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Nikon Warns of ‘Extraordinary Losses’ Due to COVID-19

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Nikon Corp. published two financial statements today. The first was a warning to investors—a “recognition of extraordinary losses” caused by the COVID-19 pandemic. The second was a revised FY2020 financial forecast that discloses the expected impact on profit and revenue for the fiscal year that ended March 31st.

“Nikon Corporation expects to post extraordinary losses and to reverse a part of deferred tax assets in its non-consolidated financial statements,” reads the statement. “Using the future plan that reflects the impact and more caused by the spread of COVID-19 to business activities, the Company has assessed an indication that fixed assets may be impaired, performed valuation of financial assets, and examined the recoverability of deferred tax assets.”

As with a previous statement of this nature, it’s important to note that the term “extraordinary” means something different in financial disclosure terms than it does in colloquial terms. While Nikon’s profit and revenue losses are expected to be large—everyone’s are—this statement is simply a note to investors that the losses will be extra-ordinary, as in “caused by events that were unusual and infrequent in nature.”

In a world shut down by COVID-19, a “recognition of extraordinary losses” is even less “extraordinary” than usual. It’s downright expected. As a result, Nikon is announcing plans to re-asses the value of its assets so that it can decrease its tax burden.

You can read the full statement below:

A clearer picture of expected losses is presented in Nikon’s updated FY2020 forecast for the fiscal year that ended March 31st, 2020, which was also released earlier today. In this document, Nikon revised its forecast published on February 6th, 2020 to reflect the “impairment losses” that were caused by the “impact … of COVID-19 on business operations.”

Due in large part to expected impairment losses of 11.1 billion yen (~$103.4 million) total, 7.5 billion yen (~$69.8 million) of that in the Imaging Business Division, Nikon dropped its forecasted revenue by 4.7% and forecasted operating profit by a whopping 70% compared to the February 6th disclosure.

The new revenue and profit numbers they are forecasting—and which we should see officially in about two weeks—are expected to represent a 16.6% drop in revenue and a 92.7% drop in operating profit compared FY2019 results posed March 31st of 2019.

You can read this full document below:

None of this is unexpected, but as we monitor the impact of the COVID-19 pandemic on the camera companies we know and love, it gives us a sense of the hole that they will need to dig themselves out of when this is all over.

Nikon is saying that the pandemic has caused the value of the Imaging Division to drop by almost $70 million. That includes fixed assets like “property, plant and equipment,” as well as intangible assets, which Nikon did not describe in detail, but can include everything from brand recognition to intellectual property and trademarks.

By disclosing these “impairment losses,” the company will be able to keep more tax money in its coffers. A move that will help investors swallow what will no doubt be a brutal end-of-year report, which is scheduled to be published on May 28th.


Image credits: Header photo by Joe Shlabotnik, CC-BY-SA 2.0

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