Nikon released their fiscal year results last Thursday and at the surface level there's not a lot to say. They had some ups and downs across all their divisions. Particularly for the Imaging division that makes the Z System cameras, the year-over-year revenue was up, but the year-over-year profits were down.
Some of the "down" has to do with a write down that Nikon took against Mark Roberts Motion Control (the UK robot arm maker Nikon bought previously) and both the acquisition and a financial loss at RED (the video camera maker Nikon bought this year). But hidden away in the details is another reason why Nikon didn't quite make their forecasted numbers for Imaging: they didn't sell as many lenses as expected (1.31m units instead of 1.35m). Yes, 40k units doesn't sound like a lot, but if those were higher end lenses they expected to sell, it easily explains a lowered profit. None of this, however, is a big thing. Companies have minor misses and adjustments like these all the time. All this I would regard as pretty much business as usual.
What struck me were two things:
- Inventory for Imaging has built to 98.2b yen, up from 74.3b a year ago. Inventory has been rising every year for awhile, and is now double what it was four years ago. Given Nikon's overall Imaging sales revenue, this seems like a lot to carry over, and I have to wonder why. It's possible that Nikon has been pre-building something, it's possible that they now have a bigger inventory because of RED, but I suspect that some of the products just weren't selling at the demand level Nikon anticipated. I'll come back to that thought in a bit.
- In Nikon's estimates for camera unit volume next year, they're saying they'll sell 950k units, up from 850k in the year just closed.
That's a whopping 12% increase year-to-year. They haven't published that optimistic a future unit volume in a long, long time. Moreover, they're saying they'll go from a slightly sub-13% market share to a solid 14% market share in that same twelve months. That, too, is the most optimistic I've seen them. What this tells me is that they expect a pending new model to do quite well. What model that might be is open to speculation, of course, but it has to be a model that's capable of selling 10k units a month. Also, given that they expect revenue to be flat, I think we can rule out a high end model ;~). Z3V anyone?
Nikon didn't say all that much about the tariff situation. Indeed, of the major camera and lens vendors, it seems that Nikon is the only one that hasn't issued a specific official statement about what's likely to come. I still expect price increases in June here in the US, but I also—given the inventory situation I mentioned above—still expect Instant Rebate sales, it just might not be across a wide range of products or with as big a discount, but rather a little more targeted.
Lest anyone read the above as negative in any way, I'd say this: the rest of Nikon should be thankful that Imaging is executing so well. While the profit is down—not really due to camera sales—I see pretty much everything they did during the fiscal year as being positive. You can't acquire an entire new company without some costs, and it appears that one reason why RED was available is that it currently wasn't making a profit. It'll take Nikon time to digest RED and get it on a better footing.
By the way, Nikon seems to think similarly to me: there is no real possible unit volume market growth coming in ILC. Nikon projects that only 5.8m units will sell globally across all vendors in 2030, which is down from the year just completed.
