KONICA MINOLTA 2nd Quarter/FY2019 ending in March 2020 Consolidated Financial Results  


Office Business

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First is the Office Business.
The top shows the summary. We were affected by the stronger Japanese yen against the euro.
And in the 2Q following the 1Q, we have been affected by the slowdown in the economies in Europe and China, resulting in a lot longer cycle of business. Of course, we were aware of this in advance, but in the 2Q the situation became lot tougher, and the MFP market in the US started shrinking. So, it is in this area we had a big gap vis-a-vis our original plan.
That said A3 color, seg.4, mid and high speed, did not have new products in the 1st half. New products were launched in seg.2 and seg.3. Seg.4 has been the major battleground in north America. So, it became apparent that we were losing our competitiveness. As shown in the bottom right, in the dark blue, seg.4+ became negative in volume in the 2Q YoY, having a major impact. We launched new products in seg.2 and seg.3. The new products ratio became higher in the 2Q, but, as I will give you details later, we had a quick shift and ramp-up of manufacturing to Malaysia from China, though we had some production base in Malaysia against the backdrop of tariffs issues in the US-China trade friction. And besides this, we had some robustness issues in the new products, and we went ahead in treating the quality challenge as our priorities, so we had to change parts design and specification again and again, and it goes without saying that we prioritized our supply we became in sync with our suppliers. So that affected our plan to reduce cost, and we suffered major delays in our goal. This is what happened in reality.
On top of that, here I would like to explain non-hard business. Please look at the line in the bottom right in light blue. Revenue in the 2Q declined 2%. This is within our forecast we had back in the 1Q. Non-hard revenue decline is within our assumption. We are continuing our efforts including shift-left strategy in order not to lower gross margin.