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Imaging Company

As of July 19, 2013

Overview

Main Products

Digital cameras, film cameras, interchangeable lenses, speedlights, film scanners, accessories, software, sport optics

Consolidated Financial Results

Net Sales

Net Sales for the year ended March, 2013 ware 751.2 billion Yen.

Operating Income

Operating Income for the year ended March, 2013 was 60.7 billion Yen.

Market Environment and Business Trends

The compact digital camera market continues to shrink in the fiscal year ending March 2014. By contrast, we anticipate that the market for interchangeable lens-type digital cameras will continue to grow.

Shipments of Digital Cameras

Shipment Units

Shipment Units in 2012 were 98,13 million units.

Shipment Amounts

Shipment Amounts in 2012 were 1,468.1 billion Yen.

  • Source: Camera & Imaging Products Association
  • *Shipment units=domestic shipment units+export units (member manufacturers only)
    Shipment amounts=domestic shipment amounts+export amounts (member manufacturers only)

Shipments of Digital Camera with Interchangeable Lens

Shipment Units

Shipment Units in 2012 were 20.15 million units.

Shipment Amounts

Shipment Amounts in 2012 were 753.1 billion Yen.

  • Source: Camera & Imaging Products Association
  • *Shipment units=domestic shipment units+export units (member manufacturers only)
    Shipment amounts=domestic shipment amounts+export amounts (member manufacturers only)

See Financial and Business Data for the Year ended March 31, 2013 (May 9, 2013)

Sales volume of Nikon Digital imaging products (Sales & Forecast)

  • Digital Camera with Interchangeable Lens
  • Interchangeable lenses
  • Compact DSC
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Business Strategy

Objectives

Successive launching of products that are clearly differentiated in terms of technologies and marketing capabilities. Establish brand and secure leading positions in emerging nations Achieve 15% operating margin in the year ending March 2016 / 2016/3 Digital camera - Interchangeable Lens Type Market 24M-26M units 25-35% growth/3yrs Target D-SLR: Improve profitability Market Share: 40-45% Non-Ref: Expand market Market Share: 25-30% / Compact DSC Market 50M-60M units 15-25% shrink /3yrs Target C-DSC: Secure profitability Market Share: 25-30% ＊Source of market forecast: CIPA; Non-Ref：Non-Reflex Camera with Interchangeable Lens

Priority Measures

Single-lens Reflex DSC（D-SLR）・Expand product lineup Strengthen product groups both in DX and FX formats to secure profit. / Non-Reflex Camera （Non-Ref）・Launch differentiating products Leverage Nikon 1 that offers new ways of photography enjoyment to continuously attract and gain new customers. / Compact DSC （C-DSC）・Strengthen the presence as a major player in the matured market which is getting oligopolistic.Lineup that is tailored to each market Brand strengthening, sales channel construction

  • *Objectives and Priority Measures for Business Strategy are at the time of Medium Term Management Plan announced on May 9, 2013.
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An Interview with the Company President

Yasuyuki Okamoto
Director, Member of the Board & Executive Officer, President of Imaging Company

Q1:What were the business results and principal activities in the Imaging Company for the fiscal year ended March 2013?
A1:

Market conditions began to deteriorate in late November 2012. This had a negative impact on earning capacity in the second-half of the fiscal year ended March 2013, although net sales during the period rose sharply to a record high of well over ¥600 billion, with year-on-year gains in operating income as well.

During the first half of the period, our overall business performance–including revenue, earnings and market share–had been steady. Thus we found the timing of the deteriorating market particularly bad, as we had temporarily increased product inventory in order to mitigate the risk of any adverse effects of the flooding in Thailand, and to prepare for the year-end shopping season. Unfortunately, as market conditions worsened and retail prices fell, particularly affecting entry-model digital SLR cameras, we faced a serious decline in profitability. This has served as an important lesson for us.

