Shimano Inc. said the lack of any decisive economic recovery 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 of personal consumption.

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.

Nine-month year-to-date consolidated revenues fell 21.2% to ¥134.4 billion ($1.42 bn) and net income plummeted 57.8% to ¥7.86 billion ($83 mm) for the period.  Gross margins narrowed 180 basis points to 33.8% of sales, while operating expenses surged 450 basis points to 23.6% of sales for the year-to-date period.

Bicycle Components
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.

As a result, nine-month year-to-date sales for this segment declined 22.9% to ¥102.87 billion ($1.09 bn) and operating income fell 47.7% to ¥13.37 billion ($141 mm) for the segment. 

Fishing Tackle
Although there were signs of recovery of recovery in the Japanese market, 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 strengthening of the yen.

As a result, sales for this segment were down 12.0% to ¥30.59 billion ($323 mm) and operating income fell 72.7% to ¥884 million ($7 mm).

Sales from other businesses were ¥984 million ($10 mm), representing a 57.8% decline in yen terms, but the operating loss from the first half turned into an operating profit of ¥174 million ($2 mm) for the year-to-date period.

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.  Gross margins improved 10 basis points to 35.2% of sales, but net income fell 78.8% to ¥1.30 billion ($14 mm).