Olympus - Digital camera downturn takes toll

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Olympus - Digital camera downturn takes toll
Feb 12, 2013

February 12, 2013 9:39 am

Olympus trims full-year outlook

Digital camera downturn takes toll on Japanese group

By Michiyo Nakamoto in Tokyo

Olympus on Tuesday revised down its full-year forecasts as the downturn in the digital camera market took its toll on the medical equipment and camera maker as it strives to put an accounting scandal behind it.

For the year to the end of March, Olympus now expects sales to be Y740bn ($7.8bn), rather than the previously forecast Y757bn and net profit to be Y6bn, a quarter below its previous forecast of Y8bn.

The latest forecast reflects the decline in digital camera sales,which are forcing Olympus to take a Y3.7bn impairment loss on its imaging division’s assets in the full year.

This extraordinary loss comes after an impairment loss on the same business assets in the financial year to March 2012, which contributed to a Y49bn net loss for the full year.

Olympus, in common with other digital compact camera manufacturers, has suffered from a sharp contraction in the market, partly due to the rapid spread of smartphones, which incorporate cameras.

Sales of digital cameras have fallen about 25 per cent in the past two years alone, from a peak of 97m in the nine month to December, 2010 to 73m in the nine months to the end of last year, Olympus said.

During that time,Olympus’s share of the market has also fallen from more than 6 per cent to 4.8 per centin the first nine months of the fiscal year to March.

In the three months to the end of December,Olympus saw sales in imaging products fall 8 per cent, despite a strong 28 per cent rise in sales of its more expensive mirror-less cameras.

Consequently, the operating loss at the imaging division widened to Y4.3bn, larger than the Y3.6bn operating loss posted in the same quarter a year ago.

The third-quarter loss brings the cumulative loss in the imaging business so far this year to Y8.8bn. The group is forecasting a Y16bn operating loss for the division in the year to March 2013.

That follows an Y11bn operating loss for the imaging division last year, which followed a Y15bn group operating loss in the year to March 2011.

Olympus said it hadreduced personnel in its imaging business by more than 10 per cent since last March, adding that “further drastic reform is under review”.It plans to cut selling, general and administrative costs by Y4bn.

In sharp contrast, Olympus’s medical equipment business continues to perform strongly, with sales up 6 per cent to Y94bn in the third quarter, and operating profits up 1 per cent to Y19bn.

As a result, operating profits in the medical equipment division are up 19 per cent to Y56.4bn for the nine months, on sales of Y270bn, an increase of 7 per cent year on year.

Olympus forecasts medical equipment sales for the full year will be 12 per cent higher at Y390bn, and operating profits will be 23 per cent up at Y84bn.

Olympus, which has formed a capital tie-up in medical equipment with Sony, is working to shore up its balance sheet after a $1.7bn accounting scandal, in which executives were found to have hidden massive losses going back 20 years.

Copyright The Financial Times Limited 2013.

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