Shimano Releases Q3 Financial Report: Revenue Edges Up 5%, Net Profit Plummets 61%

Recently, Shimano, the world's largest bicycle component manufacturer, announced its latest financial results and market dynamics. Despite a slight increase in sales revenue, the company has witnessed a significant drop in profits.

In the first nine months of this year, Shimano's bicycle product sales reached a total of 266.243 billion yen (approximately 1.749 billion US dollars), representing a 5% increase compared to the same period last year. However, the operating income of its bicycle-related business during the same period stood at 30.161 billion yen, a year-on-year decrease of 27%.

The company's overall performance is also not optimistic. While total sales grew by 4.8%, operating profit fell by 28%, ordinary profit dropped by 48% to 30.248 billion yen, and net profit plummeted by 61.0% to 16.105 billion yen. Shimano stated that part of the reason lies in foreign exchange valuation losses, which alone amounted to 18.387 billion yen (91 million British pounds) — twice the loss incurred in the same period last year.

Shimano upholds its previously announced full-year forecast, projecting a 2% year-on-year increase in revenue, a 29% decline in operating income, and a 60% drop in net income. Back in August, the company had already lowered its financial forecast, and it seems that the challenges remain severe.

Global Market Differentiation, Inventory Issues Pending Resolution

From the perspective of market performance across various regions, inventory issues have emerged as a key factor affecting Shimano's results.

The European market maintained strong retail performance amid stable weather conditions, but inventory levels remain high. The North American market, affected by uncertain economic prospects, saw continued sluggish retail sales, though inventory remained at a reasonable level. The Asian market is facing even greater challenges: retail sales of sports bicycles in China have stagnated, while in Japan, sales have declined due to soaring prices. Sales slowdown and weak retail demand have also been observed in Asia-Oceania, Central and South America, though inventory data has shown improvement.

When reviewing the global economic situation, Shimano noted that due to changes in trade policies worldwide and rising geopolitical risks caused by prolonged international conflicts, people's views on the economic outlook remain cautious.

Beyond its core bicycle business, Shimano's fishing tackle division also delivered underwhelming performance. In the first three quarters, this division's sales decreased by 4.6% to 84.435 billion yen, with operating profit falling by 31%, further intensifying the company's overall profit pressure.

Compliance Issues: Apology and Rectification

In September, Japanese authorities issued an apology to Shimano over its arrears of payments to some subcontractors. Japan's Fair Trade Commission ruled that Shimano violated the Subcontractor Act by failing to pay local subcontractors for storing materials on its behalf. Specifically, Shimano required 121 subcontractors to store molds and other equipment owned by the company free of charge, and demanded that subcontractors conduct regular inspections and inventory checks on the stored equipment — even when there were no parts orders "for an extended period of time". The total number of such molds and equipment involved 4,313 items across 121 companies, all related to production after December 1, 2023.

In response, Shimano issued a statement saying that the company "takes seriously" the recommendations of the Fair Trade Commission. It has paid compensation to some of the 121 subcontractors affected by the irregularities and expressed deep regret for any concerns or inconveniences caused. The company's board of directors explained that measures will be taken to ensure that no improper economic benefits are sought in the future, which would harm the interests of subcontractors. As part of the rectification efforts, Shimano stated that it will review internal compliance training and "strengthen" its verification system.

Additionally, Shimano had previously granted preliminary approval to a settlement agreement related to a class action lawsuit filed by U.S. crank users regarding its inspection program and product recalls.