Epson Reports Disappointing Q3 on Weak Inkjet Sales

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Epson Reports Disappointing Q3 on Weak Inkjet Sales

Seiko Epson reported its financial results for the third quarter of fiscal 2010* and its consolidated results for the first nine months of the year. While there were some positives in the firm’s report, particularly in its performance for the first nine months of the year, Epson’s third-quarter performance was disappointing, and the firm’s mainstay inkjet business was weak.

First, the good news. Cumulative net sales for the first three quarters (nine months) of the year were ¥747.3 billion ($9.17 billion*), up 1.2 percent over the same period last year. The firm attributed the increase to increased unit shipments of LCD projectors, crystal devices, semiconductor products, IC handlers, and business inkjet printers. Net income for the first nine months of the year was ¥17.0 billion ($208.7 million), up from a net loss of ¥4.7 billion in the year-ago period.

Now, the bad news. By almost every metric, Epson’s third-quarter results were not good. For the third-quarter, Epson reported net sales of ¥268.0 billion ($3.29 billion), down 7.1 percent compared with the third quarter of 2009. In the quarter, the firm’s operating income fell 38.9 percent to ¥19.2 billion ($236.0 million), and net income declined a stunning 61.0 percent to ¥9.5 billion ($117.1 million.) One factor contributing to the net income decline is that Epson reported extraordinary losses for the quarter (see notice), including business structure improvement expenses of ¥5.343 billion ($65.6 million) related to the termination of its small- and medium-sized display business.

Like Canon, Epson was impacted by the yen’s appreciation. The firm said during the quarter under review the average exchange rates for the yen against the U.S. dollar was ¥82.64, an 8 percent appreciation from one year ago, and the exchange rate for the yen against the euro was ¥112.23, which marks a 15 percent appreciation compared with the same period last year.

But, more alarmingly, Epson also reported weakness in its core inkjet business. Third-quarter net sales in the information-related equipment segment were ¥199.7 billion ($2.45 billion), down 6.3 percent year-over-year. This area of the firm’s business includes the firm’s printer and supplies businesses, scanners, LCD projectors, LCD monitors, label writers, and PCs.

Epson said that demand for consumer inkjet printers and consumables was weak, with unit shipments flat year-over-year. The firm said consumer inkjet sales were flat in Europe and contracted in North America, and shipments in this segment were “hurt by fierce competition in Asia.” In more positive news, Epson saw increased business inkjet printer demand in China and other parts of Asia, and unit shipments of large-format printers grew, but unit shipments of consumables for these devices declined and average selling prices rose.

Read Epson financial report.
*Like many Japanese firms, Epson’s fiscal 2010 ends March 31, 2011 and its third quarter ended December 31, 2010. U.S. dollar amounts are translated from yen at the rate ¥81.49 = U.S.$1, the approximate exchange rate on the Tokyo Foreign Exchange Market on December 31, 2010.

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February 8, 2012 at 8:10 AM