(Changes “IFAS” to “IFRS” in 7th, 8th and 9th paragraphs)
* Aims to boost ROE to over 8 percent by March 2017
* Japan increasingly focused on boosting shareholder value
* Konica Minolta Q1 operating profit up 49 percent
By Sophie Knight
TOKYO, July 30 (Reuters) - Konica Minolta Inc will continue with share buybacks similar in scale to a 10 billion yen ($98 million) transaction announced on Wednesday that was only the second in its history, aiming to better address shareholders’ interests, its president told Reuters.
Shoei Yamana said the company wanted to boost its return on equity (ROE), a measure of how efficiently companies are deploying their capital in which Japanese firms typically lag their global peers.
Pressure has risen for share buybacks, higher dividends and other measures seen boosting value for shareholders as foreign investors increasingly move into Japanese shares, encouraged by a surge in the market under the economic policies of Prime Minister Shinzo Abe.
Konica Minolta also said it would cancel 20 million Treasury shares, or 3.8 percent of the total issued shares, on Aug. 29. Yamana said that the company would continue share cancellations instead of holding it as Treasury stock.
“We had a very high volume of stock on issue so by cancelling shares I would like to increase our earnings-per-share (EPS) ratio,” Yamana said.
“I expect that our ROE will increase by about 1 percent as a result.”
The company has forecast its return on equity under Japanese accounting standards to rise from 4.6 percent last year to 5.6 percent in the current year ending March 2015. That figure would be 7.8 percent under IFRS accounting standards, to which the firm plans to switch to from April 2015.
Konica Minolta wants to boost its ROE under IFRS to above 8 percent by the end of the financial year to March 2017.
Nomura analyst Kengo Nishiyama estimates the average ROE for Japanese companies under IFRS to be around 8 percent, compared with more than 10 percent in other developed markets.
Nishiyama said Japanese companies’ share buyback programmes exceeded 100 billion yen in each of the six consecutive months through May, the longest streak of buyback announcements topping 100 billion yen since a 22-month run through November of 2008.
“We’re seeing high levels of buybacks. But if we are to see ROE rise to more international levels, there needs to be more proactive measures to boost returns and use up savings. The thing is, if profits go up, your ROE goes down unless the cash is used.”
Konica Minolta’s shares rose 3.7 percent on Wednesday before it announced its earnings for the April-June quarter. Its operating profit rose 49.1 percent to 11.7 billion yen on a 4.5 percent increase in sales.
Its shares have risen 5.6 percent this year against a 4 percent drop in the benchmark Nikkei average. ($1 = 102.2100 Japanese Yen) (Additional reporting by Ritsuko Ando; Editing by Christopher Cushing)