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Latest financial developments at Ricoh

March 26, 2018

The OEM has made three new announcements over the last few days, revising its consolidated full fiscal year results, and offering an update on the repurchase of its Coca-Cola Bottlers Japan Holdings shares.

The first announcement related to the company’s revision of its consolidated operating results for the full fiscal year and included an announcement of impaired losses.

Initially, in February 2018, the company forecast net sales of ¥2.04 trillion ($19.3 billion/€15.6 billion), which has been repeated in the new forecast. However, the February forecast for operating profit was ¥20 billion ($1.9 billion/€1.5 billion), but in the new forecast announced last week this figure was reduced by ¥160 billion ($1.5 billion/€1.2 billion), giving them a loss of -¥180 billion. Meanwhile the profit before income tax was originally predicted to be ¥14 billion ($133.1 million/€107.3 million) and the new forecast reduces this figure by ¥166,000 billion ($1.5 billion/€1.2 billion), giving another loss of -¥180 billion ($1.7 billion/€1.3 billion).

Ricoh’s consolidated operating results for the full year ending March 31, 2018 are scheduled to be announced on April 27.

Ricoh explained that its sales subsidiary in the United States, Ricoh USA, Inc. (RUS), is expecting to allocate impairment losses of ¥140 billion ($1.3 billion/€1.07 billion) in their fourth quarter financial results ending March 31, 2018, from fixed assets including the goodwill of IKON Office Solutions, Inc. (already merged with RUS and referred to as IKON from here), acquired in 2008. In addition to this, RUS is expecting to allocate impairment losses of ¥40 billion ($380 million/€306 million) in their fourth quarter results March 31, 2018, from companies such as the IT services company, mindSHIFT Technologies, Inc. (mindSHIFT) acquired in 2014.

Ricoh’s President and CEO, Yoshinori ‘Jake’ Yamashita, explained the financial developments in more detail in an open letter penned to the company’s stakeholders, in which he stated that he felt personally responsible for any concerns that customers, partners and shareholders might have as a result of the adjustment. He explained that the adjustment “is coming mainly from the amortisation caused by our acquisitions in North America” before going on to write the following lengthy break-down of events:

“Under our 19th mid-term management plan, “RICOH Resurgent”, we strengthened our core business and undertook structural reforms in order for us to apply our management resources to growing the business. 

With the support of all our stakeholders, our structural reforms are on schedule and we have succeeded in expanding our value proposition. We launched our growth strategy, “RICOH Ignite”, on February 6, with three main strategies. To ensure their execution we reset our business management units based on our current six business domains. Based on the profit we can expect from each unit we evaluated the business assets in each unit. Then we found that we needed to impair the value of some of these assets. 

The assets that we needed to impair are mainly companies we acquired in the past, principally IKON Office Solutions (2008) and mindSHIFT Technologies (2014). With this impairment, our business P&L forecast will show a negative adjustment to our operating Income. To reiterate, this accounting action has been caused by the revaluation of our assets, and doesn’t have any impact on our cash flow. 

This impairment is regrettably negatively impacting our business performance for this year but this is necessary in order to execute our growth strategy, change our business structure and move forward for the future.

In Fiscal 2017, we have been working on structural reforms to strengthen our profitability and modify our asset base. In 2018, my role is now to ensure we execute our growth strategy.”

In Ricoh’s third announcement made last week, the OEM revealed that it had tendered all of its Ricoh-owned shares in Coca-Cola Bottlers Japan Holdings Inc, completing the tender on 22 March 2018.

After offering more detailed information on the shares, Ricoh concluded its announcement with the following statement:

“Regarding the impact on its financial results, Ricoh is going to allocate a non-consolidated extraordinary profit of ¥50.6 billion ($481.8 million/€387.8 million) as a gain on the sale of investment securities in fiscal year 2019, ending March 31, 2019. Regarding the consolidated financial performance, Ricoh has complied with International Financial Reporting Standards (IFRS), and the IFRS 9 Financial instruments will be applied from next fiscal year, ending March 31, 2019. Consequently, there will be no impact on net sales on a consolidated basis.”  

 

 

Categories : City News

Tags : Business Financials Impairment Losses Japan Ricoh Shares

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