OEMs Mostly See Lower Demand for Equipment but Some See Uptick in Supplies Sales

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In October and November, original equipment manufacturers (OEMs) and vendors of single-function printers and multifunction printers (MFPs) announced financial results for the three-month period ended September 30, 2023. For most Japanese companies including Brother, Epson, Fujifilm, Konica Minolta, Kyocera, Ricoh, Sharp, and Toshiba Tec, the three-month period was the second quarter. For Canon, Ninestar, and Xerox, this period was the third quarter of fiscal 2023. HP is on a different financial calendar than all the other OEMs. Its fourth quarter of fiscal 2023 ran from August 1, 2023, through October 31, 2023.

The previous quarter ended in June 2023 turned the old adage that all the market growth is in A4, not A3, on its head (see “OEMs See Strong A3 Sales and Slumping A4 Sales in Latest Quarter”). During the previous quarter, many A3 MFP vendors continued to benefit from better product availability that enabled them to fulfill order backlogs and grow units and revenue. At the time, however, we warned that the growth in the A3 segment would not last long because several OEMs spoke of their backlogs normalizing. Indeed, in the quarter ended September 30, 2023, the A3 MFP business seemed to run out of steam for certain vendors, and several reported unit sales were down. Unfortunately, things weren’t much better for most A4 vendors, either. Most vendors reported downturns in A4 laser and inkjet equipment demand, aside from the refillable ink tank printer category, which continues to grow.

Japanese OEMs’ results would have looked a lot worse if not for the continued positive impact of favorable foreign currency exchange (FOREX). It is not a coincidence that the two worst-performing business segments this quarter, HP Printing and Ninestar, were also vendors for which FOREX was a headwind not a tailwind.

One notable trend this quarter is that several OEMs reported upticks in their consumable supplies businesses. Brother reported that its laser and inkjet consumables revenue rose. Canon’s sales of office MFD non-hardware, laser non-hardware, and inkjet non-hardware all increased. HP’s supplies sales rose for the first time in over two years. Epson’s ink sales increased. There are various reasons for these increases including the price hikes for consumables most vendors have implemented and FOREX for some vendors. Nevertheless, we can’t help but wonder if these firms, all of which face a good deal of competition from third-party supplies vendors, are seeing supplies sales improve due in part to the Ninestar ban in the United States.

Ninestar is the world’s biggest third-party supplies maker, but sales of its products were banned in the United States starting in June due to its alleged use of forced labor (see “Ninestar Imports Banned by U.S. Government Due to Forced Labor Concerns”). The quarter ended in September represents the first full quarter since the ban went into effect. Thus, it is possible that some of the supplies revenue gains reported by these vendors have come at the expense of Ninestar. It would make sense that these vendors in particular would benefit while certain A3 MFP vendors in whose installed base Ninestar has less penetration might not. Still, we must emphasize that we are just speculating about possible reasons for the supplies revenue increases seen by these vendors. None of these vendors specifically mentioned benefiting from the Ninestar ban when discussing their improved supplies sales. HP, however, did point to market-share gains indicating it is gaining share from somebody. Ninestar was more explicit and specifically said its sales of third-party supplies are down in the year-to-date due to the U.S. ban as well as unfavorable currency exchange.

Performance by Vendor

Actionable Intelligence currently covers financial results for the following 12 printer OEMs: Brother, Canon, Epson, Fujifilm, HP, Konica Minolta, Kyocera, Ninestar, Ricoh, Sharp, Toshiba Tec, and Xerox. Here, we look specifically at the performance of OEMs’ business segments that include home and office printer hardware, supplies, and related software and services.

Figure 1 presents a snapshot of the financial performance of OEMs’ printing businesses for their most recent quarter.

Figure 2 shows how OEMs’ printing businesses fared in terms of year-over-year revenue and profit growth or declines in their most recent quarter. While last quarter eight out of 12 printing businesses posted both revenue and profit growth (see “OEMs See Strong A3 Sales and Slumping A4 Sales in Latest Quarter”), in the quarter ended September 30, six vendors did. The six business posting both revenue and profit growth in the latest quarter were Brother Printing and Solutions, Canon Printing, Konica Minolta Digital Workplace, Kyocera Document Solutions, Ricoh Digital Services, and Toshiba Tec Workplace Solutions. Last quarter, the three-month period ended June 30, 2023, Canon Printing wasn’t on this list of vendors reporting both revenue and profit growth but Epson Printing Solutions, Fujifilm Business Innovation, and Xerox Print and Other were.

