Q1 FY2019 Headlines (Apr 1, 2018, to Jun 30, 2018)

• Overall company Revenue up +5%
• Overall company Operating Profit fell -¥24.3B
• Imaging Business segment Revenue fell -8%
• Imaging Business segment Operating Profit down -¥6.7B

The latest results for the first quarter of FY2019 are a mixed bag and make predicting the rest of the year very uncertain. Overall revenues were up 5%, and that is good, but all the profits and more are being used to settle previous legal issues and restructure manufacturing. Whilst these are one-off charges you have to ask, when will it end?

So, we are going to look at just the performance of the Imaging Segment and how that is performing in the current shrinking Camera marketplace.

Imaging Segment Performance

The Imaging Segment of Olympus accounted for just 7.7% of Revenue in the first quarter. Whilst this is a significant part of the business it is becoming less and less so. Revenue was down -8% to ¥13.9B year-on-year but Operating Profit was down from ¥0.9B to a loss of -¥5.8B.

The loss was due to a one-off charge incurred for the closing of the China production facility and subsequent move to the Vietnam production facility. Without this ¥5B charge, Operating profit was still down -¥0.8B.

The hope is that when the new Camera production is fully up and running the revenues and profits will improve. Given the rate of market shrinkage, that may be wishful thinking.

Foreign exchange rates have had a small effect on these figures and that was largely favourable.

The Imaging segment is split into three sectors, Mirrorless (CSC) Cameras, Compact Cameras and Other (audio recorders). We will take a closer look at the two camera types.

Mirrorless (CSC) Cameras

These are cameras that have removable lenses and are becoming more popular as the technology improves. Largely because of their flexibility and smaller size.

Olympus produce Micro Four Thirds cameras that can interchange with Panasonic Lumix cameras and lenses. This refers to the image sensor size that has a subsequent effect of the lens size. Whilst this is much smaller than other APS-C sized sensors it does lead to a smaller, lighter camera that is popular with consumers conscious of carrying the weight around.

Unfortunately, Olympus revenues for this type of camera fell by -11% to ¥10.3B in this quarter. What about the overall market? According to the CIPA figures, with whom Olympus shares camera data, the total market for Mirrorless cameras sales excluding additional lenses grew by +6% in the same quarter. So on this evidence, it seems Olympus has slipped behind the competition.

In terms of units sold, Olympus sold 90K Mirrorless cameras. That is a drop of -18% from the same quarter the previous year. Again looking at the CIPA figures for the market growth in Mirrorless cameras, shipments are up by +9.8% on last year to 1.2M. That gives Olympus about 7.5% market share by units. So again some work to do to catch the competition in what is becoming a very tough market.

Compact Cameras

Turning attention to an even tougher segment of the market, Compact cameras have been in decline for many years now as consumers turn to using smartphones for simple snapshots.

Olympus has a good line in ‘tough’ compact cameras for the action sports enthusiast. This is also a very competitive market with the likes of GoPro taking a large chunk of the market.

Olympus revenues fell by -12% to just ¥2.0B. According to CIPA figures Compact camera sales fell by -29.6% from the same quarter the previous year. So better news from Olympus in terms of keeping up with the competition. The problem is the market is shrinking so fast that it hardly seems worth it.

Coming to the units sold, Olympus sold 60K Compact cameras, a drop of -25% from the previous year. The CIPA figures show that 2.3M Compact cameras were shipped in this quarter a fall of -38.5% from the previous year. This gives Olympus about 2.7% of the market share by units.

Forecast

The forecast for the rest of FY2019 has not been changed other than to factor in the losses from litigation and restructuring that will see profits substantially reduced.

Imaging segment Revenues and Operating Profit remains unchanged with a loss of -¥7B being forecast.

This, however, is where I see a problem. The current forecast for sales in Mirrorless Cameras was to increase unit sales by +24% year-on-year and reduce Compact Cameras by just -16%. Given the way both Olympus and the market, in general, have performed so far this year, I think it will be a struggle to get near to those figures. If they can sell higher value products that may not affect the Revenues and Profits so much.