Where To Hide Depressing News?

(news & commentary)

It’s gogatsu-byou time in Japan, when staff rotations occur and new graduates gain employment. This is also the time of year when most of the Japanese camera companies (except Canon, who uses a different fiscal year) announce their fiscal results. 

This year I’m noticing a new game being practiced as the Japanese camera companies report their latest financials, a game I call “where do we hide the depressing camera results?” 

Canon used what I call the Obfuscation Technique. They did report some negative actuals in Imaging early on in their presentation material (sales in Imaging down 21.6b yen for comparable quarters on page 5), though they didn’t link this to an overall sales number. Indeed, their later numbers seem to disagree. They eventually show a chart that shows Imaging sales are only down 5b yen for the same comparison (page 12). Which is it?

Indeed, Canon likes putting multiple confusing numbers together so you can’t quite figure out what’s going on at first glance. IJP (inkjet printers) up 6.7% but down 2.3% on the local currency base or down 9% on a unit base. Cameras down 6.7% (-15.1% on a local currency base) or down 22% in unit base. Canon uses the “make the reader not be able to figure out what’s causing the problem” method of hiding things. Let me make it clear (from Canon’s own numbers): 59% of their camera unit sales were compacts, which brought in only 17% of the revenue, and that’s partly because Canon sold 30% less of them. See, that wasn’t so difficult to say directly.

Canon then says they want to “implement measures aimed at achieving stable growth of entry level interchangeable-lens cameras”, which is immediately followed by a table showing growth rate of interchangeable lens cameras at -1%. Uh, okay. They want to sell fewer high end cameras, then? Because -1% is not “growth.” 

Panasonic, on the other hand, chose to hide the following table in their supplemental materials, a technique I call Bury the Gold:

  • previous year: 33.2, 26.7, 20.2, 12.9 total 93
  • current year: 16.4, 19.4, 22.5, 11.2 total 69.5


That’s DSC sales in billions of yen (DSC is the abbreviation for Digital Still Camera, you know, that thing at the beginning of all your photo file names ;~). In other words, a 25% drop in sales of cameras from year to year, with the worst quarter they’ve ever reported the most recent one. Ouch. 

Fujifilm took a popular recent approach, changing what’s counted in the Imaging Division, which triggered a nice "Returned to profitability” line in the financial reports (page 4 of the presentation materials). Down in the Appendix we learn why: “robust sales of camera modules for smartphones,” which is the thing added to the Imaging Division. Page 13 is where they buried the real news: 

  • previous year: 92b yen
  • current year: 86.1b yen


That’s the camera sales. Note, however, that they didn’t break out the profit contributors though they did break out the sales contributors. Why? Well, with optical devices (those smartphone modules that are now in the group) up 40.3%, where do you think the profit came from? That and, believe it or not, instant film cameras. 

The good news, if there is any, is that overall sales of cameras did increase from quarter to quarter over the last three quarters. But I suspect that cameras were still unprofitable for them, otherwise they would have reported the reversal, almost surely. Oh, and did anyone notice that R&D expenses declined by 40% year to year in Imaging? Despite the addition of the smartphone module group? 

Fujifilm’s technique is what I call Four Card Monte. You think you’re playing Three Card Monte, but they add a fourth one when you’re not looking.

Ricoh generally plays the Needle in a Haystack game. Their camera group is so small that it’s not necessary to document their results in Ricoh’s overall financials. Those big office machines are hiding all the cameras. Cameras are in the “Other” category for them, which is about 7% of their business, and cameras are only a part of even that. So good luck finding the needle. Ricoh did say that camera sales increased, mainly due to release of new models in Japan.

Olympus usually plays the Rosy Expectations gameChanging the mix of mirrorless to compact sales is good news, right? Up front they point out the ratio of compact to mirrorless sales went from 57/38 to 40/43, and they expect a 17% gain in mirrorless sales in the coming year versus a 20% decline in compact sales. Okay, fine. Later they point out that they didn’t meet their net sales target for mirrorless cameras, missing by 41%! They mostly blamed this on the EM-10 being late due to a manufacturing delay. And, as usual, Olympus has had to once again state that they didn’t meet their last stated forecast made only three months ago, and they it was a bad miss: 4.2b loss versus 0.6b expected loss. I note further that they didn’t actually state the unit volume shipped. Their previous Rosy Expectation was 660k units, then 630k units, then 610k units, and now we have them missing forecast sales numbers by 41% and not talking about how many units they actually shipped (Credit Suisse quotes Olympus as saying they shipped 510k units, about the same as last year). 

Even if Olympus hits their Imaging group forecast numbers for the coming year (remember, Rosy Expectations), they will be a smaller camera company selling fewer products, and still losing big money. I should also note that they are still diluting shares to pay for their past transgressions, and they have a huge (27b yen) lawsuit still outstanding with primary shareholders that they haven’t settled. Good thing the medical business is doing well.

Oh, and one other thing: buried deep in their financial statements is this gem: Japan is 1/3 of their camera sales worldwide. So goes the Japanese economy, so goes Olympus, at least for cameras. Indeed, year-to-year, Japanese sales were down 5%, North America down 12%, Europe down 15%, and the rest of the world down 12%.   

And why is everyone reporting that they think the exchange rate for the yen will remain flat for the next four quarters? Did Japan’s Finance Minister give them a secret clue that he will keep the yen constant—contrary to President Abe’s stated economic plans? Or is this a way to hide their actual results via a declining yen but a strong export business, where the final numbers would show “growth” due to FOREX (foreign exchange)? (A one yen change in the US dollar rate, for example, would result in a 4.9 billion yen change in profit at Canon). There’s almost a 1:1 variation in foreign profits at the moment: the yen moves one point on dollar and the exports just returned 1% more. 

Of course, it’s crazy math to figure out how that works. Not all camera products are produced in Japan, not all cameras are sold as exports, and so on. Still, there are entire offices of folk at the Japanese companies doing this math every day, yet everyone seems to have to come to the conclusion that the yen/dollar and yen/Euro aren’t going to move in relationship this year. Guess they can take the year off, then, eh? 

Sony played Needle in a Haystack. Can’t really blame them, as they have far bigger issues going on in the company than the problems in the Imaging Division. While sales were down only 2% in value, there was a 32.3% reduction in digital camera units sold, likely mostly in compacts and DSLRs, though I can’t find any detail about that as I write this. However, the needle in the haystack was this: they are forecasting another 30%+ drop in digital camera units sold in the coming year. Any wonder why they’re emphasizing full frame mirrorless and other high price cameras? It’s the only way they’d be able to keep their total sales number from plummeting. 

Nikon results are discussed here.


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