Tokyo Olympus Corp will cut about seven per cent of its workforce and may consider an alliance as the Japanese camera maker seeks to recover after writing down assets following a $1.7 billion (Dh6.24 billion) accounting-fraud scandal.
The 2,700 jobs are to be eliminated by March 2014, the company said in a statement in Tokyo today. Olympus is considering capital-alliance offers from domestic companies and other options that may include selling shares in the market, President Hiroyuki Sasa told reporters.
Olympus will increase its focus on the imaging, medical and life-sciences businesses as the company aims to boost its capital ratio to more than 30 per cent by March 2017, it said in today's statement. The world's biggest maker of endoscopes needs to shore up capital after writing down the value of assets because of a 13-year accounting fraud exposed by former President Michael Woodford.
“The first thing they need to do to accomplish their plan is to become profitable, and it seems like they’ll begin this by cutting jobs,” said Yoshihiro Okumura at Chiba-Gin Asset Management Co in Tokyo. “But it seems like they’re still working on how they’ll get cash after that.”
Olympus has received alliance offers from several companies, which have already been mentioned in media reports, Sasa told reporters in Tokyo today, without naming the companies. None of the offers is from overseas, he said.
The Tokyo-based manufacturer received offers from “more than three” potential partners including Sony Corp, Fujifilm Holdings Corp and Terumo Corp, he said in an interview in April.
The camera maker may seek to sell a 10 per cent stake in itself and is looking for a strategic investment from companies including Sony Corp and Panasonic Corp, the Nikkei newspaper reported today, without saying where it got the information.
“They certainly need a capital injection,” said Tamaru Manabu, a senior investment manager in Tokyo at Baring Asset Management Ltd. “Their first priority should be on their brand image and financial stability.”
Olympus had a capital ratio of 4.6 per cent as of March 31, compared with 4.4 per cent as of December 31, according to earnings statements. The ratio was 13.5 per cent as of June 30.
Olympus had 34,391 employees, including 3,234 in Japan, as of March 2011, according to its website. Most of the jobs being cut are in overseas manufacturing, Sasa told reporters in Tokyo today. The company will close a plant in the Philippines this year and will reorganise others, it said in today's statement.
The camera maker said it may post net income of seven billion yen ($88 million) this fiscal year, compared with the 25 billion yen average of four analyst estimates compiled by Bloomberg. Operating profit may be 50 billion yen, compared with the 63.4 billion yen average estimate of analysts.
“We will withdraw from businesses which we judge to offer insufficient profitability and potential,” Olympus said in the statement. “We will not make new investment in areas other than the core business domains.”
The maker of Pen digital cameras had a loss for the first time in three years last fiscal year partly because of higher tax costs and a strong yen that eroded overseas earnings, Olympus said May 10. The net loss was 49 billion yen for the year ended March 31.
Olympus is aiming for average annual revenue growth of 10 per cent and profit growth of 13 per cent at its medical business as it expands in emerging markets including China and India, it said. The company plans to restructure its imaging business and increase the focus on mirrorless cameras and high-end compact models, it said in the statement.
Olympus controls 75 per cent of the global market for endoscopes, instruments that doctors use to look inside the body’s cavities to help detect disease.
The company got 41 per cent of sales from its medical division last fiscal year. The business, including endoscopes, was the most profitable at Olympus and covered losses in imaging and “other” businesses. The medical business posted operating profit of 68.2 billion yen in the 12 month period, almost double its overall operating profit of 35.5 billion yen.
The company will dissolve Altis Co, News Chef Co and Humalabo Co, three domestic companies, by March 31, it said in April. Olympus paid a total of 73.4 billion yen to acquire them between 2006 and 2008. In March 2009, the company wrote down a total of 55.7 billion yen in the value of those companies.
Woodford, who was dismissed on October 14 after publicly questioning fees paid for takeovers, settled a London lawsuit against the company under whistle-blowing rules on May 29. Olympus has said it attempted to conceal past losses by inflating fees to advisers on the $2.1 billion acquisition of London-listed Gyrus Group Plc in 2008 and overpaying for three Japanese companies.
Olympus said today it settled the Woodford suit for £10 million ($15.4 million).