Nikon Reports Better Than Expected Camera Sales, But Losses Widen

Nikon Reports Better Than Expected Camera Sales, But Losses Widen

There has been a flurry of reports about Nikon as the second quarter results hit the press, which show the manufacturer fighting to turn around the business but struggling under the impact of COVID-19.

Nikon's 2020 year-end financial results and medium-term strategic plan highlighted the painful restructuring the company was going through in order to return the business to profit as it shut down compact camera sales and pivoted from DSLR to mirrorless sales. This was complicated by a reliance upon income generated by their Imaging Products division — in short, Nikon wanted to spread income across all their business divisions (and particularly Precision Equipment) while cutting costs and increasing mirrorless sales. The weakness was in increasing mirrorless sales, in part a result of the relatively unsuccessful 1 System, which was canceled in 2018. In comparison, Sony has gradually built up mirrorless sales and Canon has been largely successful with its EOS-M range. This weakness was highlighted by a recent Nikkei report on 2019 MILC sales which placed Nikon fifth. Nikon has been rapidly trying to build out its Z-system range and increase sales. Then, COVID-19 hit.

So, what do the second quarter results look like? The broad headline figures are a 58% increase in sales (¥110.9B), but still a slight increase in overall losses at ¥-23.1B. While the other divisions were largely profit neutral, Imaging Products saw a relatively large increase in losses, which doubled to ¥-19.3B on the back of increased sales of ¥39.3B. Nikon report that this is largely due to ¥15.5B impairment losses (asset depreciation in excess of their stated value) in Imaging Products on manufacturing equipment in Thailand and Japan, which could relate to older compact camera and DSLR production lines. If this is taken into account, then Imaging Products is closer to profit neutral and performed better than expected. As a result of this, they have revised up the end-of-year performance.

Comparisons to previous years are less relevant because of the uniqueness of the impact of COVID-19. What is more important is relative performance to other manufacturers as their restructuring continues. It's self-apparent that unit sales and their value will be significantly down on last year, with revenue decreasing by 46% and units down 58% (1.2M to 0.5M) in the half-year to date.

Nikon has stuck with their medium-term strategic plan and use the following graphic to place a positive spin on their repositioning within a new camera market. It shows a 57% drop in sales, while retaining the pro/hobbyist segment. As a result, they make up a significantly larger proportion of sales which supports the strategy of targeting high-end models. They are also promoting the idea of a 59% drop in costs although that is yet to be realized.

Where Next?

The above graphic implicitly highlights the dramatic reduction in camera sales but hides Nikon's poor performance in the compact camera and mirrorless markets. Nikon remains strong in DSLR and lens sales, and the mirrorless pivot is designed to make the business unit sustainable. Some other takeaways that are worth reporting are, firstly, the continued decrease in relative income of Imaging Products, with Healthcare and Industrial Metrology continuing to expand. Secondly, European and Japanese markets increased in importance at the expense of the US and China, and while this is across all segments, it will inevitably change the way sales are targeted and supported. Finally, and perhaps most importantly, Nikon has consistently spent ~¥62B annually on research and development as it pivots Imaging Products and expands its other divisions; however, as income has fallen, this has increased the proportion spent from 8.5% to 14.4%, meaning cost-cutting is coming elsewhere. Nikon Rumors summarizes a Nikkei report that states a 20% cut in the overseas workforce (2,000 employees), while also transferring some production from Japan to Thailand.

The key to the future is therefore building out its Z range and being both economically and technically competitive in the market. What would make you buy Nikon? Where should it focus?

Body image copyright Nikon.

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14 Comments

Robert Lype's picture

As a lifetime Nikon shooter I have to give credit to their attempts to standardize their gear to a certain extent in the pro world some of the lenses I purchased 30 years ago I still use today for the most part the controls are still in the same place. Living in Alaska I have to say after working in some extreme conditions there has only been one time Nikons gear has let me down. lets face it Nikon probably didnt design their equipment to operate in 50 below for an extended period.
For shooters like me the mirrorless cameras dont make sense for me to switch, I have big hands for starts smaller cameras are difficult for me to operate let alone with gloves on, the investment thats made in putting the ideal kit together and fine tuning it to my needs loses it value faster than a new car. . Nikon needs to keep up on the full frame and SLR pro bodies and lenses and keep us users happy we are the cheapest advertising they have.
Two weeks ago covering an outdoor event at 30 below another shooter was using a Nikon mirrorless it was a total failure for him in all fairness the Sony didnt do well either. the viewfinders in both cameras was so slow they rendered useless. Needless to say the mirrorless idea is going to have to trough some growing pains

William Faucher's picture

For such extreme conditions, DSLR's are going to be a go-to tool for years to come, they're not obsolete yet. My D800 from 2012 is still going strong after years of abuse. From saltwater to -30°C in Svalbard, it has never let me down, not to mention battery life is exceptional. I can go weeks without charging, even if I leave it on by accident.

