Shares in Japan’s Largest LSP Plummet on Declining Q1 FY20 Revenues

On August 9, 2019, Japan’s largest language service provider (LSP), Honyaku Center, published its financial results for the first quarter of its 2020 fiscal year. The company is listed on the Tokyo Stock Exchange under the ticker symbol (2483.T).

In the three months to June 30, 2019, sales fell to JPY 2,735m (USD 25.8m), a decline of 5.2%. Honyaku Center largely blamed uncertainty in the Japanese economy linked to US trade frictions, muted growth in China, and instability in the capital markets.

The company’s largest business unit, Translation, was a drag, Honyaku said. In addition to Translation, the company has four other business units: Temporary Staffing, Interpretation, Conventions, and “Other.” Sales declined across three of the five units, and grew in Interpretation and Conventions.

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Interpretation performed strongly thanks to an “expansion of the customer base,” notably among pharmaceutical companies. Temporary Staffing was largely “steady,” but suffered because of the high number of holidays during the period.

Within its Translation business unit, Honyaku Center further breaks out its revenues across the patent, pharma, industrial, and financial and legal sectors. Sales fell across all sectors, with the exception of Patent, which fared well as a result of “an increase in the number of international [patent] applications,” the financial results noted.

The biggest revenue generator from translation services remains Pharmaceutical by a small margin. According to the financial results, sales from this sector fell because there were an unusually high number of orders in the same period last year.

In Industry / Localization, “orders from auto-related companies, which are our main customers, were sluggish,” while energy-related orders remained “firm.” Sales to Corporate Management Departments under Financial / Legal were also “sluggish,” while a number of large insurance projects mitigated the overall decrease in this sector.

Markets have reacted unfavorably to Honyaku Center’s Q1 2020 results, with shares falling steeply since the financial results were published on August 9, 2019. Shares are now off 45% from their October 2018 highs.