In the area of interchangeable lens-type digital cameras, we recorded good sales of such digital SLR models as the high-end D800 camera. Meanwhile, the Nikon 1 interchangeable lens-type advanced digital camera struggled slightly as the market for non-reflex digital cameras failed to grow to the extent that we had anticipated. Nevertheless, Nikon managed to secure the second-highest market share worldwide, with a stake of more than 20%. We believe that this has placed us in an advantageous position.

Unit sales of Nikon's compact digital cameras remained on a par with those of the previous fiscal year, despite the more than 30% contraction of the huge market for compact digital cameras. We believe that this, gave us a leading market share worldwide for the first time. We credit our success to strong product capabilities that reflect feedback from customers, pull marketing that makes effective use of advertising, and an enhanced marketing mix that includes effective sales capabilities.

Q2:What is the market outlook for interchangeable lens-type digital cameras, and Nikon's measures to improve earnings?
A2:

We expect the market for interchangeable lens-type digital cameras to continue expanding in the fiscal year ending March 2014, with particularly strong growth in non-reflex digital cameras.

Drawing on lessons learned from the diminished profitability of the fiscal year ended March 2013, Nikon will focus on sales of high-margin new digital SLR cameras. At the same time, we will reduce manufacturing costs–through cutbacks in the procurement division and improvements in the upstream design process–to lower costs. Further, Nikon will bring distinctive new products to market, and strengthen its product lineup for the FX and DX formats. Our Medium Term Management Plan target is to gain a market share of between 40% and 45% by the fiscal year ending March 2016.

We already have unwavering confidence in such aspects of our interchangeable lens-type advanced digital cameras as their small size, light weight and autofocus speed. Thus, we plan to focus our development strategy on offering customers new dimensions in everything from design to use, while at the same time enhancing profitability. We aim to increase our market share to between 25% and 30% by the fiscal year ending March 2016.

Q3:What is the market outlook for compact digital cameras, and Nikon's sales strategies?
A3:

We anticipate negative growth in the fiscal year ending March 2014, due to the growing use of smartphones with camera functions. Over the long term, we see the smartphone market expansion as an opportunity: many people become more interested in photography once they start taking pictures with smartphones.

Nikon plans to secure continued profitability by pursuing earnings-oriented strategies for compact digital cameras. We will implement a flexible product lineup strategy to match market scale and characteristics, and strengthen our position as a major player in the market. Under our Medium Term Management Plan, we aim to achieve a 25% to 30% share of the market by the fiscal year ending March 2016. We believe that compact digital cameras play an important role in enhancing the value of the Nikon brand and, during the fiscal year ended 2013, made great strides in expanding the Nikon brand. We focused particularly on those markets for compact digital cameras in which our position had been considered weak, such as Central and South America, the Middle East, and certain countries in Asia. This helped to expand our overall market share. Since emerging countries are also potential markets, we will continue to take steps to expand our brand there.

Nikon offers compact digital cameras that are distinct from the lineups of competitors. We offer models that parents and children can enjoy together, waterproof outdoor models, ultra-high ratio zoom models, and high-end models that incorporate a DX format CMOS sensor. While formulating product development plans from a profitability perspective, we will continue to bring attractive new products to market as part of our full lineup strategy.

Q4:What issues are you prioritizing to achieve your target of an operating profit margin of 15% in the fiscal year ending March 2016?
A4:

For its new Medium Term Management Plan goal, the Imaging Company is aiming for an operating profit margin of 15% by the fiscal year ending March 2016. As the first step, we are determined to achieve a double-digit operating profit margin for the fiscal year ending March 2014. To this end, the Company will make every effort to implement reforms from the upstream design process, expand the adoption of platforms, enhance the level of manufacturing capability, and further strengthen our marketing structure.

Nikon's position in the camera market, its brand image, as well as product development and sales capabilities have unquestionably reached record high levels. We will continue to focus on market trends and to function as a team, faithfully implementing initiatives to achieve our goals.

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