In a quickly-convened webinar Wednesday with industry press and analysts, Konica Minolta Business Solutions (KMBS) President and CEO Sam Errigo provided an overview of the financial revisions released Tuesday by parent company Konica Minolta Inc. (KMI) that included a 105.6 billion yen ($785.8 million U.S.) consolidated net loss for fiscal year 2022 ending March 31, 2023.
On a brighter note, Errigo noted that the accounting measures will not have a deleterious impact on KMBS from an operational and investment standpoint. In fact, he sees KMBS garnering a bigger market share in the coming fiscal year.
KMI, which had forecast a net profit of 5.5 billion yen ($40.9 million U.S.), booked an impairment charge of 116.6 billion yen ($864 million U.S.), marking its fourth consecutive year of recording an annual loss. A lion’s share of the impairment charges was attributed to KMI’s precision medicine field ($770M), notably its investments in Ambry and Invicro, which have underperformed due to a variety of circumstances. These include lower-than-expected demand for genetic testing in diagnostics and health screenings at hospitals and a sharp decline in visits for preventative genetic testing during the pandemic period.
Other impairment charges were incurred in KMI businesses outside of the U.S., including several acquisitions, among them an IT services company. Its MOBOTIX AG division in Germany took a charge of $27.4M, and its Imaging-IoT solutions unit saw a loss of $23M.
The good news for KMI is that its lenders have waived the right to “call in” their loans, having been satisfied by the OEM’s long-term plan and viability, according to Errigo. Consequently, KMI (and KMBS) will not see its FY2023 cash on hand or cash flow impacted.
Despite the disappointing news from the corporate level, KMBS’ performance has not missed a beat. As a whole, it posted 17.6% year-over-year growth. Growth for U.S. and Canadian dealers stood at 21.7% each, while KMBS’ direct branches posted 16.3% growth. Its digital transformation platform (including IIM, MOBOTIX and managed IT) jumped 7.6% while production print notched 9.3% growth. Citing IDC statistics, Errigo pointed out that KMBS ranked fourth in market share at the Q1 pole for calendar 2023 with a 15.7% share (up from 12.8%), trailing Ricoh, Canon and Xerox.
“I’m so proud of our team,” Errigo said. “We’ve had significant uphill battles over the last three years with COVID, our supply chain and toner issues. It was a daunting task for all of us that support our dealer channel, our direct channel and most importantly, our customers. But our team did a phenomenal job … they helped us overachieve on the revenue side and profit side.”
Constant communication with reseller partners and the eventual dwindling of the supply chain/toner challenges heading into 2023 enabled the OEM to have a better frame of mind and generated confidence within the walls of KMBS. Despite the impairment charges at the parent level, Errigo feels KMBS is in a good place and positioned to take even more market share moving forward.
“We have an unbelievable team of executives and people below them who support our customers, support our dealers and get the job done day in and day out,” he added. “And that’s what matters, right? This is how you win. It’s the hearts and minds of your people. It’s the hearts and minds of your dealers.
“We don’t have an axe to grind, but man, we have something to prove. And we’re fired up. Watch us, we’re coming after the market hard, and we’re going get our good name back. We still are the premier provider in the marketplace when it comes to quality of service. And that’s how we’re going to win business.”
