Zacks_Analysts' Blog : Fujifilm Beats on Market Recovery - Analyst Blog

Fujifilm Holdings Corporation (FUJIY) announced financial results for the first quarter of fiscal year 2011. During the quarter, the company reported an income of ¥17.8 billion (US$193.1 million) compared with a loss of ¥0.7 billion (US$7.2 million) during the same period of 2010. On a per share basis, Fujifilm reported a net income of ¥36.35 or 39 cents per ADR compared with a net loss of ¥1.42 per share or 1 cent per ADR.

 

Revenue topped 9.0% year over year to reach ¥547.4 billion (US$5.94 billion) from ¥502.4 billion (US$5.15 billion) in the prior-year quarter. The growth is attributable to the rapid recovery in demand for FDP (Flat Display Panel) materials and lower operating cost in the quarter.

 

Revenues from the Imagine Solutions segment reached ¥83.2 billion (US$902.7 million), up 3.7% year over year due to the increase in demand for digital camera products. Revenue in the Information Solutions segment rose 10.4% and reached ¥225.8 billion (US$2.45 billion). Revenues in the segment benefited from the large rise in sales of FDP materials. Revenues from the Document Solutions grew 9.6% year over year and reached ¥238.4 billion (US$2.59 billion) due to the increase in demand for products in the emerging markets.

 

During the quarter, Fujifilm recorded an operating income before restructuring and other charges of ¥50.5 billion (US$547.9 million) from just ¥7.6 billion (US$78.0 million) in the year-ago quarter. The growth was attributable to increased revenue and decreased cost. Restructuring charges were ¥3.6 billion (US$39.1 million) compared with ¥10.3 billion (US$105.7 million) in the first quarter of fiscal 2010.

 

Fujifilm had a capital expenditure of ¥12.5 billion (US$135.6 million) in the quarter, down 39.6% from ¥20.7 billion (US$212.3 million) in the year-ago quarter. Fujifilm was cautious on its investment plan, which is one reason for lower capital expenditure. Fujifilm is planning to invest ¥40.0 billion (US$444.4 million) in the fiscal year 2011 to enhance production in order to meet the increasing demand, particularly in the emerging economies.

 

Free cash flows reduced to ¥55.5 billion (US$602.1 million) from ¥72.8 billion (US$746.7 million) during the first quarter of 2010 to meet the working capital requirements. Total debt decreased to ¥288.1 billion (US$3.2 billion) from ¥295.6 billion (US$3.1 billion) at the end of the previous quarter while cash & cash equivalents grew to ¥435.8 billion (US$4.9 billion) from ¥406.2 billion (US$4.3 billion) in the previous quarter.

 

Outlook

For fiscal 2011, management expects revenues of approximately ¥2,300 billion (US$25.6 billion) and operating income before restructuring and other charges of ¥145 billion (US$1.6 billion) with restructuring charges of approximately ¥25 billion (US$277.8 million). Exchange rate is assumed to be ¥90 per US Dollar.

 

Fujifilm’s strong business and expansion strategy into wider markets with innovative products will drive greater momentum for the stock. Further, the company’s cost and expense reduction techniques and its acquisition strategy will boost both top line and bottom line results. Moreover, the markets are picking up and have started showing improvements. Thus, we reiterate our Outperform recommendation with a Zacks #1 Rank, equivalent to Strong Buy.