Japan's Ricoh to axe 10,000 jobs to get in shape; shares jump
TOKYO (Reuters) - Copier and printer maker Ricoh Co (7752.T) will cut nearly 10 percent of its workforce to try to boost sagging profits, a move that could signal another wave of cost-cutting by underperforming Japanese companies.
Ricoh said on Thursday the restructuring included slashing 10,000 jobs from its global workforce of 109,000, cutting unprofitable products and consolidating factories.
The restructuring could help Ricoh, which has long promised but failed to deliver cost cuts, fend off competition from firms such as Xerox (XRX.N) and Canon Inc (7751.T).
Analysts said Japan's devastating earthquake and tsunami on March 11, which tipped the country into recession, could speed up efforts by Japanese firms to stay competitive.
"The earthquake has ended any lingering complacency at Japanese companies that have been behind the curve in restructuring and in M&A," said Macquarie strategist Peter Eadon-Clarke.
"It has reminded people of the limited opportunities at home and of the need to build successful global operations."
Last month, Panasonic Corp (6752.T) said it would cut 17,000 jobs and close up to 70 factories globally. Camera and medical equipment producer Olympus (7731.T) has also said it would shed jobs.
Ricoh's shares closed up 4.1 percent after surging as much as 7.4 percent on the news. Analysts said the job cuts marked a welcome change in direction for a company that has until now refrained from major restructuring, despite lagging rivals in terms of profitability.
"Ricoh has been dragging its feet on restructuring and has finally started moving. The market has been worried how it would deal with its bloated cost structure after acquisitions," said Kazuyuki Terao, chief investment officer at RCM Japan.
"There are more companies out there that need to carry out restructuring. Some successfully engineered a recovery by restructuring after the Lehman shock. I expect those that did not restructure then will do so this time around."
Ricoh said in a statement the job cuts were expected to boost operating profit by 140 billion yen ($1.7 billion) in the year ending March 2014.
"We have become a big company and need to re-engineer our corporate structure throughout to become more muscular," Ricoh President and CEO Shiro Kondo told a news conference.
"We have done very little pruning of unprofitable businesses, and we need to pull out of some."
The firm is targeting operating profit of 210 billion yen in the financial year to March 2014, more than triple the 60 billion yen it posted in the past year, ending in March, when sales fell 4 percent to 1.94 trillion yen.
Ricoh bought U.S. office equipment distributor Ikon Office Solutions for $1.6 billion in 2008 in a bid to grab market share from rival Canon, but has yet to clear its network of overlapping operations, Kondo said.
While Ricoh's staff grew by 43 percent over five years, its operations stayed in the red in key areas such as fast-growing China, while margins in office copiers slumped amid fierce competition and a dearth of new hit products.
With an operating profit margin of 3 percent in the past business year, Ricoh is less efficient than its Japanese rivals. Konica Minolta (4902.T) had a margin of 5 percent while Canon managed a profit margin of 10 percent. It now targets a profit margin of 8.8 percent in the year to March 2014.
Ricoh said last month it expects its operating profit to rise 16 percent to 70 billion yen in the business year that started in April on sales of 2.09 trillion yen, up 7.6 percent.
(Additional reporting by James Topham and Taiga Uranaka in TOKYO and Maneesha Tiwari in BANGALORE; Editing by Nathan Layne and Anshuman Daga)
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