Brother Industries faces printing profit challenges
August 7, 2024
Revenue surges 7.1% but Printing & Solutions profits remain flat amidst higher expenses.
Brother Industries Ltd reported a 7.1% year-on-year increase in revenue for the first quarter of fiscal year 2024, reaching ¥214.7 billion (€1.35 billion/ $1.47 billion). This growth was largely driven by favourable foreign exchange rates and cost management strategies despite a challenging market environment for its flagship Printing & Solutions (P&S) business.
The company’s P&S division, which remains its largest revenue generator, experienced a modest revenue increase to ¥134.3 billion (€844 million/ $920 million), up from ¥127.2 billion (€800 million/ $871 million) in the same period last year. However, business segment profit for P&S saw a decline, primarily due to weaker sales volumes and escalating selling, general, and administrative (SG&A) expenses.
Brother Industries benefitted significantly from the yen depreciation, with the USD/JPY exchange rate moving from 138.11 to 156.53 and the EUR/JPY from 150.35 to 168.37. This currency movement provided a considerable boost to the company’s top line. However, the positive impact of these exchange rates was offset by reduced sales in the P&S business, where market conditions remain tough.
Despite the revenue increase, the P&S segment faced a 1.4% decrease in business segment profit, down to ¥22.8 billion (€144 million / $156 million). This decline is attributed to higher logistics costs and the pressure of increased SG&A expenses, which grew from ¥64.8 billion (€407 million / $444 million) to ¥74 billion (€465 million / $508 million) year-on-year.
While the P&S segment struggled with profitability, other divisions showed mixed results. The Machinery segment saw a revenue increase to ¥20.9 billion (€131 million/ $143 million) but suffered a slight dip in profits. Domino, another significant business unit for Brother, recorded revenue growth to ¥29.3 billion (€184 million/ $201 million), though it too faced a small profit decrease.
Brother’s Personal & Home (P&H) division, which includes home sewing and cutting machines, reported increased revenues but struggled with high operational costs. The Network & Contents (N&C) segment, which manages online karaoke systems and content services, posted steady growth in both revenue and profit.
For the full fiscal year ending 31 March 2025, Brother Industries maintains its forecast, projecting a 6.9% increase in revenue to ¥880 billion (€5.53 billion/ $6.04 billion). The company anticipates significant improvements in profitability, with an expected 76.7% rise in operating profit to ¥88 billion (€553 million/ $604 million) and a near doubling of net profit to ¥63 billion (€396 million/ $432 million).
Basic earnings per share are forecast to leap from ¥123.81 (€0.78/ $0.85) to ¥246.48 (€1.55/ $1.69), and dividends per share are projected to increase from ¥84 (€0.53/ $0.58) to ¥100 (€0.63/ $0.69).
The company is investing in new product development within the P&S segment, aiming to capture emerging opportunities in the digital printing space. Additionally, cost-cutting measures in logistics and strategic pricing adjustments are expected to bolster the bottom line in the upcoming quarters.
Categories : City News
