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FY2006 1st Quarter Financial Announcement

ended June 30, 2005
Date : July 28, 2005
Time : 4:15pm-5:30pm
Place : TSE Hall
Contents : Mr. Zenji Miura, CFO of Ricoh Company, Ltd., explained FY2006 1st quarter results using materials below.
Summary of 3rd Quarter Results Presentation
Q&A Session


< Attention >
These contents are prepared for the convenience of investors who could not participate in the financial results meeting. The contents below are by way of a summary and are not word for word account. Additionally, the Company bases the estimates in this material on information currently available to management, which involves risks and uncertainties that could cause actual results to differ materially from those projected.


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Presentation Materials
Financial Highlights /Appendix
 

 

 

 


 

Summary of 1st Quarter Results Presentation

The consolidated sales of Ricoh Group increased y-o-y in the 1st quarter of the fiscal year ending March 2006 due to the steady growth of office solution business especially sales increase of color machines and MFPs both in Japan and overseas. However, SG&A increased due to integration and reorganization of bases for the execution of growth strategy in the 15th mid-term plan. Besides this, profits in the semiconductor business declined as the recovery in that business came later than expected. These factors contributed to a decrease in operating, pre-tax and net income from the same corresponding period of last fiscal year.
Taking into consideration 1st quarter results, we revised the forecast of the fiscal year ending March 2006. But we did not change the forecast of net income as 97.0 billion yen.


 
Q&A Session

Q1.
 
Q2.
 
Q3.
 
Q4.
 
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Q9.
 
Q10.
 
Q11.

 
Q1. How much front-load expense was there for integration and reorganization of bases?

A1. It came to approximately 3 billion yen. The number for the second quarter has not changed from original estimate. Therefore, estimated expenses for the second half decrease by 3 billion yen.

 
Q2. What is the reason why sales growth rates for office business in both domestic and overseas markets were below expectation for Q1?

A2. Sales in April and May in Japan were rather poor due to a slow start in the office business in Q1. But, it recovered in June. Overseas, the Americas were strong including Central America and Canada which had not performed strongly before. Asia was also strong. In Europe, with a tough business environment due to hard competition, we were almost flat.

 
Q3. How did operating income by business segment change compared to the forecast for Q1?

A3. Profits of semiconductor business decreased by 1.4 billion yen in the Industry Business. There were no major changes in the Other Business. The Office Solution Business also contributed to the downturn. Earnings decreased there due to an increase in front-load expense in both the Imaging Solution and Network System Solution categories.

 
Q4. What are the results (sales and operating income) of the semiconductor business in Q1 and the forecast for coming quarters?

A4. Sales were 8 billion yen and operating income suffered a 1.4 billion yen deficit in Q1. Sales forecast for Q2 is 9 billion yen and annual sales forecast is 36 billion yen. Also annual profit should reach the break even point.

 
Q5. Please tell us the new product launch schedule.

A5. We released new products in Japan and overseas in May and June. Although we can't disclose the detailed schedule in advance, we plan to launch other new color copiers within this fiscal year.

 
Q6. Are the "strategic expenses" in this fiscal year similar to the "color strengthening" program of the last fiscal year?

A6. No, it is not the same program. "Strategic expenses" this year include the reorganization of domestic bases and restructuring or integration of group companies both in Japan and overseas, the development of core IT system and the structuring of organization for expanding the printing business. These will cost around 12 to 13 billion yen included in the 21.4 billion increases of SG&A in this fiscal year. That cost will decrease slightly compare to the latest forecast that was 15 billion yen.

 
Q7. Isn't the increase of front-load expenses the main factor behind the downward adjustment of annual earnings forecast?

A7. The main factors are trimming the sales forecast and decrease of gross profit.

 
Q8. How much impact did the acquisition of Hitachi Printing Solutions have?

A8. The forecast of operating income by business category is not disclosed. We trimmed earnings estimate by 2.5 billion yen from semiconductor business in Industry Business. And the rest is changes in the Office Solution Business.

 
Q9. How much impact did the acquisition of Hitachi Printing Solutions have?

A9. The contribution to profits is still slight. Also, it is difficult to calculate the impact of sales since products have been integrated into the Ricoh group. They are part of the expansion of the office solution business as a whole.

 
Q10. Is the price of raw materials increasing? Do you estimate any influence from that?

A10. We recognize the price of raw materials is increasing. But, at the same time some materials are going down in price. This doesn't mean production costs are increasing overall. However, if the price of raw materials continues to increase, it will have a negative effect on our cost reduction.

 
Q11. Is there any plan to further restructure some of the sales/service sites after the integration of the service division into Ricoh Technosystem, Co., Ltd. in Japan?

A11. The number of existing sites is our power base for executing our business models in Japan. Improving efficiency through integration, we intend to expand our business by taking advantage of our sites.

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