Konica Minolta’s Growth Continues at Slower Pace, Continues to Bank on Color

Konica Minolta’s Growth Continues at Slower Pace, Continues to Bank on Color

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On October 31, Konica Minolta announced its financial results for the first half and second quarter of the fiscal year ending in March 2015.

The fiscal year ended in March 2014 was a strong one for Konica Minolta (see “Business Technologies Business Drives Growth for Konica Minolta’s Fiscal Year”), the company had a good start to its current fiscal year (see “Konica Minolta Reports Strong Sales of bizhub MFPs and Production Printing Products in Q1”), and the trend does not seem to be abating. Once again, the firm’s Business Technologies Business drove overall growth, although by slightly lower percentages than we have seen previously. As in the first quarter of this year, the firm cited strong sales of color production units, specifically the bizhub PRESS C1100 and bizhub PRESS C1085, along with the favorable effects of currency exchange, as driving its success.

Company Results

For the second quarter ending in September 2014, Konica Minolta had net sales of ¥250.3 billion ($2.2 billion*), an increase of 7.9 percent from ¥231.9 billion in the year-ago period—not quite the 19.3 percent increase the firm saw in the second quarter of the previous fiscal year. Operating income in Q2 was ¥17.5 billion ($154.3 million), up 7 percent from ¥16.4 billion in the year-ago period. Again, this is less than the 17.4 percent year-over-year growth in operating income seen the previous year. Net income, however, which had declined significantly in last year’s second quarter due to Konica Minolta’s withdrawal from the business of glass substrates for hard disk drives (HDDs), grew to ¥9.0 billion ($79.3 million), compared with the year-ago period’s net loss of ¥4.2 billion), an overall increase of ¥13.2 billion ($116.3 million).

For the first half of the year, Konica Minolta’s net sales were ¥478.6 billion ($4.2 billion), a year-over-year increase of 6.2 percent from ¥450.5 million in the first half of the previous fiscal year. Operating income was ¥29.2 billion ($257.3 million), up 20.7 percent from ¥24.2 billion in the year-ago period. Konica Minolta attributes that increase in part to the aforementioned withdrawal from the glass substrates for HDDs business. That withdrawal also caused a 27 percent decline in net income in the second half of the previous fiscal year, and the normalization of net income following that withdrawal led to a 164.2 percent increase in net income year-over-year, jumping from ¥5.6 billion to ¥14.7 billion ($129.5 million).

Business Technologies Business

Net sales for the Business Technologies Business, which includes MFPs, copiers, printers, supplies, and related services, totaled ¥199.7 billion ($1.76 billion) for the second quarter, up 11.2 percent from ¥179.6 billion in the previous-year period—once again, nothing like the 31.7 percent increase we saw in the second quarter one year ago, but not insignificant. Operating income increased 9.0 percent year-over-year, from ¥16.9 billion to ¥18.4 billion ($162.2 million). (Konica Minolta began classifying its industrial inkjet business in the Business Technologies segment rather than “Other” in the first quarter of this fiscal year, so the comparisons to last year’s figures do not line up.)

In its earnings presentations, Konica Minolta breaks the Business Technologies Business into Office Services and Commercial/Industrial Print. Office Services net sales increased 7 percent to ¥147.8 billion ($1.3 billion) in the second quarter, with ¥135.5 billion ($1.2 billion) of that in office products, up 6 percent year-over-year. Although that leaves only ¥12.3 billion ($108.4 million) in IT Service solutions, that segment is clearly seeing growth, as it was up 10 percent from the previous-year period. Konica Minolta reports that sales volumes for A3 color MFPs remained solid, expanding year-over-year in all regions. Additionally, expansion of hybrid-type sales that combine MFPs with IT services were cited as boosting the increase in sales, particularly in Europe and the United States. In its highlights of Q2, the firm noted its global partnership with Hyland Software as well as its launch into providing managed content services by business type, both of which were announced in early October, and so will not begin to impact the company’s financials until the next quarter.

In the Commercial/Industrial segment, Q2 sales grew 27 percent year-over year to ¥52.0 billion ($457.5 million). Marketing print management (MPM) was the biggest growth area, up 85 percent, which Konica Minolta attributes to its entry into that market in the Asia Pacific region through the acquisition of Australia-based Ergo Asia Pty Ltd., as well as European growth through the acquisition of UK-based Charterhouse PM Ltd. The firm reports it is planning further expansion into North America and Japan. Industrial inkjet was up 14 percent, and production print, the largest product segment, was up 16 percent, attributed to new color products released in June.

Looking Ahead

Konica Minolta continues to anticipate growth and revised its forecast for the year ahead upward. When announcing Q1 results, Konica Minolta said it expected full-year net sales of ¥1 trillion, operating income of ¥62 billion, and net income of ¥26 billion. The company now anticipates full-year net sales of ¥1.01 trillion, operating income of ¥65 billion, and net income of ¥30 billion. Konica Minolta expects the bulk of that growth will be driven by sales of color products in the Business Technologies Business, which is now expected to deliver sales of ¥810 billion, rather than the ¥800 billion previous forecast, but growth will be mitigated by uncertainty in the European economy. Konica Minolta maintained its forecast for ¥600 billion in net sales from the Office Services segment, but raised its outlook for net sales in the Commercial/Industrial print segment from ¥200 billion to ¥210 billion. The company said it plans to continue to leverage IT services in developed countries to increase sales of its color MFPs, while releasing strategic models to solidify sales of color MFPs in developing countries. In the Commercial/Industrial Print segment, Konica Minolta plans a full-fledged sales promotion of new color products along with global expansion of its MPM services.