1 Ricoh’s Medium-Term Management Plan March 19, 2002 Masamitsu Sakurai President and COO Ricoh Company, Ltd. AGENDA 1. Review of 13th Medium-Term Management Plan 2. Business Environment Awareness 3. 14th Medium-Term Management Plan - Group Vision/Management Policy 4. Major Business Strategy 5. New Technology Area to be further reinforced 6. Financial Targets 2 3 Review of 13th Medium-Term Management Plan (1) -Basic Policy and Business Performance Projection1.7 trillion Pretax Profit 1,500 Sales 1.43 trillion 100 1,000 53.0 50 500 Sales (¥ billion) Pretax profit (¥ billion) 0 '93 '94 '95 '96 11th Plan '97 '98 12th Plan ■CS Management '00 '01 (As Planned) 13th Plan 1.Renovation of group management with the aim of increasing corporate value ■Reinforcement of Overseas Sales ■Further Digitalization '99 ■Reinforcement of MFP Lineup 2. Reform of business and profitability Structure with the aim of maintaining steady growth 3. Reinforcement of cash flow management and realization of low cost business structure 4 Review of 13th Medium-Term Management Plan (2) （¥billion） ） Financial Achievements ’99 As Planned Domestic Overseas 856.8 633.3 ’00 Actual 873.1 573.9 As Planned 900.6 679.4 (1.5%) (Growth ratio) ’01 Actual As Planned 930.4 607.8 954.0 746.0 (6.3%) Forecast 905.0 765.0 (8.6%) 1,490.0 1,447.1 1,580.0 1,538.2 1,700.0 1,670.0 Net Sales (3.8%) (4.9%) (4.7%) Pretax Profit 57.0 70.4 75.0 97.7 100.0 113.0 Net Income 33.1 41.9 43.5 53.2 58.0 61.5 (Pretax profit/Net Sales) RIVAC Spread 0.7% Free Cash Flow 10.0 $ ¥115 EURO ¥132 2.8% 57.1 ¥112 ¥115 1.6% 15.0 ¥115 ¥132 (6.4%) (5.9%) 3.0% 40.0 ¥111 ¥100 (6.8%) 3.0% 50.0 ¥115 ¥132 ■Reasons for Achievements:Reform of Operational Profit Structure ・Expansion of High-Speed Machines ・Black&White to Color Transition ・MFP+P ・Solutions Business 4.1% 18.9 ¥124 ¥110 5 Review of 13th Medium-Term Management Plan (3) Transition of Sales by Product Category Net Sales (¥ billion) 2,000 1,800 1,670.0 Other Businesses 1,425.8 1,600 ...Semiconductors, etc. 1,400 Network System Solutions 1,200 33% 21% Networking I/O Systems 1,000 …MFPs, LPs, optical discs, scanners, etc. 800 600 Imaging solutions 67% 56% 400 200 0 …Software, useware, PCs, etc. FY’98 FY’01 (Forecast) …PPCs, facsimile machines, digital duplicators Business Environment Awareness - Market, Customer ■Demand Trend (’01 - ’04) ・ Total PPC/MFP markets are almost flat, but color is tremendously growing. ・ Total LP market is one-digit growth rate, but color is tremendously growing. ・ Sales of MFPs are progressing in both PPC and LP markets. ・ TDV is increasing in line with greater information volume. ■Customer Needs ・ Colorization, higher speed, lower cost ・ Reduction of TCO, Improvement in business productivity ・ One-Stop, total solution * MFP ： Multi Function Printer * LP ： Laser Printer * TDV ： Total Document Volume(copy volume+print volume) * TCO ： Total Cost of Ownership 6 14th Medium-Term Management Plan - Group Vision Winners in the 21st Century ・ Contribute to productivity improvement and knowledge creation for individuals working anytime, anywhere, providing high reliability and new value creation. ・ Ricoh-like values should be clearly recognized by stakeholders, and the Ricoh brand globally established. Customer 1. World No.1 Products 2. Solid relationship with customers Employee 3. Vital and motivated culture Shareholders 4. Performance Excellence Society 5. Responsible action as a corporate citizen Business Domain To provide working individuals with improvements in productivity and knowledge creation anytime, anywhere. 7 14th Medium-Term Management Plan - Group Management Policy Practice Ricoh group management to increase “Individual Strengths” and maximize “Group Collective Strengths” for growth and progress 1. Realize a “vital and motivated culture” 2. Strengthen technologies to become “the world No.1 product engineering” company 3. Build “Customer-Friendly” and “Environmentally-Friendly” company. 4. Strengthen each business unit and revolutionize group business structures. 