Fujifilm Holdings Corporation (FUJIY) recently completed its buyback of 7.0 million shares for a total amount of ¥20 billion (US$246.3 million) instead of the initial announcement of 7.5 million shares.
Fujifilm is planning to invest a total of ¥110 billion (US$1.2 billion) in fiscal 2011 to enhance production in order to meet increasing demand, particularly in the emerging economies.
Fujifilm had a capital expenditure of ¥24.0 billion (US$286.8 million) in the second quarter of fiscal 2011, up 20.6% from ¥19.9 billion (US$221.2 million) in the year-ago quarter.
Free cash flow reduced to ¥24.7 billion in the first half of 2011 (US$277.4 million) from ¥119.9 billion (US$1.3 billion) during the first half of 2010 to meet working capital requirements. Total debt increased to ¥309.7 billion (US$3.7 billion) from ¥288.1 billion (US$3.2 billion) at the end of the same period of the previous year. Cash & cash equivalents dropped to ¥418.4 billion (US$5.0 billion) from ¥435.8 billion (US$4.8 billion) in the first half of fiscal 2010.
For fiscal 2011, management expects revenues of approximately ¥2,300 billion (US$25.6 billion) and operating income before restructuring and other charges of ¥170 billion (US$1.9 billion), with restructuring charges of approximately ¥25 billion (US$277.8 million). Operating income after restructuring and other charges is expected to reach around $120 billion (US$1.3 billion). Exchange rate is assumed to be ¥90 per US Dollar.
We believe Fujifilm’s strong expansion strategy into wider markets with innovative products will bring greater momentum for the stock. However, decrease in the demand for FDP materials followed by the decline in the production of LCD panel together with weaker profitability at the digital camera business from intense price competition raises our concern on the ADR. Hence, we reiterate our Neutral recommendation for the long term. The stock retains its short-term Hold rating (Zacks #3 Rank).
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