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Olympus publishes the new financial report: Imaging Business lost more money than expected

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Olympus published the latest financial report: There are two news:

  • In the Imaging Business Olympus lost $500 million more than previously forecast
  • The Imaging Business is now marked as “discontinued operation”

Our reader Mistral made a more deep analysis for us:

This business is soon to be divested and therefore accounted for as ‘discontinued operation’ (= not consolidated anymore) but they are still reporting the corresponding figures.
They recorded an operating loss of ¥46bn in Q2 (July – September) and ¥48.6bn in H1 (April – September) and forecast a total operating loss of ¥53bn ($500m) until divesting the business to JIP (thus meaning an additional ¥4.4bn in Q3).
See https://www.olympus-global.com/ir/data/brief/pdf/Olympus_Q1FY2021_Presentation_E.pdf page 6 and page 25-26 for Q2 and H1 (‘profit from discontinued operation’) and page 14-15 for the FY2021 forecast.
See also https://www.olympus-global.com/ir/data/brief/pdf/Olympus_Q2FY2021_Supplemental_E.pdf Page 7 gives the same information plus additional details on investments, R&D, revenue by geographical zone and unit sales. Bottom of page 2 gives information on headcount.

All these pieces of information point at a severe downsize before the divestment.

  •  Headcount went down 30% in 6 months between 31 March 2020 (4,270 employees) and 30 September 2020 (3,031 employees). In Japan, less than 400 employees remain in the Imaging business.
  • Between the first half of FY2020 and the first half of FY2021, capital expenditures (= investments) fell by half and R&D expenditures by 30%.
Q3 (October – December) business forecast is gloomy too:
  • Revenue: ¥6.3bn, down more than 50% in comparison to the same quarter last year after -43% in Q1 and -26% in Q2 and in spite of the global economy recovering from Covid-19, in particular in Asia.
  • Operating loss: ¥4.5bn = 72% of revenue, even though all one-off costs should have been recorded in the Q2 accounts.
I have trouble seeing how JIP could turn that thing around (make it profitable again) without deeply modifying the business model…
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