Olympus Financial Report H1 FY2017 - Sales flat while Profits better than expected

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 unfavorable 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.

How the sales and profits are made.

  • Medical Business - MB
  • Scientific Solutions Business - SSB
  • Imaging Business - IB
  • Others - OB

The business is being propped up by the Medical Devices Business as the only segment to make a profit in the first half of the year. Thankfully, profits in the Medical Business are substantially higher than any losses in the other Businesses. Turning the loss makers in to profit centers is the biggest challenge in the short term, otherwise they may have to pruned as ‘dead wood’.

Imaging Business Segment Results

The nature of my interest in these results is largely with the Digital Camera Business and that is what we will consider from here on. The Imaging Business has a small and shrinking part of the overall sales within Olympus, at just 8.6%. It has not seen a profit since the first quarter of FY2016, last year. Olympus are a global brand with a long distinguished history in cameras with a loyal user base. So what is the problem?

Net Sales are well down by -28% and Operating Loss is ¥1.4b. Three things have effected sales this year, shrinking camera market, Kumamoto Earthquakes and the strong ¥en. If we discount the effect of forex, sales would still be down 20% year-on-year.

Effects of the Kumamoto Earthquake

We have heard much about the effects to camera production of the damage to the component factories that produces parts for not only Olympus cameras but many other top brands. Many cameras have been and still are in short supply. Lost sales from the summer peak season have been seen across the board. However, looking at camera unit production figures below it does not appear that Olympus has been effected too much. Compact cameras are down but they are a sinking market. Mirrorless are stable from the previous quarter but with few new models this would be expected too.

Effects of Exchange Rates

The effects of the exchange rate on the digital camera market is also important. In the Imaging segment the effect is -8% of the -28% fall in sales and contributing to the Operating Loss.

The exchange rate for the H1 has been averaging ¥105 per $ and ¥118 per €. Forecast for the rest of FY2017 are ¥105 per $ and ¥115 per €. That looks a little high at todays rate.

Total Camera Sales

Total unit sales for digital cameras were 430K units in the first half of FY2017. This is down 29.5% from the 610K units sold in the same period the previous year. Sales by value are down from ¥36.4b in 2015 to ¥26.9b for the same period, a drop of -26.1%.

Compact camera sales are down with 240K unit sold as compared with 330K the previous year, down 27.3%. The same by value has fallen from ¥9.6b to ¥6.5b, down 32.3% in the first half of the year compared year-on-year.

Mirrorless camera sales are also down from 280K to 200K units, a drop of 28.6%. By value ¥26.8b to ¥20.4b, down 23.9%.


Second half forecast for the imaging segment are to improve camera unit sales up slightly to 440K units but down from 520K units the previous year. The value of cameras sales will improve to ¥32.9b, about equal to the ¥32.4b in H1 2016. This will be achieved by further reducing the sales of Compact cameras and replacing them with high-end Mirrorless cameras.


Olympus make some of the most attractive and desirable Digital Cameras on the market today. The fact that their Imaging Business is not performing well financially is therefore worrying. Its understandable that the Compact camera market has been hit hard from rise in Smartphone Cameras and that the Earthquake disrupted production. I think the Earthquake has taken more than its fair share of blame for the woes in the Digital Camera industry. The exchange rate has also had an impact but not as much as for other camera businesses.

The problem for Olympus is simply not getting new products to market quick enough and losing out to the likes of Fujifilm with their XT-2 who have gained a large following and taken the money in the second half of 2016. Will there be enough left when the OM-D E-M1 Mark II reaches the market in late December. Maybe in Asia, but it will be too late for the US/EU.

We will have to wait and see if Olympus can built from here, but I fear more contraction before they find a firm profitable base for their Imaging Business.

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