This quarter, four businesses, Epson Printing Solutions, Fujifilm Business Innovation, Sharp Smart Office Business, and Xerox Print and Other, posted mixed results. Epson Printing Solutions saw revenue grow as profit dropped, but the other three businesses saw improved profit but lower revenue. And the same two vendors that saw both revenue and profits shrink last quarter, HP’s Printing Business and Ninestar, also saw revenue and profit drop this quarter.  Note that we do not have an operating profit figure for Ninestar for Q3 2023 specifically—just for the first nine months of the year. But given that operating profit was down 88.0 percent in the first nine months of FY 2023 and that the downturn was steeper than it was in the first half, it is a sure bet that operating profit was down sharply in Q3 as well.

Vendors seemed to agree that conditions were a bit tougher in the latest quarter despite the fact that Japanese OEMs continue to benefit from FOREX. Several vendors noted that inflation is depressing capital investment, A3 MFP vendors have largely fulfilled the big order backlogs stemming from shortages in prior periods, China’s once-booming market has turned sluggish (see “IDC Reports Another Downbeat Quarter of Hardcopy Peripherals Shipments in China”), and the Western European market contracted (see “IDC Reports Another Decline in Western European Hardcopy Peripheral Shipments in Q3 2023”). IDC has yet to publish a press release with its worldwide hardcopy peripheral shipments, but we expect the research firm to report a second consecutive quarter of declines. In short, although the impact was lessened by FOREX and price hikes, demand for printing equipment is down.

Figures 3 and 4 show these same year-over-year percentage changes separately. Figure 3 shows year-over-year revenue growth or decline for the quarter. This quarter, two vendors saw double-digit revenue growth: Toshiba Tec Workplace Solutions and Ricoh Digital Services. While last quarter three vendors (Ninestar, HP Printing, and Sharp’s Smart Office Business) reported a shrinking top line, this quarter these same three businesses had company with two additional vendors, Fujifilm Business Innovation and Xerox Print and Other, also reporting revenue declines.

Figure 4 shows that nine out of 12 vendors saw improved profits in the quarter. HP Printing, Epson Printing Solutions, and Ninestar (again we don’t have an exact percentage for Ninestar for Q3) were the only vendors that saw profits shrink. Similar to what we saw last quarter, several businesses reported some pretty big year-over-year improvements, including triple-digit profit growth for Sharp Smart Office, Toshiba Tec Workplace Solutions, and Brother Printing & Solutions. As we noted last quarter, this is mostly because profits were slim in the year-ago period due to high component and transportation costs and other factors.

Figure 5 shows how much revenue in U.S. dollars each OEM’s printing business generated in the quarter ended September 30, 2023. Overall, the vendors rankings from biggest revenue to the smallest looked exactly the same as in the previous quarter. The only change is that while last quarter Brother Printing & Solutions brought in more revenue than Sharp Smart Office, this quarter the reverse is true.

Figure 6 shows the OEMs’ printer segment profits in U.S. dollars. As always, this chart exemplifies the fact that big percentage increase don’t always translate into big profits. For example, Sharp Smart Office and Toshiba Tec Workplace Solutions were the two segments with the highest year-over-year increases in profits, but these two business rank dead last in delivering operating profit in U.S. dollars. Similarly, HP Printing and Epson Printing Solutions were the only businesses (aside from Ninestar) to report profit declines, but HP Printing brought in the most profit in U.S. dollars while Epson Printing Solutions was ranked number four.

Another interesting thing about Figure 6 in comparison to Figure 5 is that the figures show how Canon is a far closer competitor to HP in terms of revenue than in terms of profit. (Note that in one recent quarter,  Canon Printing’s revenue exceeded HP Printing’s revenue, see “OEM Financials for Quarter Ended December 2022 Show Revenue Shakeup”). In the quarter ended September 30, 2023, HP Printing raked in 16.2 percent more revenue than Canon Printing, but HP Printing deliver 172.4 percent more profit than Canon Printing.

