Konica Minolta flags impairment losses on past buys

Jo Francis
Friday, April 29, 2022

Konica Minolta has downgraded its profit forecast for the year – and now expects to make an operating loss – and is also likely to breach one of its banking covenants.

Konica Minolta: revised expectations for fiscal year ending 31 March
Konica Minolta: revised expectations for fiscal year ending 31 March

The Japanese manufacturer has issued a revised forecast for the financial year ending 31 March. 

KM revised its sales forecast up by ¥10bn (£61m) to ¥910bn, but said that, rather than an operating profit of ¥12bn it now expected to file a ¥23bn loss.

The ¥35bn reversal was due to impairment losses of ¥10.9bn on past acquisitions – including ¥1.5bn related to Konica Minolta Marketing Services EMEA, which now trades as Indicia Worldwide. 

KM said the “recovery of the invested amount is deemed difficult”.

“The profitability [of KMMS EMEA] declined because of the decline in demand for the print procurement support services resulting from the accelerated shift of the consumer behaviour towards online purchasing and cancellation or reduction in scale of in-store campaigns and in-person events run by client companies due to the prolonged Covid-19 pandemic,” KM stated. 

KM acquired print manager Charterhouse PM back in 2012. 

In its most recent results, for the pandemic-impacted year to 31 March 2021,  KMMS EMEA posted sales down 32% at £80.6m and reduced its operating losses to £2.3m (2020 operating loss: £10.9m).

KMMS EMEA owed Konica Minolta £58.8m at the balance sheet date.

CEO Yves Rogivue told Printweek that impairment on KM’s books and current financial success “are two totally different kind of shoes”.

“We had actually finalised our painful restructure, reposition and rebranding initiative by March 2020, just before the pandemic hit the western world,” he explained.

“Since then not only have we put our people first, won a ton of big new brands and have exceeded our own financial targets month by month (albeit pandemic, supply chain and current horrific war challenges).”

Rogivue said the firm was focused on its strategy to combine marketing activation campaign efficiency with data-driven ROI effectiveness.

In the financial update Konica Minolta said that other goodwill write-offs related to the acquisition of imaging of things business Mobotix in Germany (¥5.8bn impairment loss), and at its IoT solutions unit (¥3.5bn). 

At part of its Healthcare business, accounts receivables are expected to decrease by about ¥9.2bn, while operating profits are expected to be around ¥11.5bn lower than forecasted. 

KM said that it expected to breach one of its financial covenants in its syndicated loan agreement as a result of the downgrade, but stated: “However, the company has obtained the consent from all relevant financial institutions not to request the company to forfeit the benefit of time due to this breach.”

Fresh CEO Toshimitsu Taiko took over at the top at the beginning of this month, and is tasked with implementing the group’s medium-term business plan. 

Konica Minolta’s share price fell sharply on the announcement, and was down nearly 8% to ¥446. The shares had previously descended to a 52-week low of ¥440 in early February. The 52-week high is ¥658. 

Separately, this week KM has described the rise of inkjet production as “unstoppable” with production inkjet a growth market for the group. 

KM said that in the past three years its global market share of B2 inkjet systems had tripled “and now stands at 10%”.

“Numbers are expected to continue upwards as inkjet continues to break new ground as a real growth engine for digital printing,” the manufacturer stated. 

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