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Business

Ricoh's troubles extend beyond massive write-downs

Japanese copier maker faces shrinking market and stiff competition

A shrinking market and merging competitors threaten Ricoh's office equipment business.   © Reuters

TOKYO -- As Ricoh braces for a flood of red ink in the year through March 31 from heavy impairment losses on overseas units, the company maintains that its painful structural reform is succeeding and that next year will bring recovery.

But digitization and stiff competition have the Japanese copier maker's core business in a bind, and no relief is yet in sight.

The company now projects a record 160 billion yen ($1.52 billion) operating loss -- its first in six years -- down from a 33.8 billion yen profit the previous year. Just last month, it had forecast an operating profit of 20 billion yen. It also predicts a net loss of 170 billion yen, although it previously expected to break even on a net basis.

Ricoh is "taking the matter very seriously," President and CEO Yoshinori Yamashita told reporters at an emergency press conference Friday.

Of the roughly 180 billion yen in impairment losses estimated for this fiscal year, 140 billion yen stems from fixed assets including goodwill on Ikon Office Solutions, a U.S. distributor it acquired in 2008 for $1.63 billion in an attempt to develop that market. The purchase seemed promising, but the rise of the internet and other factors caused earnings to stall.

The transition away from paper "exceeded expectations, and competition turned harsh," said the CEO. "North America faced a striking decline in unit prices."

Yamashita, appointed in April 2017, has pushed hard for structural overhaul. Under his watch, Ricoh eliminated 5,000 jobs primarily in North America, with further trimming to come, and cut off financial support to a money-losing Indian unit. It also sold its stake in Coca-Cola Bottlers Japan Holdings, a distributor for the soft-drink company with strong ties to Ricoh founder Kiyoshi Ichimura. The impairment loss was positioned as part of the same restructuring effort.

But though the company has "made it over the mountain" of reform, in Yamashita's words, further impairment losses may lurk beyond North America, as regions the world over shift from print to digital.

Ricoh has "climbed the mountain" of structural reform, says President and CEO Yoshinori Yamashita. But it still faces a steep path to recovery.

Competitors such as Canon and Fujifilm Holdings are striving to adapt to the shrinking market for printers, copiers and scanners by moving into new fields such as medical equipment, while Ricoh has stuck to its core operations.

But the office equipment market's pecking order is shifting, with Fujifilm looking to purchase Xerox and combine the U.S. company into their existing joint venture. That deal, if successful, would create a giant whose scale surpasses Canon and American competitor HP, bumping Ricoh down one spot to fourth place.

Last month, Yamashita outlined a growth strategy focused on industrial and commercial printing as well as digital services for improving office efficiency. But those pursuits are largely extensions of existing operations. The digital services idea still centers on multifunction office equipment. The company has prepared a war chest of more than 200 billion yen for mergers and acquisitions, but with rivals like Canon already pushing ahead in such fields, the road ahead may still be bumpy.

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