The reason for the disparity, of course, is operating profit margin, which is shown in Figure 7. Despite the weak performance of its Printing business in the year to date, HP has consistently maintained an industry high profit margin for the group. In the latest quarter, HP Printing’s operating profit margin was an enviable 18.9 percent. While last quarter, three vendors in addition to HP (Brother Printing & Solutions, Epson Printing Solutions, and Canon Printing) delivered double-digit profit margins, this quarter the only vendor aside from HP did so was Brother Printing & Solutions. Several vendors including HP Printing, Kyocera Document Solutions, Konica Minolta Digital Workplace, Sharp Smart Office, Toshiba Tec Workplace Solutions, and Ricoh Digital Services saw their operating profit margins grow sequentially.

Below we have summarized the performance of the various OEMs we track, keeping the focus on their home and office hardware and supplies businesses. For more information, click on the links below to access our detailed coverage of these companies’ financial results.

Brother: In Q2 2023, Brother posted modest revenue growth, strong operating profit growth, and a modest dip in net profit. It was a very good quarter for Brother’s Printing and Solutions segment, with revenue up 2.5 percent and operating profit up a hefty 157.6 percent. The subsegment we are most interested in, communications and printing equipment, saw revenue grow 1.4 percent in Q2. Brother reported that in Q2 2023 its laser hardware revenue declined 17 percent year-over-year; however, laser consumables revenue was up 15 percent. In the inkjet business in Q2 2023, hardware revenue grew 3 percent and consumables revenue was up 16 percent. The strong consumables sales, along with lower parts and materials costs, are what fueled the robust profit growth in the Printing and Solutions segment this quarter. One thing to note, however, is that the year-ago period was a tough one for Brother’s consumables sales, so Brother had an easy comparison. Last year, Brother raised supplies prices and channel partners stocked up in Q1 2022 in advance of the price hikes in Q2 2022.

Canon: Canon was able to post net sales and operating and net profit growth in Q3 2023, but it seems the growth wasn’t as high as Canon expected due to the sluggish market in China. In the Printing business in Q3 2023, net sales were up 2.8 percent and operating profit grew 12.3 percent—that’s the first time all year segment profit increased. In the Office subsegment, net sales in Q3 2023 grew 5.2 percent year-over-year, but office MFD net sales were up just 1.2 percent. Canon’s net sales from office MFD hardware fell 4 percent on a 13 percent decrease in units. Canon laid the blame for this on two things: stagnant market conditions in China and the high level of unit sales last year resulting from the resumption of product supply. In other words, Canon’s backlog has normalized. What drove office MFD net sales higher in Q3 was sales of office MFD non-hardware, which rose 7 percent. In Q3 2023, Prosumer net sales declined 0.8 percent year-over-year. The main problem in Q3 was the laser printer business. Total laser printer net sales fell 3.8 percent as laser hardware revenue fell 12 percent on a steep 23 percent decline in units due to soft demand in China and an overall “curbing of corporate investments” worldwide. One piece of good news in the laser business was that laser non-hardware sales improved 2 percent in Q3 2023. In Q3, Canon’s inkjet net sales rose 4.7 percent. Inkjet hardware net sales declined 1 percent on flat units. Canon noted work-from-home demand declined but it saw sold sales of refillable ink tank models. Canon reported its inkjet non-hardware net sales rose 10 percent. So much like was the case for Brother, better consumables sales fueled higher profits in Canon’s Printing business in its latest quarter.

Epson: Q2 2023 was not a good quarter for Epson. Epson saw its long revenue growth streak come to an end, and operating profit and net profit fell. Printing Solutions was the only Epson segment to see revenue growth in the quarter. Revenue in this segment improved 3.1 percent, but segment profit tumbled 19.5 percent. In the Office and Home Printing subsegment, revenue increased 3.8 percent year-over-year in Q2; however, Office and Home Printing profit fell 38.4 percent. In Q2 2023, SOHO and home inkjet printer revenue grew a modest 0.9 percent. The firm reported unit sales of ink cartridge printers decreased but unit sales of high-capacity ink tank printers increased. Office-shared inkjet printer revenue grew 31.4 percent in Q2 due to an uptick in demand for medium-speed models and higher ink sales. Epson’s inkjet ink sales grew 5 percent in Q2 2023 due mainly to favorable currency exchange. The firm noted sales of ink bottles and consumables for office-shared printers were up.

