Fujifilm's 2Q14 Earnings Rise Y/Y

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Fujifilm Holdings Corporation (FUJIY) reported net income of ¥21.5 billion ($217.1 million) for the second quarter of fiscal 2014 (ended Sep 30, 2013), up 89.8% year over year, in terms of local currency. The hike in earnings was a result of increase in both revenues and margins.

Revenues: Revenues in the reported quarter improved 11.5% year over year to ¥605.5 billion ($6,123.9 million). The year-over-year rise in revenues was attributable to strong sales in the medical systems business, pharmaceutical business, documents business and favorable effects of the yen depreciation. However, revenue growth was partially offset by decline in the demand for compact digital cameras.

Revenues from the Imaging Solutions segment came in at ¥90.4 billion ($913.8 million) and accounted for 14.9% of total revenue. The Information Solutions segment contributed ¥230.5 billion ($2,330.9 million) or 38.1% of total revenue and the Document Solutions segment generated ¥284.7 billion ($2,879.3 million) or 47.0% of total revenue.

Of the total revenue, domestic revenues accounted for 42.2% while international revenues contributed the remaining 57.8%.

Costs/Margins: Gross margin in the fiscal second-quarter stood at 37.4%, declining 100 basis points (bps) from the year-ago quarter. Selling, general and administrative (SG&A) and research and development (R&D) expenses, together accounted for ¥194.0 billion ($1,962.0 million), representing 32.1% of the total revenue.

Balance Sheet:Cash and cash equivalents at the end of the period was ¥514.9 billion ($5,242.2 million) registering an increase of 2.8% from the previous quarter..

The company’s long-term debt stood at ¥314.5 billion ($3,202.2 million) as of Sep 30, 2013, down 1.4% as of Jun 30, 2013.

Cash flow: Net cash from operating activities for fiscal second-quarter increased to ¥37.2 billion ($375.8 million) versus ¥14.7 billion ($186.7 million) in the comparable quarter last year. Capital expenditure for the reported quarter was ¥18.2 billion ($184.5 million), compared with ¥22.9 billion ($291.2 million) in the second quarter of fiscal 2013.

Outlook: Fujifilm reaffirmed its guidance for fiscal 2014, based on strong financials for the quarter. The company reiterated its revenue guidance of ¥2,350.0 billion, representing year over year increase of 6.1%, for the year ending Mar 31, 2014. Operating income is expected to be ¥140.0 million, an increase of 22.7% from fiscal 2013.  Moreover, Fujifilm estimates its net income for the coming fiscal to be ¥70.0 billion, increasing 29.0% year over year.

Other Stocks to Consider

Fujifilm currently carries a Zacks Rank #2 (Buy). Other stocks in the industry worth considering are Mattson Technology, Inc. (MTSN), MKS Instruments, Inc. (MKSI) and Ultra Clean Holdings Inc. (UCTT). All of these carry a Zacks Rank #2.

Note:

1. The effective currency exchange rates used for 1 U.S. Dollar against Japanese Yen for Income Statement and Cash Flow Statement were ¥98.88 and ¥78.64 for quarter ended Sep 2013 and Sep 2012, respectively.

2. The effective currency exchange rate used for 1 U.S. Dollar against Japanese Yen for Balance Sheet was ¥99.22 for the quarter ended Sep 2013.

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