Shimano Inc. said that any decisive economic recovery never materialized in the third quarter despite signs of recovery in Asia. The company said the worst of the recession appears to be past in Japan, but excess manufacturing and excess labor have not been completely shed and there remains concern that the possibility of further deterioration in personal consumption.
The third quarter trend in the top-line improved from second quarter and the year-to-date trends, with consolidated revenues declining 19.5% to ¥44.38 billion ($474 mm). Third quarter sales declined most in Asia and Japan, while North America jumped more than 50% for the quarter, aided by an acquisition. Third quarter consolidated gross margins improved 10 basis points to 35.2% of sales, but net income fell 78.8% to ¥1.30 billion ($14 mm).
Japan revenues declined 27.8% to ¥29.11 billion ($311 mm) from ¥40.32 billion ($400 mm) in the year-ago period and Asia revenues fell 24.5% to ¥3.25 billion ($35 mm) in Q3 from ¥4.30 billion ($43 mm) in Q3 last year. Europe was also down double-digits for the period, declining 12.4% to ¥5.67 billion ($61 mm) in the third quarter from ¥6.47 billion ($64 mm) in the year-ago period. North America, which saw some upside from acquisitions, posted a 50.1% increase in revenues for the quarter to ¥5.50 billion ($59 mm). The business grew more than 61% when measured in U.S. dollar terms.
The company launched a Lifestyle Gear Division, which they said had the aim of “enriching the experience of cyclists and anglers.” The Group apparently worked to build its market and streamline its production and logistics systems, but the Group’s sales were said to be “lackluster” for the year-to-date period, but did improve sequentially in the third quarter versus Q2 and the year-to-date period through September 30.
In the Bicycle Components business, the pace of inventory adjustment slowed in North America after sluggish sales of mid-range and high-end bicycles in the region since the spring. Europe experienced “steady” sales of mid-range and high-end bikes, but the company said customers took a “cautious approach” in placing new orders, cutting into shipments of Shimano components for the YTD period. Third quarter Bicycle Components revenues declined 22.1% to ¥34.75 billion ($371 mm) and Q3 operating income fell 39.1% to ¥5.04 billion ($54 mm) for the period.
In the Fishing Tackle business, Shimano said that there were signs of recovery in the Japanese market, but domestic sales were “slightly lower” that the year-ago period due to the consumer’s reluctance to purchase high-end products, which the company attributed to the weaker economy and a deterioration of river conditions.
Shimano said non-Japan sales were “far lower” for the nine-month year-to-date period as inventory adjustment programs continued in Europe and demand in Asia weakened due to the stronger yen.
Third quarter sales for the Fishing Tackle segment were down 6.2% to ¥9.27 billion ($99 mm) and operating income fell 42.0% to ¥163 million ($2 mm).
Third quarter sales from other businesses were ¥366 million ($4 mm), representing a 42.8% decline in yen terms, and the operating loss was ¥52 million ($1 mm) for the quarter.
