Ricoh 2007 Annual Report Download - page 24

Management's Discussion and Analysis of Fiscal 2007 Results
Sales
Consolidated net sales of Ricoh Group for fiscal year 2007 (April 1,
2006 to March 31, 2007) increased by 8.4% to ¥2,068.9 billion($17,533
million) from the previous corresponding period. This marks the
thirteenth consecutive year-on-year revenue increase and the first time
the Group achieved sales exceeding ¥2 trillion. During this period, the
average yen exchange rates were ¥117.02 against the U.S. dollar (down
¥3.76) and ¥150.08 against the euro (down ¥12.22). Sales would have
increased by 5.2% if not for the effects of foreign currency fluctuations.
Sales in all the segments such as the Office Solutions, Industrial
Products and Other increased. The increase in sales in the Office
Solutions was due mainly to continuous growth in sales of digital plain
paper copiers (PPCs), multifunctional printers (MFPs) and printers,
mainly for color products. Sales of IT services also increased resulting
from the expansion of the solutions business. As for Industrial
Products, sales in semiconductors, electronic components and thermal
media businesses increased. Other areas experiencing increased its sales
of financing business as well as digital cameras. As a result, domestic
sales increased by 3.7% from the previous corresponding period, to
¥1,002.2 billion($8,494 million). Overseas sales also increased by
13.1% from the previous corresponding period, to ¥1,066.6
billion($9,040 million). Both domestic and overseas sales exceeded ¥1
trillion for the first time ever.
Operating Income
Gross profit increased by 8.5% from the previous corresponding period,
to ¥862.4 billion($7,309 million). This increase was primarily due to
the increased sales of value-added high-margin products such as MFPs
in addition to ongoing cost management controls. Foreign currency
fluctuations also served as a factor behind the profit increase.
Selling, general and administrative expenses increased by 6.4% from
the previous corresponding period, to ¥688.0 billion($5,831 million).
R&D expenses remained high level due to its focus on developing new
products and the development of core operating systems. Additionally
due to our accelerated efforts in implementing measures for enhancing
our capabilities to provide solutions and expanding business spheres,
operating expenses increased. Ricoh did start to see the positive effect of
its structural reform initiatives such as enhancing the efficiency of the
core operations. Consequently, the percentage of selling, general and
administrative expenses against total sales decreased by 0.5 percentage
points from the previous corresponding period, to 33.3%. R&D expenses
increased by ¥4.5 billion from the previous corresponding period, to
¥114.9 billion ($974 million, 5.6% of total sales).
As a result, operating income increased by 17.4% from the previous
corresponding period, to ¥174.3 billion ($1,478 million).
Income before Income Taxes
In the other (income) expenses, both interest expenses and income
increased as a result of higher market interest rates as compared to the
previous corresponding period. The foreign exchange gains in the
previous corresponding period was relatively higher. Consequently, the
other (income) expenses decreased.
As a result, income from continuing operations before income taxes
increased by 14.2% from the previous corresponding period, to ¥174.5
billion($1,479 million).
Net Income
The effective tax rate was the same level as previous corresponding
period, 36.9% due to tax credits resulting from R&D expenses.
Income from discontinued operations was ¥5.5 billion($47 million),
net of tax. Income from discontinued operations consisted of the gain
on the sale of the content delivery service operation and income from
operations from the beginning of this fiscal year to the sale. The sale
amount of the content delivery service was ¥12.0 billion($102 million).
As a result, net income from continuing operations increased by 11.8%
from the previous corresponding period, to ¥106.2 billion($900
million). Net income from all business operations including
discontinued business operations increased by 15.1% from the previous
corresponding period, to ¥111.7 billion ($947 million). This marks the
highest net income achieved for two consecutive years and the amount
exceeded ¥100.0 billion for the first time in the Ricoh's history.
The performance of the European office equipment sales and services
operations acquired from Danka Business Systems PLC as of January
31, 2007 was included in Ricoh Group's financial statements for this
fiscal year.
A year-end cash dividend of ¥15.00 per share was approved at the Ordinary
General Meeting of Shareholders held on June 27, 2007. Combined
with the interim dividend of ¥13.00 per share, the total dividend for the
fiscal year ended March 31, 2007 was ¥28.00($0.24) per share.
Segment Information
CONSOLIDATED SALES BY PRODUCT LINE
1. Office Solutions
Net sales in the Office Solutions segment which consists of Imaging
Solutions and Network System Solutions increased by 8.4% from the
previous corresponding period, to ¥1,774.4 billion ($15,038 million)
despite stiff competition against other manufacturers regarding the
color equipment and solutions business. The breakdown of sales for
Imaging Solutions and Network System Solutions is as shown below.
23 ANNUAL REPORT 2007