Nikon Third Quarter Financials

(news & commentary)

The third quarter of the fiscal year for Nikon is where most of the Christmas selling shows up. It’s also traditionally the Imaging group’s largest quarter of the year. The first two quarters of this year weren’t so hot, so what happened at the end of 2014?

Let’s quote from the top line in their presentation: "Overall sales and incomes decreased year on year both for Q3 and 3 quarters total. Although sales did not reach the Q3 target marginally, operating income almost achieved the target.”

Nikon tries to make the best of a bad situation. They claim that camera sales almost achieved the sales volume forecast. Of course, they don’t remind anyone that this forecast was updated just a couple of months ago, thus things were indeed worse than expected this quarter.

Let me graph unit volumes for you quarter by quarter for the past few years, and you’ll see the problem immediately, I think:

bythom nikonquarterly

Note the falling peaks for third quarter volumes in the last two years. In interchangeable lens cameras alone, Nikon is now down 1m units through three quarters from where they were last year. Lenses, down 1.4m units. Compacts down 3.3m units. Nikon once again lowered their full year unit volume expectations, too. 

Yet, they claim sales and profits will be closer to their last forecast. How? Well, they are expecting the yen to be 115 against the dollar this quarter (it’s currently 118). Basically, they’re cutting costs and finessing currency fluctuations. An example of the cutting costs bit just recently hit North America: it seems that Nikon Canada is now using NikonUSA’s repair system database. Nikon Inc. (the North American entity) apparently is starting to consolidate wherever they can to save money and avoid duplication of effort.

For the full year, which ends March 31st, Nikon is predicting the following:

  • 4.65m ILC cameras, or a 33.9% market share
  • 6.75m lenses, or a 30.7% market share
  • 7.5m Coolpix, or a 26.8% market share


Blame for the declines is in the usual places: “severe market conditions in Europe and China.” No, Nikon. Go read the Economist’s article on why your Precision Equipment business is struggling, and the Imaging business is down because no one has figured out how to get people to buy new cameras.

Speaking of which, the Precision Equipment business (semiconductor creation equipment such as steppers) isn’t looking all that hot, either. Estimates have been revised downward for that group, as well. Which all leads to: total corporate net sales down 12.3% for the year, and corporate profits down 57.3% for the year (but still profitable, though now only at a 2.3% rate, which is about a quarter of where it should be for a healthy manufacturing company).

One interesting bit: add up the expected “operating incomes” for the three major groups and compare it to the expected company “operating income.” 26 billion yen disappears ;~). That falls to “corporate expenses.” Which I’d now say are too high for the sales rates.

As I noted over a year ago: where is any growth going to come from? Nikon can’t continue down the path of having two declining major businesses and stay profitable for more than a year or two without having to reorganize, I’d guess. In the Japanese business environment, though, they probably wouldn’t reorganize, but more likely just suffer for awhile. 

The engines of growth are turned off at Nikon. They are in a glide path to the ground at the moment. They need to do something substantial to change direction. 

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