5. Strengthen management constitution for competitive advantage 8 14th MTP - Enhance Value and Increase Customers, Major Business Strategy 3F Printing Solutions Standalone Equipment Major Strategies * B to C….Black and White to Color High-speed machine sales expansion 1F 5 regional global marketing Printing Solutions MFP + P Network Connective Equipment Document Solutions B to C Transition 2F Useware Document Solutions Maintenance support for networks and equipment 4F Supply, service, and support <<<Provide customers with new values (Customer enclosure, higher added value ) Income sources Enhancing Customer Base *Major Accounts *New Sales Channels *Respond to New Requirements Sales through Internet Expansion of customers >>> Existing businesses New businesses Selecting and focusing on promising businesses, and Further strengthening efficient management resource allocation business structure 9 14th MTP - Strategy for Operational Structure Reform Goal Optimize TDV Major Strategies Products Product Strategies Printing Solution Sales Strategies MFP+P Technology World’s Strongest Engine B to C Transition High-speed machine sales expansion Customer Needs ・Color ・High Speed ・One-Stop ・Total Solutions Sales Document Solution Global 5 Region Marketing 10 Structure Reform New TSS In-house Key Components SCM GW Architecture P300 Ricoh Document Highway B to C Transition (1) - What B to C transition is meant for and aimed at 11 ■What Black and White to Color transition is meant for and aimed at (to be confirmed) <Background> *To meet the needs for colorization <Aim> *Increase TDV *Add more value per copy/print <Contents> *Replace existing B/W machines with color *Cultivate new market with color 12 B to C Transition (2) - Strengthening of High Speed Machines, and Product Lineup *During the 13th MTP, Ricoh performed successfully by strengthening color machines centered on the mid-volume segment. *In the 14th MTP, we will launch a flagship color model in the high-volume segment, thus establishing a comprehensive lineup. B to C Transition (3) - World’s Highest Image Quality and Reliability ■World’s Strongest Engine In terms of its image quality, reliability, environmental friendliness, and appliance-like ease, Ricoh will provide the strongest color LP/MFP engine, which overwhelms the competition. Completion of World’s Strongest Engine Module-in development results accordingly 2001 2004 Strengthen in-house key components which supports the strongest engine 13 Solutions Business (1) - What Solutions Business is meant for and aimed at ■Printing Solution <Aim> Aimed to increase our market share, acquire TDV, and raise the customer loyalty <Contents> Provide our customers with the most appropriate printing environment that meets with the needs of the digital network era. ■Document Solution <Aim> Raise the customer loyalty, and add new profit such as in TDV, consultation and training <Contents> Provide our customers with the best combination of I/O equipment and software programs to improve their document flow and operation. 14 Solutions Business (2) - Keys For Success 4. Reliable Support and Service 3. Proposal/Arrangement Ability 2. Meeting “Open & Modular” 1. Products-Basic Functions, Reliability 15 16 Solutions Business (3) - “Open & Modular” ■GW Architecture By adopting open technology, and utilizing modular common architecture in all the products, development lead time and costs can be drastically reduced and secure flexibility achieved. Conventional Architecture GW Architecture Controller Board Main Board Printer Board FAX Board Scanner Board Copying application Printer application FAX application Scanner application OS OS OS OS HDD NIC Telephone Line SCSI Memory Memory Copying application Printer application Scanner application ．．． Other application Application I/F GW Architecture Common Service General-Purpose OS ＨＤＤ ＮＩＣ Telephone Line Memory Engine I/F Engine Control Board Printer Engine ・GW….Grand Works Scanner Engine Engine Control Board B/W printer Engine Color Printer Engine Scanner Engine XML 17 Solutions Business (4) - “Open & Modular” ■Ricoh Document Highway (RDH) Concept Promote “Open & Appliance-like ease platform” which realizes seamless communication between hardware and applications Business Personal Equipment PPC / MFP Printers / Scanners Seamless Communication Ricoh Document Highway Platform Application Software 18 Solutions Business (4) - “Open & Modular” ■Ricoh Document Highway (RDH) Concept Desktop Distribution Network Management Document creation, information use Printing support Management Device management System management Document Highway Intranet/Internet Output Storage & retrieval Input Applications integration Solutions Business (5) - Promotion of TCO Improvement TCO Administration Proposal for Optimal Products Software to administrate status of office product use Program to propose optimal configuration of office products ◆Japan Customer Configuration Sheet Sahoo ◆North America Print Wise Docutivity ◆Europe Pay Per Page MFP + LP ◆Japan Ridoc IO Account Ridoc IO Gate ◆Overseas Print Observer Print Trender PAS Docosoft 19 Solutions Business (6) - Case Study of TCO Improvement Customer:Beverage Maker (US) TCO Administration Copier (Company A) Copier (Company B) Printer (Company C) Printer (Company D) Proposal for Optimal Products All products are digitalized/ networked Facsimile machine (Company E) ・ ・ ・ 104 units of copiers, facsimiles, and printers (diverse manufacturers) 20 Ricoh MFP+LP 30 units (still installing) $83K/year Cost Down 21 Global 5 region marketing strategy (1) -Overseas Sales by Region 450.0 Net Sales (¥ billion) 450 395.0 400 350 283.3 300 338.5 305.5 ％ 239.6 250 Americas 45% Europe 44% ％ 200 % of net sales % of net sales 40% 150 Others 100 50 47% 40% 40% FY’98 FY’01 FY’04 (Forecast) (Plan) 0 Global 5 region marketing strategy (2) -Overseas Sales by Product Category 22 1,000.0 Net Sales (¥ billion) 1,000 765.0 900 800 700 Other Businesses 56% Network System Solutions 604.9 …Software, useware, PCs, etc. 25% Networking I/O Systems 11% 600 ...Semiconductors, etc. …MFPs, LPs, optical discs, scanners, etc. 500 400 Imaging solutions 300 …PPCs, facsimile machines, digital duplicators 200 82% 70% 39% 100 0 FY’98 FY’01 FY’04 (Forecast) (Plan) 23 Global 5 region marketing strategy (3) Major Account Strategy ■Strengthening Global Major Account(MA) ・Strengthen MA sales structure globally ・Integrate Ricoh group sales power including Lanier and NRG EUROPE NRG Subs. N R GR NRG Distributors Ricoh Subs. JAPAN MA Domestic E Lanier CHINA ROS RH Ricoh Distributors ASIA PACIFIC Ricoh Subs. Ricoh Distributors Lanier O P G Branch MA Int’l Account GCL RA AMERICAS Sales Co.s Ricoh Distributors RC RBU SAVIN Lanier RLA R Canada 24 New Technology Area To Be Further Reinforced Reinforcement of core business *Strongest Engine *Zero emission *Key component Basic Research Growth of core business *New image process *GW Architecture II *RDH II *High speed communications *Large capacity optical memory ・Photonics ・Micro machining ・Nano technology * RDH : Ricoh Document Highway Cultivation of new business *Ubiquitous Document *Environment-related …etc. ・High-speed wireless technology ・Environment-related technology ・Appliance-like ease technology ・Personalization-related technology Promotion of Structural Reform - Major Countermeasures 1. Total Process Reform Activity (New TSS) *Reduce development time *Quality up *Cost down 2. SCM *Reduce inventories *Reduce lead time 3. Company-wide structural reform activity (P300) *Sales structure reform *Review of product base 25 26 14th MTP Financial Targets (¥ billion, %) ’01 Forecast ’04 % of net sales 905.0 54% Overseas 765.0 46% Net Sales 1,670.0 Domestic 14 MTP % of net sales CAGR Growth Ratio 3.4% 9.3% 10% 31% 6.2% 20% 1,000.0 50% 1,000.0 50% 2,000.0 Operating Income 126.0 7.5% 180.0 9.0% 12.6% 43% Pretax Profit 113.0 6.8% 160.0 8.0% 12.3% 42% 61.5 3.7% 90.0 4.5% 13.5% 46% Net Income ¥124/$ ¥120/$ 1.03 ROA 6.4% 8.3% RIVAC Spread 4.1% 5.5% Free Cash Flow ¥116.0 billion(’99-’01) ¥150.0 billion(’02-’04) Total assets turnover 0.95 27 14th MTP - Changes in Business Structure Transition of Sales by Product Category 2,000.0 Net Sales (¥ billion) 2,000 1,800 1,670.0 Other Businesses 1,425.8 53% 1,600 Network System Solutions 1,400 1,200 ...Semiconductors, etc. 33% …Software, useware, PCs, etc. 21% Networking I/O Systems …MFPs, LPs, optical discs, scanners, etc. 1,000 800 Imaging solutions 600 …PPCs, facsimile machines, digital duplicators 400 67% 56% 36% 200 0 FY’98 FY’01 (Forecast) FY’04 (Plan) Further Accelerate Business Structure Reform toward Growth Areas 28 14th MTP - Summary Net Sales (¥ billion) 2.0 trillion Pretax Profit 1.67 trillion Pretax profit (¥ billion) Net Sales 100 1,500 160 1,000 0 50 113 500 '96 '97 '98 12th Plan ■CS Management ■Reinforcement of Overseas Sales ■Further Digitalization ■Reinforcement of MFP Lineup '99 '00 '01 (Forecast) '02 '03 '04 (Plan) 14th Plan 13th Plan ■Continuous Promotion of Business Structure Reform *High-speed machine sales expansion *B to C Transition *MFP+P *Solution Business ■Further Reinforcement of Technology ■Continuous promotion of company-wide structural reform Contribute to productivity improvement and knowledge creation for individuals working anytime, anywhere 29 * The Company bases the estimates above on information currently available to management, which involves risks and uncertainties that would cause actual results to differ materially from those projected.