Nikon (NINOY) Posts Fiscal 2017 Loss, Revenues Remain Weak

Nikon Corporation’s (OTC:NINOY) fiscal 2017 earnings declined significantly over the previous fiscal year, as the company generated a net loss of ¥7.1 billion ($65.1 million).

The camera maker had announced a major restructuring plan in second-quarter fiscal 2017, which included reassigning over 1,500 employees and focusing on “high-value” cameras. Nikon recorded losses from inventory write-downs/write-offs in the Semiconductor Lithography business as restructuring expenses, which resulted in the net loss. An increase in tax expenses arising from tax effects also hurt the bottom line.

However, operating income increased 61.1% year over year to ¥51 billion, supported by strong performance in the Precision Equipment businesses.

Inside the Headlines

In fiscal 2017, Nikon’s net sales fell 8.6% year over year to ¥748.9 billion ($6.9 billion). The top line was positively impacted by increase in unit sales from FPD and Semiconductor lithography, which was more than offset by the impact of adverse foreign exchange rates and decline in digital cameras unit sales.

For the fiscal, sales for the Precision Equipment Business surged 38.5% year over year to ¥247.6 billion ($2.3 billion).The unit enjoyed remarkable growth in the FPD Lithography System field, which benefited from the extension of capital investments. Capital investments in the semiconductor-related field also showed strong performance. Operating income at the segment rose to a whopping ¥51 billion compared to just ¥9.6 billion in the prior year.

However, the Imaging Products Business witnessed a steady decline in both sales and profits, as the top line shrunk 26.4% over fiscal 2016 to ¥383 billion ($3.5 billion). The unit’s performance was affected due to the shrinking digital camera market and negative impact of foreign exchange translation. In addition, the 2016 Kumamoto earthquake disrupted the suppliers, which affected this unit’s operations as well. Operating income at the segment also fell to ¥27.7 billion, down 39.4% from ¥45.7 billion in the year-ago period.

The Instruments Business also displayed negative growth, with the top line coming in at ¥73.4 billion ($673.4 million), down from sales of ¥77.2 billion recorded last fiscal. The microscope-related field’s performance was weak and adverse foreign currency translation impact further hampered revenues. Further, in the industrial metrology field, the company recorded poor sales due to sluggish recovery in capital investments. The segment recorded an operating profit of ¥0.3 billion compared with ¥2.8 billion in the prior fiscal year.

The new Medical Business posted sales of ¥20.2 billion ($185.3 million) in the fiscal, up from ¥18.3 billion in the year-ago period. Optos Plc's retinal diagnostic imaging equipment exhibited solid performance, which drove revenues. This segment also recorded an operating loss of ¥4.5 billion, slightly narrower than the ¥4.6-billion loss in the prior year.

Lastly, the Other Businesses segment net sales remained flat year over year at ¥24.4 billion ($223.8 million).

Liquidity & Cash Flow

As of Mar 31, 2017, Nikon’s cash and cash equivalents were ¥319 billion ($2.9 billion), up from ¥251.2 billion recorded a year ago.

Long-term liabilities (which include Bonds and Long-term loans) totaled ¥141.5 billion ($1.3 billion), up from ¥110.4 billion a year ago.

Nikon Corp. Price, Consensus and EPS Surprise

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Written By: Zacks Investment Research