UPDATE - Ricoh eyes M&A, investments to boost sales
Tuesday March 9, 3:51 am ET
By Nathan Layne
(Adds buyside comment, details, closing share price)
TOKYO, March 9 (Reuters) - Ricoh Co Ltd (Tokyo:7752.T - News), Japan's second-largest office machine maker, said on Tuesday it planned to invest in new businesses and seek out M&A opportunities to boost revenues by nearly 50 percent over the next five years.
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Ricoh, which competes with Canon Inc (Tokyo:7751.T - News) and Xerox Corp (NYSE:XRX - News) for control of the global copier market, said it would use its cash pile -- 238 billion yen ($2.14 billion) as of the end of December -- to accelerate growth.
"We are going to constructively and strategically use the cash generated from (years of emphasising) profitability to expand sales," Ricoh President Masamitsu Sakurai told a gathering of industry analysts and reporters.
"We have reached a major turning-point in our strategy."
Ricoh's sales have grown by an average of about four percent in the past five years thanks to growing corporate demand for colour copiers and multi-function printers, which can combine the functions of a digital copier, a printer and a fax machine.
But by boosting its business in fast-growing China and taking other steps such as investing in new technologies and bolstering its printer business, the company now hopes to accelerate the pace of revenue growth to about eight percent each year.
"We will have to put a lot of energy into M&A (mergers and acquisitions) and collaboration," Sakurai told Reuters on the sidelines of the gathering, declining to give details on potential acquisition or alliance targets.
Ricoh said it was aiming for consolidated sales of 2.6 trillion yen in the business year to March 2009, a rise of 46 percent compared to its estimate of revenue of 1.77 trillion yen in the year ending this month.
It is targeting a group operating profit margin of 10 percent in 2008/09, which would produce a profit of 260 billion yen based on the sales target. Ricoh is projecting an operating profit of 153 billion yen and an operating margin of 8.6 percent this year.
STRONG REPUTATION
Sakurai said Ricoh would bolster its line-up of colour copiers and printers to meet growing demand in the major markets of Japan, Europe and the United States where companies are upgrading from monochrome models at a rapid pace.
He also pledged to boost sales in "non-imaging" businesses such as semiconductors to 500 billion yen by 2008/09 from about 330 billion yen this year, while quintupling annual sales in the Chinese market to 100 billion yen in five years.
Ricoh's stock failed to get a lift from Sakurai's bullish outlook, however, ending down 2.56 percent at 2,280 yen. That underperformed the Nikkei average's (^N225 - News) 0.25 percent gain.
Some investors said a correction in the share price was probably due after a rise of nearly 20 percent in the past month but, on the other hand, they also noted that Ricoh was projecting record sales and profits in 2003/04 for the 10th straight year.
"Here is a company that has a demonstrable track record of success and has the balance sheet to support some more aggressive new initiatives," said Marc Desmidt, director of the equities fund management team at Merrill Lynch Investment Managers.
"There is always going to be a risk associated with that kind of challenge but the track record of the management suggests that they have a better than even chance of being successful."
Ricoh's Sakurai also unveiled a bullish target for the company's stock price, saying he aimed to lift Ricoh's market capitalisation to about three trillion yen ($27 billion) in 2008/09 from 1.7 trillion yen now.
The company said higher sales and profits would attract investors and that achieving the market capitalisation target would not involve the issue of new shares.
Ricoh also said it planned to raise its dividend payout ratio to 20 percent by 2008/09 compared with an estimated 14 percent for the current business year.
Sakurai reiterated that Ricoh would struggle to hit its target of two trillion yen in sales in the next business year to March 2005, although the company stuck to its forecast of an operating profit of 180 billion yen. ($1=111.23 yen)
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