Announcing results for financial year 2019 (April 1, 2019 – March 31, 2020), Japanese multinational print technology and electronics manufacturer Ricoh outlined a steep fall in demand caused by COVID-19 but said growth areas included industrial printing and IT services. “Profit attributable to owners of the parent was ¥39.5 billion, down 20.2% from a year earlier.” Industrial Printing sales increased 11.2%, to ¥23.0 billion on higher demand for new advanced inkjet heads and industrial printers.
“In fiscal 2019 the outlook became increasingly uncertain owing to intensifying trade friction and rising geopolitical tensions,” said a company statement. “The economic climate deteriorated rapidly toward the end of the term, particularly overseas, with a global spread of COVID-19 infections from the start of 2020 prompting governments in numerous countries to impose lockdowns or requests to voluntarily constrain activities.
“In March 2020, however, demand plummeted in response to the COVID-19 pandemic. In the fourth quarter, corporate demand for consumables fell as office operations shrank. Demand for office IT services continued to grow during the year in line with progress in information and communication technology and changing work practices.
“It is also worth noting that Ricoh’s targeted the collaboration services and contents market is expected to grow around 10% annually. Even amid the pandemic, demand for IT services continued to expand steadily, reflecting greater IT demand relating to teleworking and other aspects of business continuity.”
Consolidated sales for fiscal 2019 declined 0.2%, to ¥2,008.5 billion. Gross profit decreased 5.9%, to ¥721.5 billion. Ricoh posted ¥79.0 billion in operating profit, down 9.0% from a year earlier.
“Profit attributable to owners of the parent was ¥39.5 billion, down 20.2% from a year earlier. After excluding corporate income tax expense increase associated with the Ricoh Leasing share transfer, profit attributable to owners of the parent would have risen 6.5%. Comprehensive income decreased 67.9% to ¥11.6 billion due to a decrease of exchange differences on translation of foreign operations and profit decline.”
We expect the Commercial Printing market to grow on the strength of the high image quality and productivity and broad paper support of our offerings and a rising need for systems that can deliver high-value-added printed materials that open doors to new business opportunities. We aim to expand our business by catering to the needs of customers while helping them to develop their businesses.
In fiscal 2019, we promoted sales of the RICOH Pro C9210/C9200 and RICOH Pro VC70000, which we launched in fiscal 2018 for commercial printing customers. The RICOH Pro C9210/C9200 has earned a solid reputation among customers for delivering image quality that is comparable to that of offset printers while saving labour and stabilizing print quality. The RICOH Pro VC70000 has won top marks for delivering outstanding productivity and image quality and for being more compact and entailing lower initial costs than offset printers.
Fiscal 2019 segment sales dropped 3.7%, to ¥178.3 billion. We enjoyed double-digit growth year-on-year in sales of hardware through the third quarter on the strength of products introduced during that period, principally in Europe and the United States. Hardware sales declined from the fourth quarter, however, owing to the COVID-19 pandemic. Sales of consumables for transactional printers were also down, reflecting decline in demand for those systems.
Operating profit was ¥23.1 billion, less than the ¥27.2 billion posted a year earlier, owing to lower sales of transactional printer consumables and a gross profit decline.
In this segment, we seek to capture new markets and customers based on our strong position in inkjet heads that offer superior durability and are compatible with an array of inks. Furthermore, we can generate new value by drawing on our printing technologies, good examples being additive manufacturing and bioprinting in 3D printers.
In fiscal 2019, we expanded sales of the RICOH MH5320/5340/5320 Type A (the latter being without an ink port) inkjet heads, which we launched at the end of the previous fiscal year. These heads offer greater productivity, durability, image quality, and ink compatibility, and offer potential for cultivating new customers and expanding beyond regular sign graphics to encompass textiles and other applications.
Segment sales for the year increased 11.2%, to ¥23.0 billion. This was because while the COVID-19 pandemic hampered sales activity in the key Chinese market in the fourth quarter, overseas revenues grew on higher demand for new advanced industrial inkjet heads and expanded sales of industrial printers.
The operating loss was ¥4.9 billion, down ¥2.1 billion from a year earlier, reflecting higher product development expenses to fuel business growth and such transient factors as new product inventory allocations.
In the Office Printing field, we endeavoured under the 19th Mid-Term Management Plan to focus away from sales toward profitability, strategically transforming and optimizing our structure and boosting earnings to generate new value.
In fiscal 2019, we endeavoured worldwide to expand sales of the RICOH IM C series of advanced MFPs, which we launched in January 2019. In striving to enhance sales of advanced MFPs, we cultivated sales of packages combining applications and cloud services that we tailored to customer industries and businesses, creating new customer value.
Office Printing sales for the year decreased 7.4%, to ¥1,006.2 billion. Through the third quarter, they kept solid and unit sales of colour A3 MFPs rose 3% reflecting the impact of new models. Hardware sales declined in the fourth quarter, however, owing to the COVID-19 pandemic, as lockdowns, requests to voluntarily constrain activities, and other factors constrained customer business activities and caused sales of related consumables to fall. Segment operating profit dropped from ¥117.9 billion posted a year earlier to ¥90.3 billion. This was because the pandemic caused sales and gross profit to decrease, offsetting progress in cutting operating expenses on the strength of structural reforms.
In the Office Service field, we pursue business growth by enhancing the value we offer customers, notably by leveraging our global customer base to deliver solutions services that support work practice reforms.
In fiscal 2019, sales surged, particularly in Japan, for solutions packages that integrate IT equipment, software, and services to digitize workflows for customer industries and businesses, centred on small and medium-sized enterprises. Overseas, we selected countries in which we would prioritize building an IT sales and services infrastructure, constructing a structure that included acquisitions. We moved to expand our digital business by purchasing DocuWare GmbH, which maintains a cloud and on-premise content services platform to support the automation of corporate document management and workflows, primarily in Europe and the United States.
Office Service sales in fiscal 2019 increased 18.2%, to ¥568.9 billion. In Japan, we sold personal computers, deployed IT systems, and offered support solutions in line with demand for transitioning to Windows 10. We also offered industry- and business-specific solutions packages. Toward the end of the year under review, sales surged from packages that help companies create teleworking frameworks to overcome the impact of the COVID-19 pandemic. Overseas, we expanded sales of IT services and other offerings in Europe, the Middle East, and Africa.
Segment operating profit jumped from ¥14.7 billion posted a year earlier, to ¥29.0 billion, as profitability improved with sales expansion. The operating profit on sales in Office Service rose from 3.1%, to 5.1%, reflecting steady progress in constructing business foundations to transform away from being an office automation manufacturer toward becoming a digital services company.