North American Blues: Ricoh Taking $1.6 Billion Loss for Fiscal Year

Ricoh Co. announced a revision to its forecasted consolidated operating results for the fiscal year ending March 31, with the Tokyo-based manufacturer recording a 170 billion yen ($1.6 billion U.S.) loss, due in large part to a write-down in the value of its North American business. The revision is a sharp deviation from its previous forecast of a 20 billion yen operating profit.

Ricoh said the announcement has no impact on its customers or partners, and that the company remains committed to helping customers drive their business forward.

The Ricoh USA subsidiary is expected to absorb impairment losses of 140 billion yen ($1.32 billion U.S.) in the fourth quarter from fixed assets, including the goodwill of IKON Office Solutions, which it acquired in 2008. Ricoh USA will also record 40 billion yen in impairment losses from businesses such as mindSHIFT Technologies, an IT company it acquired in 2014.

The acquisition of IKON was designed to help expand Ricoh’s presence in the U.S. market and buffer future earnings by acquiring direct sales while securing a sales infrastructure and customer base to move into areas such as managed services and production printing. Ricoh cited the increase of digitalization in the North American market intensifying competition, with unit prices continuing to decline.

In response to market conditions, Ricoh rolled out Resurgent, its 19th Mid-Term Management Plan (covering the 2017-2019 fiscal years) which included three key elements: structural reforms, expanding growth businesses and reinforcing its management systems. Based on the framework of the new business domains, Ricoh said it improved its ability to monitor its business units and support decision making and management. The structural reforms, it added, are on schedule.

In early February, the company launched its Ricoh Ignite growth strategy, and to ensure its successful execution, Ricoh reset its business management units based on its six domains, and given the result of the outlook on each unit, it was determined that Ricoh needed to impair the value of some assets.

Moving forward, Ricoh plans to promote structural reforms for Ricoh USA to bolster its value to the parent company, both short- and long-term. On the services end, Ricoh will move from a scale expansion strategy to one more focused on profits while investing heavily in areas where it can yield the best profits. Under Ignite, Ricoh plans to invest 200 billion yen in M&A to pursue new growth businesses.