Ricoh struggles amid costly restructuring drive
November 11, 2024
Ricoh’s growth defied challenges but profit took a serious hit as high restructuring costs eroded gains.
Ricoh reported an 8.1% increase in overall sales for the half-year ended 30 September, reaching ¥1,202.5 billion ($8.04 billion/ €7.57 billion). However, profits were hit hard as the company’s high restructuring costs undermined gains made across its major business lines. Operating profit dropped dramatically by 65.2% to ¥6.8 billion ($45.42 million/ €42.8 million), reflecting the weight of Ricoh’s ongoing Corporate Value Improvement Project.
The restructuring, which includes reorganising its office printing and office services segments, forms part of a broader strategy to transform Ricoh into a digital services company. This plan has seen Ricoh consolidate operations and cut costs to boost profitability in the face of rapid industry changes. However, the recent transition has proven more expensive than anticipated, eating into potential gains.
While domestic sales rose by 8.9%, driven by strong demand for office services and software solutions, sales growth in overseas markets lagged, increasing by just 7.6% overall, with some regions showing notable declines. Adjusting for the yen’s depreciation, which boosted sales figures, Ricoh’s overseas revenue fell by 0.4%. In particular, the Americas and Europe, traditionally strong markets for Ricoh’s office printing hardware, were marked by a slump in printer sales, as demand for non-hardware services in these regions softened.
Ricoh’s most significant successes came from its Digital Products and Graphic Communications segments, which saw robust growth. Digital Products, primarily A3 multifunction printers (MFPs), saw sales rise by 44.4% to ¥64.3 billion ($429.24 million/ €404.86 million), buoyed by a recovery in production volume and improved product mix. Meanwhile, the Graphic Communications division, responsible for production printers, achieved a 16.5% sales increase to ¥140.2 billion ($936.09 million/ €882.4 million), with solid demand in Europe and the Americas. New production printer models were particularly successful, reflecting Ricoh’s efforts to diversify its hardware portfolio in high-performance printing solutions.
In contrast, the office printing segment struggled, with lower hardware and non-hardware sales pulling down the Digital Services division’s operating profit by ¥15.9 billion ($106.1 million/ €99.99 million) to ¥3.0 billion ($20.02 million/ €18.89 million). Ricoh’s restructuring costs, including job cuts through the “Second Career Support Programme,” led to higher expenses, with selling, general, and administrative costs rising by 12.7%.
Looking forward, Ricoh revised its profit forecast downwards, expecting continued pressure from restructuring. With the completion of its joint venture, Etria, with Toshiba Tec earlier this year, Ricoh aims to leverage shared production and development resources, although analysts caution that sustained demand in growth segments will be crucial to offset challenges in its legacy printer business.
Categories : City News
Tags : Financials Growth OEM Printers Profits Restructuring Ricoh
