Revenue increased while business profit declined during the quarter.
Financial results for the third quarter (Q3) of FY2021 (October-December 2021) for Epson, whose main business is inkjet printers, were as expected. Revenue increased by 296.1 billion yen (+17.3 billion yen year-on-year) because of the market recovery from the impact of COVID-19 and continued demand for home printing. Business profit was 27.2 billion yen, a decrease of 3.9 billion yen due to soaring material and distribution costs. However, with respect to the internal plan, revenue was as planned, but the actual result of the business profit exceeded Epson’s rigorously viewed plan by about 7 billion yen as the company implemented price adjustments based on the supply-demand balance and material and distribution cost increases as well as further cost controls.
Quarterly revenue of the Americas in FY2021 was 85.2 billion yen in Q1 (59.8 billion yen in the same period of the previous year), 80.1 billion yen in Q2 (71.9 billion yen in the same period of the previous year), and 81 billion yen in Q3 (73.3 billion yen in the same period of the previous year).
Printing Solutions business revenue was 205.3 billion yen (+10 billion yen), and segment profit was 30.8 billion yen (-9.3 billion yen). In Q3, while sales volume of office/home printing in the Printing Solutions business decreased by 8% year-on-year because of supply constraints due to parts procurement and distribution disruptions, while SIDM revenue was flat and office/home inkjet printer (IJP) revenue increased. Although the sales volume of ink cartridge models decreased year-on-year, the volume of large-capacity ink tank models remained at the same level as the previous year. Advertising in developed countries in Europe and the United States, increased sales of large-capacity ink tank models.
Revenue of IJP Ink is about the same level as in the same period of the previous year when demand was high. Epson expects that home printing demand will continue. While the number of ink cartridges decreased, ink for the large-capacity ink tank model and office-shared IJP increased.
Due to these factors, while office/home printing revenue in Q3 increased to 150.3 billion yen (+5.4 billion yen), business profit decreased to 22.9 billion yen (-7.7 billion yen) because of soaring material and distribution costs and a decrease in ink cartridges.
In addition, revenue of commercial/industrial printing in Q3 increased to 55 billion yen (+4.5 billion yen), but business profit decreased to 7.9 billion yen (-1.5 billion yen), resulting from soaring material costs and an increase in logistics costs such as air transportation.
Sales of the printhead external sales business increased in China and Japan.
Overall, Epson’s Q3 financial results showed increased revenue and decreased profits, but the company continues to take a cautious view on its Q4 financial results forecast, projecting that supply constraints will get worse.
Epson is cautiously viewing changes in the business environment as risks in their forecast, such as further deterioration of supply constraints due to difficulty in procuring semiconductors, and logistics cost increases to cope with B2B projects and increased cost for ocean shipments.
In the latest full-year FY2021 forecast of Printing Solutions, revenue is revised downward by 5 billion yen from the forecast in October last year to 782.0 billion yen, and segment profit is revised upward by 1 billion yen to 104 billion yen. In comparison with FY2020, revenue is expected to increase by 90.8 billion yen and segment profit is expected to decrease by 2.2 billion yen.
Office/home printing has been revised downward by 1 billion yen from the latest revenue forecast in October last year to 569 billion yen (+57.2 billion yen) because of worsening supply constraints due to difficulty in procuring materials for office/home IJP and SIDM. Business profit has been revised upward by 4 billion yen from the forecast in October last year, projecting that the selling price of IJP main units will remain higher than the previous plan even though distribution costs increase. However, it is expected to decrease by 10.5 billion yen to 72 billion yen year-on-year. In addition, for commercial/industrial printing which was expected to significantly increase both revenue and business profit, Epson revised the forecast downwards to 4 billion yen and 3 billion yen, respectively from October last year due to supply constraints and increased logistics costs on their finished product business for small printers and commercial/industrial IJP. Revenue has been revised downward by 4 billion yen and business income by 3 billion yen. Nevertheless, the latest forecast for FY2021 for commercial/industrial printing shows revenue will increase by 33.4 billion yen from the previous year to 213 billion yen, and business profit will increase by 8.3 billion yen to 32 billion yen.
The sales volume of the office/home IJP main units in FY2021 is expected to increase by about 1.8 million units from the previous year to about 17.2 million units (up 12%). Of these, it is forecasted the large-capacity ink tank model is about 12 million units (up 15%), the ink cartridge model is about 4.9 million units (up 7%), and the office-shared IJP model is about 300,000 units (same as the previous year).
Bio: Tetsuo Kubo is the president of OA Life Co., Ltd., a trade publication for Japanese document imaging technology resellers and OEMs.
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