Shimano Inc. reported that the impact of the global recession and the pressure to reduce inventories has caused its bicycle components business and fishing tackle business to suffer from lackluster sales for the first half of 2009 ended June 30.
As a result, first half consolidated revenues fell 22% to ¥90,057 million ($945 mm) and net income plummeted 48% to ¥6,565 million ($69 mm) for the period. Gross margins shrunk 270 basis points to 33.1% of sales, while operating expenses surged 470 basis points to 23.5% of sales for the first half.
Bicycle Components
After a significant drop in the demand for bicycles in the popular price zone both in the Japanese market and in overseas markets, reflecting weak consumer confidence amid the global economic crisis, the decline in demand appeared to have bottomed out. However, since it will take some time to reduce inventories, shipments of the companys products in the popular price zone did not pick up.
Nevertheless, consumer demand for mid-range and high-end sports bicycles remained firm in Japan, the United States and Europe, underpinned by worldwide interest in health and the environment. However, there was a definite trend toward inventory trimming in the market and this took longer than initially anticipated. As a result, shipments of the companys mid-range and high-end products remained at relatively low levels.
As a result, first half sales for this segment declined 23% to ¥68,121 million ($715 mm) and operating income fell 52% to ¥8,324 million ($87 mm) for the segment.
Although new products boosted sales somewhat in the Japanese market, overall domestic sales were slightly lower than the figure for the same period of the previous year because the recessionary mood continued from the end of the previous year and retailers took steps to reduce inventories.
In overseas markets, sales of sophisticated, high-end products were particularly sluggish owing to the rapid deterioration of the global economy, resulting in significantly lower sales than the figure for the same period of the previous year.
As a result, sales for this segment were down 14% to ¥21,318 million ($224 mm) and operating income fell 77% to ¥521 million ($5 mm).
Others
Sales from other businesses were ¥618 million ($6 mm) and the operating loss was ¥226 million ($2 mm).
The second quarter trend in the top-line worsened somewhat from first quarter and the first half trends, with consolidated revenues sinking 25% for the period to ¥44,965 million ($462 mm). Second quarter sales declined most in Asia and Japan, while North America posted a double digit increase for the quarter. Second quarter gross margins fell 490 basis points to 31.7% of sales and net income plummeted 85% to ¥1,061 million ($11 mm).
The companys forecast for the year remains unchanged.