Fujifilm: In Q2 2023, Fujifilm posted revenue and profit growth as well as record highs for revenue, operating income, and net income for the second quarter. While Fujifilm as a whole saw growth, there were areas of weakness in the Business Innovation segment. Revenue in the Business Innovation segment in Q2 2023 declined 1.4 percent year-over-year as operating income in the segment increased 1.4 percent. While revenue grew 5.4 percent in the business solutions subsegment, the office solutions group that is responsible for printers, MFPs, and supplies saw revenue decline 4.9 percent in Q2. Fujifilm said it grew its OEM business to include more partners, but it had lower exports to Europe and the United States—meaning to Xerox.

HP: HP wrapped up the final quarter of FY 2023 with a Q4 revenue decline but with year-over-year growth in both operating profit and net profits for the quarter. The Printing segment remained under pressure in Q4, with revenue dropping 2.5 percent year-over-year and operating profit declining 6.5 percent. As has been the case for a while now, the biggest drop in revenue was seen for consumer printer hardware. Revenue in this category was down 21.3 percent. Commercial hardware revenue was down a more modest 4.0 percent. Total hardware units declined 19 percent in Q4 with commercial units down 24 percent and consumer units down 18 percent. But not all was doom and gloom: HP posted a surprise 2.7 percent increase in its supplies revenue as the firm has been able to gain market share and has hiked supplies pricing.

Konica Minolta: In Q2 2023, Konica Minolta’s companywide performance was mixed with revenue up modestly but operating and net profits declining year-over-year. The Digital Workplace Business we are most interested in, however, actually performed well. The segment’s revenue ticked upward 1.1 percent, and segment operating profit improved 15.1 percent. Konica Minolta reported that in Q2 2023 revenue in the Office subsegment was essentially flat, up 0.1 percent. In Q2 2023, the company’s unit sales of A3 color MFPs declined 19 percent and unit sales of A3 monochrome MFPs were down an astounding 48 percent. In better news, however, A4 unit shipments in Q2 2023 were up 31 percent. Konica Minolta said its non-hardware revenue dipped 5 percent as increases in non-hardware revenue in China and India were offset by decreases in Japan, the United States, and Europe.

Kyocera: Q2 was a tough period for Kyocera as a whole. Company revenue fell modestly, but operating and net profit exhibited double-digit year-over-year declines due to weak demand for semiconductor-related products. In contrast, the Document Solutions segment actually performed quite well. In Q2, Document Solutions revenue increased 4.2 percent year-over-year and segment profit soared 61.4 percent. Unfortunately, however, Kyocera never shares much commentary about its Document Solutions unit. The firm said the unit’s revenue growth was due to the impact of the weaker yen.

Ninestar: As is customary for Ninestar, the company reported more about its performance in the year to date than in Q3 2023, but what the firm did reveal shows the firm’s revenue and profits fell significantly in both periods. As noted above, Q3 2023 was the first full quarter following the United States’ decision to ban importation of products made by Ninestar Corporation and certain subsidiaries, and it looks like the ban worsened the declines the company was already experiencing this year due to lower demand in the domestic market and weakness overseas. In Q3 2023, Ninestar’s revenue declined 15.5 percent year-over-year. The firm did not report how its operating profit fared in Q3, but the firm said that for the first nine months of the year, its operating profit decreased 88.0 percent. Ninestar reported relatively few details about its business segments, but what it reported was declines across the board. Lexmark’s revenue for the first nine months of the year contracted 12.3 percent due to a decline in its OEM business. Revenue from the sale of Lexmark-brand printers was up 12.4 percent year-over-year in the first nine months of the year on a 5.8 percent uptick in unit sales volumes. In a surprising reversal of its years of growth, Pantum reported its revenue fell 15.5 percent in the first nine months of FY 2023 and its net profit fell 37.4 percent. The big problem for Pantum has been the decline in demand in the Chinese market. We expect that Pantum’s U.S. sales, a small but growing market for Pantum, also took a hit in Q3 due to the U.S. ban on Pantum imports and the firm’s products being pulled from certain retailers like Walmart  (see “Walmart.com Drops Many Ninestar Cartridges and Pantum Products”). Ninestar reported its Geehy chip business saw revenue plunge 28.0 percent and net profit plummet 76.9 percent in the first three quarters of the year. Moreover, in the year to date, Ninestar said that in its general printing consumables business, which makes and sells third-party supplies, revenue fell 7.0 percent and net profit declined 41.7 percent, and Ninestar laid the blame for this squarely on the U.S. ban as well as unfavorable currency exchange.

