are taken from Cipa data that has previously correlated to Nikon data from prior years. Market share has slipped especially in the lens area.

Future Forecast

Forecast for the full year have been lowered with Net Sales lowered from ¥840B to ¥820B but Operating Income to remain at ¥46B. Although sales improve the exchange rate will work against this in the second half of the year.

The Imaging segment will reduce by -19% Net Sales whilst the Operating Income drops -28%. To achieve this will take a marked improvement in the second half of the year.


Interim Dividend for the year have been estimated at ¥12, up from ¥8 the previous year.


There is little from the perspective of Cameras that we could not have guessed here. Compounding problems have led to a severe shrinkage in the market. This shrinkage has been quantified at around 30% but that is expected to improve in the second half. New high end DSLRs such as D5 and D500 are helping to prop up this market but Nikon have lost some market share and that at this time is worrying.

Second half may pick up but exchange rates continue to work against this and forecasts may have to lower before the year is out. In the meantime Nikon is reliant on their Flat Panel Display Lithography products to fill the gap. That may last a while but may not be a long term solution. An upturn in Camera sales is vital for their future.

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