Days after announcing it was streamlining sales and marketing operations in Europe, Shimano Inc. reported that its operating income plunged 45.7% on a 20.6% decline in sales. The Japanese manufacturer of cycling components and fishing tackle reported that revenues fell to ¥186.7 billion ($2.00 bn) for the year ended Dec. 31 from ¥235.0 billion ($2.28 bn) in 2008. Operating income plunged 45.7% to ¥20.5 billion ($219 mm) from ¥37.8 billion ($366 mm) the prior year. Net income fell 62.0% to ¥9.6 billion ($103 mm), or ¥99.8 per share ($1.06), compared to ¥25.2 billion ($244 mm), or ¥262.1 ($2.54) per share in 2008.
The company said that sales of Bicycle Components fell 22.2% to ¥144.7 billion ($1.55 bn) for the year, resulting in a 43.4% decline in operating income to ¥18.9 billion ($1.34 bb). In Fishing Tackle, Shimano said sales fell 12.2% to ¥40.7 billion ($435 mm), while operating come plummeted 61.0% to ¥1.1 billion ($11 mm).
The one area of dramatic improvement was cash flow, which more than doubled to ¥42.6 billion at year-end from ¥19.9 billion at the prior year-end. A quarter of that improvement, or ¥10.5 billion, came from decreased inventory.
Despite lingering doubts about the sustainability of the recovery, Shimano said it expects net sales to rise 7.7% in the first half of fiscal 2010 and 9.8% for the entire fiscal year to ¥205 billion. That includes ¥161.0 billion in Bicycle Component sales and ¥43.0 billion in Fishing Tackle sales. The forecast called for operating income to rebound 46.1% to ¥30.0 billion yen and net income to rise 109.3% to ¥820.0 billion, or ¥201.7 per share, with the bulk of that growth coming in the second half of the year. The company said improved profitability would also come from streamlining of production and logistics.
Shimano attributed the steep decline to the global recession and said the Japanese economy remained in a severe situation. That coincides with preliminary estimates of a 20% decline in bicycle exports from Taiwan to 4.3 million units in 2009.
Shimano said both its businesses suffered greatly from the decline in consumer confidence as well as inventory adjustment in the market.
Sales of Bicycle Components were sluggish across all price ranges despite a steady increase in the number of cyclists worldwide, however Shimano said the inventory adjustment had almost run its course and there were signs of recovery in the mid-range and high-end product categories.
In North America, the Fishing Tackle business turned around in the third quarter as retailers began restocking. But a recovery had not yet begun in either Europe or Japan, where dealers continued to work off inventory and consumers stayed away from higher end product.
Shimano disclosed last week that its European subsidiary, Shimano Europe BV, will become responsible for the marketing and sales of both Shimano retail and OEM business towards all market channels and business partners. Up until now Shimano OTC was in charge of retail business within Europe that had been part of Shimano Benelux BV. Now all retail oriented business (Shimano Cycling Wear, Shimano Eyewear, Shimano Workshop, Shimano wheel sets, shoes and pedals, PRO, AIM and all individually packed Shimano components) will be handled by Shimano Europe BV.
