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Supply Shortages, Logistics, Pandemic Woes Affect Konica Minolta Financials

by · February 1, 2022

Konica Minolta of Tokyo, Japan, today released results for its third quarter and last nine months, with both ending on December 31, 2021.

Overall, the company says it was affected by the rebound of the COVID-19 pandemic, a shortage of semiconductors and other materials, and soaring energy prices. Although it reported a revenue increase for both the nine-month period, it also reported profit losses for both periods.

Third Quarter

Third-quarter revenue was ¥216.4 billion ($1.8 billion) down 6.0 percent year-over-year; operating profit was a loss of ¥8.5 billion ($73.5 million),  versus operating profit of ¥3.2 billion ($27.7 million) a year ago; and profit was a loss of ¥8.9 billion ($77 million) versus profit of ¥1.6 billion  ($13.8 million) a year earlier.

Nine-Month Period

For the nine-month period, revenue was ¥661.5 billion ($5.7 billion), up 7.6 percent year-over-year. Operating profit was a loss of ¥10.1 billion ($87 million), versus a loss of ¥24.6 billion ($212.9 million) for the same period a year ago. Profit was was a loss of ¥13.2 billion ($114 million), versus a loss of ¥20.6 billion ($178 million) for the same period a year ago.

Digital Workplace Business

Konica Minolta’s Digital Workplace business reported revenue of ¥333.7 billion ($2.8 billion), down 2.5 percent year-over-year, and an operating profit loss of ¥8.9 billion ($77 million) versus a loss of ¥6.2 billion ($53.6 million) for the same period a year earlier.

According to the firm, although orders for A3 MFPs showed signs of recovery for three consecutive periods since the first quarter ended June 30, 2021, sales of color models, monochrome models, and all models were down 78 percent, 86 percent, and 81 percent, respectively, year-over-year. This was due to delays in production caused by the shortage of semiconductors and other materials, and the increased impact of prolonged transport periods because of congestion beginning in September 2021.

Konica Minolta also noted that the resurgence of COVID-19 cases in Europe and the United States forced employees to delay coming back into client companies’ office.

Consequently, revenue for the office unit decreased year-over-year. In addition, an order backlog for the whole unit increased from approximately ¥30.0 billion during the three-month period ended September 30, 2021 to approximately ¥48.5 billion during the current accounting period.

In the Digital Workplace group’s DW-DX unit, composed of the former IT service solutions unit and the Workplace Hub unit, managed IT services, which take care of the entire IT platform of customers, recurring revenue remained strong by meeting the demand for security services in the United States, despite the fact that the field of office solutions was negatively affected by the decline in sales
volume of MFPs.

Digital workflow solution services, which improve business process efficiency, saw an increase in sales to government-related customers in the United States. The workplace hub increased both the number of orders and the average sales price per customer. As a result, revenue for the entire DW-DX unit increased year-over-year.

Professional Print Business

Konica Minolta’s Professional Print business reported revenue of ¥140.9 billion, up 18.7 year-over-year, and operating profit of ¥0.4 billion, versus a loss of ¥8.7 billion for the same period ago.

For the production print unit, year-over-year, sales were up 102 percent, 96 percent, and 100 percent for color models, monochrome models, and all models, respectively.

In terms of the non-hardware revenue, such as consumables and services, demand for commercial printing is said to be on a recovery track, especially among mid-size and large printing companies.

Although the explosion accidents at Tatsuno (toner) Factory resulted in an under-supply of tone, Konica Minolta sought to limit the impact on customers. As a result, the production print unit showed year-over-year revenue  growth. Additionally, an order backlog for the whole unit increased from approximately ¥7.0 billion during the second quarter to approximately 8.0 billion during for the third quarter.

Other Businesses

Konica Minolta’s two other businesses, Healthcare and Industry both reported year-over-year revenue increases, 14.6 and 18.6 percent, respectively. Healthcare reported an operating loss of ¥9.7 billion, versus a loss of ¥7.1 billion for the same period a year earlier. Industry reported an operating profit of ¥19.7 billion, up 100.6 percent year-over-year.

Forecast

Konica Minolta increased its revenue forecast by ¥10.0 billion. This increase is mainly due to toner production volume for the Professional Print Business, which was expected to be significantly affected by shutdown at the Tatsuno factory, exceeded the company’s forecasted amount. Konica Minolta also forecasts improvement in equipment and non-hardware sales. Its profit forecasts remain unchanged.

For its fiscal year that will end on March 31, 2022, the company is forecasting revenue of ¥900 billion, up 4.2 percent year-over-year; operating profit of ¥12 billion, versus a loss for the previous year; and profit of ¥1.5 billion, versus a loss for the previous year.

Konica Minolta also noted that since the previous fiscal year,it’s been focusing on a  three-year medium-term business plan “Digital Transformation (DX) 2022,” which it aims at achieving this year. The basic policy is to “leap to highly profitable businesses through digital transformation.”

With the plan, the Company is  working on two portfolio transformations, aiming to realize a business structure with less dependence on the Office Business. First is the transformation into the Digital Workplace Business by using the Office Business’s customer base to implement DX in customers’ workflows.

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