Kyocera Announces Overall Growth; Document Systems Group Shows First-Half Revenue and Profit Growth

Kyocera announced their second quarter and first half FY2019 financial results Oct. 31, 2018. During the 2Q FY2019 (three months ended Sept. 30, 2018) the company posted revenue growth of 5.1 percent on sales of $3.8 billion. Operating profit for 2Q was $413.6 million, approximately 6 percent growth over 2Q FY2018 and 22.6 percent sequential growth from 1Q FY2019. This represented a 6.6 percent sequential growth from 1Q FY2019. Citing strong demand in their Industrial & Automotive Components and Electronic Devices Group, Kyocera reported total 1H FY2019 (six months ended Sept. 30, 2018) revenues of $7.3 billion, an 8.4 percent increase over 1H FY2018. Operating profit for 1H was $750.9 million, 19.2 percent above the same time last year. Total R&D spending during the first half was $320.5 million. Cash and cash equivalents were reduced by 6.0 percent from March 31, 2018, to $3.62 billion.

Kyocera’s forecasts for FY2019 revenue and operating profits remained unchanged from the previous reporting period, continuing to expect $15 billion in sales revenue generating $1.4 billion in operating profit for FY2019. These forecasts are 4.6 percent and 69.8 percent higher than FY2018 results.

Document Solutions Group

The Document Solutions Group financial performance showed 2Q FY2019 revenue of $817 million, a 1.2 percent decline from 2Q FY2018 but a 1.3 percent sequential increase from 1Q FY2019 results. For the first half of the fiscal year, this group provided $1.63 billion in revenue, representing a 3.9 percent increase over the same period last year.

Operating profit for the group in 2Q was down 9.7 percent from 2Q FY2018 to $87.5 million (down 6.9 percent sequentially from 1Q FY2019).  With 1H FY2018 operating profit at $181.6 million, Kyocera reported a slight 0.7 percent growth over the 1H of FY2018. However, first-half operating profit margin, while double digits, fell 1 point to 10.7 percent.

Kyocera cited sales volume increases of multifunctional products in Japan and overseas as well as contributions from merger and acquisition activities as the reason for the first half revenue and profit increases.  The company is forecasting it will end FY2019 with $3.5 billion in sales revenue and $377.2 million in operating profit for this business segment. This forecast remains unchanged from the previous reporting period. Achieving the forecast would be a 3.8 percent revenue increase over FY2018 and 1.6 percent growth in operating profit.

Our take

The Document Solutions Group is important to the overall performance of Kyocera. It was the top revenue-producing group for FY2018, contributing 23.5 percent of Kyocera’s total revenue and second only to the Electronic Devices Group in profit production, providing approximately 40 percent of Kyocera’s business profits last year. Recent product introductions and announcements including new A4 MFP models, Kyocera’s entry into production print and the upcoming TASKalfa Pro 15000c high-speed inkjet can position this group to keep generating this type of revenue and profit contribution to the company.

Kyocera faces challenges in current distribution, especially in the U.S., for production and high-end products. However, the company is committed to this group and building what they see as high-value business. With a record high $1.0 billion going to capital expenditures such as the OPC drum plant just opened in China, a new plant in Vietnam for MFPs and printers, and other expenditures in plant and equipment for their other groups, Kyocera is aggressively spending to expand manufacturing capabilities. R&D spend was at just under $100 million for this group and still makes up the majority (31 percent) of the total R&D of Kyocera. Additionally, they continue to look at developing or acquiring solutions and companies that will position them well as a trusted solutions provider for SMB and enterprise business.

In the short term, Kyocera should see continued revenue growth and flat profit that may experience a slight drop as R&D spending continues and product life cycles come to an end with new product coming into the pipeline. Long-term, Kyocera faces the same dynamics as their competitors in the print and imaging markets, and will need to work to keep revenue growing to quickly recoup R&D and new product promotion costs. There is a chance of doing that with the newer high-end products and their continued growth in solution offerings; adding distribution will increase the odds of success.