Ricoh: In Q2 2023, Ricoh posted revenue growth, but the firm’s operating and net profit fell. Things looked more upbeat during the quarter at the firm’s Digital Services segment. Digital Services revenue rose 12.7 percent year-over-year in Q2, while segment profit was up 32.8 percent. Unfortunately, Ricoh did not break out Office Printing sales for the quarter but only for the first half. In H1 2023, Office Printing net sales rose 6.3 percent. Hardware sales in the Office Printing business were up 8 percent excluding FOREX. Ricoh said that it was able to control pricing so that it could offset a shortfall in unit sales. Demand for A4 MFPs is outpacing demand for A3 devices, which skewed the firm’s product mix toward lower-priced units during the first half. In H1, non-hardware sales, which include consumables, were down 2 percent.

Sharp: In Q2 2023, Sharp’s net sales continued to slide, but the firm finally posted an operating profit after several quarters of operating losses. The firm reported a net loss, albeit a smaller one than in the year-ago period. In Q2 2023, the Smart Office business reported a 4.4 percent decrease in net sales but an impressive 394.9 percent increase in operating profit. Sharp reported that sales in the MFP business and the office solutions business were strong, especially in Europe and the United States, but the group’s sales declined due to lower sales of PCs and projectors. Sharp attributed its significant increase in operating profit in the Smart Office business to the increase in sales in the MFP business, a shift toward high-value-added offerings in the office solutions business, and structural reforms in the information display and PC businesses.

Toshiba Tec: In Q2 2023, Toshiba Tec reported year-over-year net sales growth and net profit growth, but operating profit declined due to the weak performance of the Retail Solutions group. The Workplace Solutions group that we are most interested in, however, had an excellent quarter, with revenue up 15.9 percent and operating profit up 202.8 percent. Despite strong sales, Toshiba Tec characterized the business environment for the Workplace Solutions group as “severe” because of declining prints volumes “due to post-COVID-19 work style reforms and office DX promotion” and intensifying competition with peers. Nevertheless, Toshiba Tec said sales of MFPs increased due both to FOREX and “strong sales in the Americas, Europe, and other regions, reflecting a recovery from product supply disruptions and increased selling prices.” The company attributed the segment’s sharp improvement in operating profit to the increase in net sales resulting from recovery from product supply disruptions, higher selling prices, and effects of structural reform.

Xerox: In Q3 2023, Xerox’s performance for the company as a whole was mixed. Revenue declined, but operating and net profit improved. In Xerox’s Print and Other business, segment revenue declined 6.0 percent year-over-year in the quarter, but segment profit improved 1.6 percent. After four consecutive quarters of growth, Xerox’s equipment revenue declined in Q3 2023, falling 1.0 percent year-over-year. Revenue in the entry-level segment declined 24.3 percent year-over-year. Total entry-level installs were down 36 percent—down 52 percent for color units and down 28 percent for monochrome. Xerox attributed the declines in the entry-level equipment business to “the ongoing normalization of work-from-home trends.” Midrange equipment sales increased 5.7 percent. The growth was due largely to higher pricing because total installs of midrange equipment fell 16 percent—down 18 percent for color and down 10 percent for monochrome. The high-end equipment business saw 3.1 percent year-over-year revenue growth as high-end installs increased 12 percent (installs were up 15 percent for color units but down 16 percent for black-and-white models). The big problem for Xerox in Q3 2023, however, was post-sale revenue, which declined 7.0 percent. This was the fifth consecutive quarter of post-sale revenue declines for Xerox and the biggest decrease posted this year. Xerox attributed the downturn to a significant decline in lower-margin paper sales and IT endpoint devices, the termination of Fuji royalty income, and “specific strategic actions, resulting in lower financing and PARC revenue.”

Forecast Changes

This quarter, we saw seven vendors adjust their forecasts for FY 2023. Four vendors, Brother, Canon, Epson, and Kyocera, lowered guidance. For Kyocera, the semiconductor slump was the impetus for the downward revision, but Brother, Canon, and Epson pointed to the slowdown in China. Three vendors—Konica Minolta, Ricoh, and Toshiba Tec—raised their revenue guidance due largely to more favorable than anticipated exchange rates.

If you want the most up-to-date information on printer OEMs’ financial performance, legal issues, new product introductions, and other topics impacting the printer and MFP hardware and supplies industry, subscribe to Actionable Intelligence.

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