JEREMY MOORE's picture

The upcoming Z9 will be a big camera. The Z6ii and Z7ii with grip will not be very different in the hands than a D850 with grip. The size difference comes from the thickeness from the mirror. We don't hold cameras there.
*The batteries will still be an issue, especially in the extreme cold.

Robert Lype's picture

The Batteries aren't so much the issue todays battery technology has fixed that somewhat in the extreme cold everything is effected.
One issue in the cold most dont think of is the effects of contraction of differnt materials as well as the speed of the contraction. With that in mind on method used in cold regions is bigger is better to control the rate of contraction and expansion. By adding the grip now you have two different components with a very small gap which will cause issues.
I am in the process of putting together an piece to submit to this web sight on how we contend the cold up here. Stay tuned

Rick Rizza's picture

Please survive, don't die. I never use Nikon for once in my life but if photography world loses another company the technology might get stagnant in the future.
Competition is needed and the religious people of Canon, Nikon, and Sony fighting with each other is actually funny.

Timothy Roper's picture

Maybe DJI can bail them out, too?

Rob Pul's picture

Most of the operating loss is due to Covid and equipment in Thailand, which are one-off.

Nikon and Canon have been hit hard by the collapse of APSC DLSR sales, the bulk of their volume for many years. Canon reduced the impact thanks to their M-line, Nikon didn't because of their focus on FF.

More Z products are coming and that will help Nikon to recover, the fact that sales are already above expectations is an indication of that.

David Jenkins's picture

It would make sense for Nikon to restructure, which they are in the process of doing. The Z50 and Z5 are amazing cameras for the price and should provide the sustenance Nikon needs to weather this rocky time. Not to mention some of their new Z lenses are so popular retailers can't keep them stocked.

jim hughes's picture

I'm pulling for them Unlike 85% of FF users I don't claim to have "big hands" (how do these guys use their phones?) so I totally enjoy the Z50 in addition to the Z6. Nikon was way late to mirrorless, but they'll catch up with solid well-designed products.

I see they just announced a massive layoff outside Japan. It's looking like camera makers are abandoning any real-world presence and distributed support organization; buy online, ship for service.

Robert Lype's picture

Here is my hand around a D4s I am not trying to argue just set the record straight, as for the phone I use a stylist or the voice to text option
After shooting for 40 years my right hand has developed a curve to fit the camera, it noticeable enough that a doctor noticed and was wonder if I had other issues
In the photojournalism field being 6 foot tall has its advantages and being a big guy sure has hell helps out doing a riot which worked out pretty well a few times over the past few weeks

Timothy Roper's picture

People with big hands learn very quickly to use voice commands with a phone!

Steve Powell's picture

I recently bought the Z50, and am liking it. Thinking of getting the Z5.

Geoffrey Stone's picture

Nikon has a problem in that there gear lasts too long. The D3 and D700 great images even after abuse, old age and foul weather. A D3 with 680k shutter count has been reported. Images are no better with mirrorless than they were 20 years ago.

Photography has been dealt a blow with the constant whinging about contrast, chromatic aberration and softness in images. On top of that we have AI in post developing the artistic side rather than capturing the image and publishing. Photographers are confused. The new technology allows many more photographers of higher quality. One guy I bought 2nd hand equipment has a business in the UK. He made huge prints. Now he says he can compose and print to A3 with an iPhone to the lens same quality. That is without pixel peeping.

Nikon is facing the dilemma Kodak, Polaroid and others faced decades ago. How do they re-invent themselves. What is the new technology? Light coming through glass onto a sensor won’t cut it in the future.

Robert Lype's picture

I have to agree with you on the durability of todays Nikons gear which its known for my F3 still is in useable condition and i still use it every once in a while. Price wise its smart business move to for me to use gear as long as its working and buy used. One issue that most people in our throw away culture is missing is the investment side of owning Nikon gear the used prices have dropped so buying high end which collectors have done for years is gone. The trend of having the great features in a pro body which produces a useable image is nice if you take the time to learn how to use the features.
I would be willing to bet 90 % of photographers have never used a calibration routine in there work flow but would rather sit behind a computer and edit all day rather than out shooting. I for one am glad this is the case over the past few years my income has increased by selling images that are natural looking rather than one that has been created in an imaging program. Dont get me wrong there is some pretty impressive work being created today its not my style.
After shooting for 40 years I shot my first wedding for a freind which hired a photographer which cancelled at the last moment . It was awkward at first never done it before afterward edited the work and handed them the package the next morning. The original photgrapher needed two weeks as a turn around time just for one simple reason knowledge and expirence of the equipment which was used.
The morale of the story here is develop a style with the camera have an effective work flow and stick with it
you have to have a good useable image to start with from the camera which Nikon has conveniently built in to the camera.