Yoshinori “Jake” Yamashita
President and CEO
Customer value perceptions and demand trends have transformed amid recent progress in digital technologies and the dramatically accelerating pace of technological innovations. Companies worldwide face rising pressure to help resolve social issues. No matter how profitable they may be, businesses that fail to help materialize Sustainable Development Goals (SDGs)*1 cannot hope to build their marketplace reputations or generate sustainable growth. The lifestyles and values of individuals have diversified considerably. The Internet of Things (IoT) and other advances have removed constraints on where people work, driving the acceleration of personalized work practices. Such changes in the operating climate have made it a pressing challenge to overhaul existing systems and business processes to align them with future business environments.
I delivered a keynote speech during the opening ceremony of Climate Week NYC on September 24, 2018. I was invited to do so in view of the Ricoh Group earning a solid reputation for its achievements, one of them being that it was the first Japanese company to commit to RE100*2, a collaborative, global initiative of influential businesses. My speech reviewed the Ricoh Group’s endeavors over the years and noted that change is only possible through action. I noted that leadership, action, and collaboration are essential to protect the environment. I also shared my view that it is vital to keep pursuing new challenges for better tomorrows.
Overall, it was a year in which we did more than ever under the 19th Mid-Term Management Plan that we rolled out a year earlier to improve our profitability and execute our growth strategies to position ourselves for growth in the years ahead. While consolidated sales were down 2.4% from a year before, to ¥2,013.2 billion, we progressed steadily on the earnings front. We generated ¥86.8 billion in operating profit and ¥105.1 billion in profitability (operating profit after excluding special and transient factors).
In our core Office Printing business, we engineered a dramatic earnings turnaround as a result of structural reforms, although hardware and consumables sales were down, especially overseas. In Office Services, one of our growth fields, we continued to steadily expand earnings. It was against that backdrop that we invested strategically to secure resources to expand Office Services and Industrial Printing businesses.
In another business selectivity move, we transferred our shares in Ricoh Logistics System Co., Ltd., to SBS Holdings Co., Ltd., a third-party logistics services provider that has become a new partner in efforts to reinforce our supply chain management capabilities.
Business process reforms bore steady fruit. After deploying logistics process automation in Japan and abroad, for example, we automated 60 internal processes and reduced annual workloads significantly. We will keep reviewing and automating tasks in the year ending March 31, 2020. Under our 19th Mid-Term Management Plan, a three-year initiative ending in the year ending March 31, 2020, we aim to generate ¥100 billion in savings from the year ended March 31, 2017 levels through structural reforms. We have left no stone unturned in optimizing fixed and other costs, producing accumulated savings of ¥88.5 billion by the year ended March 31, 2019.
We have done much to boost corporate governance. In the year ended March 31, 2019, we changed the way to evaluate the performance of the CEO. Such assessments are from financial, shareholder and capital market, and nonfinancial perspectives. We adopted total shareholder returns to evaluate the CEO’s contributions to shareholders and market assessment perspectives. In the five years through the year ended March 31, 2018, our operating results were below the capital market’s expectations amid persistently adverse operating conditions, and our total shareholder returns during that time underperformed TOPIX (including dividends). These returns have trended upward since April 2017, however, and have recently outperformed the market. It is also worth noting that Ricoh decided to introduce a performance-based stock compensation plan for directors to incentivize shareholder-centric efforts to enhance corporate value over the medium and long terms.
We established three stages to drive sustainable growth. Under RICOH Resurgent, launched in the year ended March 31, 2018, we devoted energy to enhancing our strengths and refining our implementation capabilities to deliver growth. We also embarked on five materiality efforts. These were to enhance productivity, create knowledge, improve the quality of life, decarbonize economies, and materialize circular economies. In the year ended March 31, 2019, we launched, RICOH Ignite, a platform for steering toward growth and achieving challenging targets companywide over two years. It is in this stage that we are helping customers to work smarter through our EMPOWERING DIGITAL WORKPLACES value proposition.
We look to broaden the value we deliver through business to cover everything from conventional offices through frontlines and society at large. We are drawing on the Group’s core competence in pursuing business that helps resolve social issues, thus simultaneously achieving the SDGs and enhancing our corporate value. As well as formulating business strategies to ensure the success of our five materialities, we launched a program to set and manage key performance indicators that guide business units in attaining their SDGs.
By moving away from being self-sufficient, we can swiftly deliver value in ways we could not have done before, drawing on external resources and open innovation to create new businesses. We are also changing work practices within the Group through an internal digital revolution so we can apply our practical knowledge to serve customers and provide even greater value for them.
We will endeavor to eliminate all greenhouse gases from our value chain by 2050 to materialize a decarbonized economy, which is an increasingly vital social need. In addition, we have expressed our support for the Task Force on Climate-Related Financial Disclosures (TCFD), which the Financial Stability Board set up to encourage companies to disclose risks and opportunities stemming from climate change and stabilize financial markets to streamline transitions to low-carbon economies. We disclosed our risks and opportunities stemming from climate change.
We fully pushed forward with three RICOH Ignite growth strategies from the year ended March 31, 2019, undertaking initiatives to expand our businesses.