Makita is a publicly-traded company, and as such, they are required to disclose a lot financial information.
While we don’t exactly how many tools Makita has sold last year, there is a lot that we do know, such as their revenue, profit, regional sales breakdown, and how they are performing year over year.
Makita’s fiscal year is from April thru March. Unless noted otherwise, the following 2021 figures are for the period from April 1, 2021 to March 31, 2022.
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USD figures are calculated using 7/18/2022 valuation of 1 Japanese Yen to 0.007242 US dollar, or ~138 JPY to 1 USD. Numbers are rounded to 3 significant figures.
Makita Financial Summary
2021 Revenue: ¥739 billion ($5.35 billion USD)
2020 Revenue: ¥608 billion ($4.40 billion USD)
2021 Cost of Sales: ¥511 billion ($3.70 billion USD), 69.1%
2021 Gross Profit: ¥228 billion ($1.65 billion USD), 30.9%
2021 Operating Profit: ¥91.7 billion ($664 million USD), 12.4%
2020 Operating Profit: ¥88.5 billion ($641 million), 14.5%
Here’s what Makita say about sales figures in North America:
In North America, sales of power tools accompanied by strong housing demand and sales of cordless outdoor power equipment were strong, resulting in an increase in sales of 23.4% year on year to 112,248 million yen.
Revenue by Business Segment/Region
The following reflect revenue from external customers, and excluding inter-segment figures.
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Japan: ¥141 billion ($1.02 billion)
Europe: ¥355 billion ($2.57 billion)
North America: ¥115 billion ($830 million)
Asia: ¥30.8 billion ($223 million)
Other Areas: ¥98.0 billion ($710 million)
Consolidated Total Revenue: ¥739 billion ($5.35 billion USD)
Makita North America Revenue Percentage: 15.5%
Please note that Makita reports revenue figures for their different regional business segments, and these numbers do not perfectly correspond with their revenue by geographic region, also included below.
Operating Profit by Business Segment/Region
Japan: ¥31.1 billion ($225 million)
Europe: ¥39.4 billion ($285 million)
North America: ¥803 million ($5.82 million)
Asia: ¥19.4 billion ($141 million)
Other Areas: ¥9.88 billion ($71.6 million)
Eliminations: ¥8.89 billion ($64.4 million)
Consolidated (Total) Operating Profit: ¥91.7 billion ($664 million)
North America Operating Profit Percentage (Before Eliminations): 0.798%
Revenue by Geographic Region
Japan: ¥118 billion ($855 million)
Europe: ¥352 billion ($2.55 billion)
North America: ¥112 billion ($813 million)
Asia: ¥49.2 billion ($356 million)
Central & South America: ¥41.8 billion ($302 million)
Oceania: ¥51.6 billion ($374 million)
Middle East & Africa: ¥14.0 billion ($101 million)
Consolidated Total Revenue: ¥739 billion ($5.35 billion)
North America Geographic Revenue Percentage: 15.2%
Breakdown by Product Category
Finish Goods: ¥612 billion ($4.43 billion), 82.7%
Parts, Repairs, Accessories: ¥128 billion ($924 million), 17.3%
Makita 2021 Focus
our group focused its development efforts on expanding its lineup of rechargeable finished goods, including power tools and outdoor power equipment, in the “40Vmax Lithium-ion Battery” series, which offers high power, long life and high durability.
Makita 2022 Outlook (for Fiscal Year Ending March 31, 2023)
Makita will:
Strengthen its R&D and product development capabilities, mainly for the technologies of motors and technologies for discharge/charge of batteries, to take the initiative in cordless products market;
Positioning cordless outdoor power equipment as the next pillar of our future business after power tools, we will contribute to the realization of a decarbonized society by promoting deep cultivation and development of the market.
We will strengthen the development and sales expansion of new finished goods in new fields such as cleaning, outdoor activities, and disaster prevention, and work to evolve into a supplier of a comprehensive range of cordless products.
Implement measures to strengthen and improve the efficiency of production, procurement and distribution, while further upgrading global production bases;
Strive to raise its brand power by promoting the establishment of a sales and after-sales service network to offer community-based and fine-tuned response to needs of customers around the world.
With respect to challenges:
The environment surrounding our group is expected to remain uncertain due to shortages of goods and logistics disruptions in the supply chain, rising prices, and the growing international tension surrounding the Ukraine issue.
Our group’s business performance is also expected to be affected by the continued rise in transportation and materials costs.
Discussion
I last examined Makita’s financial disclosures in 2019, and now seemed like a good time for an updated look.
See Also: How Big is Makita’s Cordless Power Tools and Accessories Business in North America?
Makita’s sales performance and revenue breakdowns are straightforward, until we get to 2021 revenue.
I double and triple-checked the numbers and made every attempt to be accurate in my conversions and calculations. Please let me know if you find an error!
Makita’s North America business segment, which I presume includes Makita USA, Canada, and Mexico, reported approximately $830 million (converted from JPY) in revenue for the year ending March 31, 2021, but only $5.82 million (converted from JPY) in operating profit. When measured against the total (before eliminations as Makita does not provide a breakdown by segment), this reflects less than a 0.8% contribution towards the total operating profit.
In 2020, Makita’s North America segment reported ¥92.8 billion ($672 million) in revenue, and ¥3.68 billion ($26.7 million) in operating profit, resulting in 15.3% and 4.10% contributions towards their overall revenue and profits that year, respectively.
North America contributing approximately 15% to Makita’s overall sales revenue is in alignment with their performance in recent years.
But, a nearly 0.8% contribution towards operating profit is definitely unusual, especially compared to 2020’s figure of 4.10%.
Revenue increased across the board for Makita, with all regions reporting increases of at least 20%, except for Japan.
Makita’s revenue increased 21.5% in 2021 compared to 2020, but their operating profit only increased by 3.7% for this same period. Their operating profit ratio was 12.4% in 2021, compared to 14.5% in 2020.
Revenue minus the cost of sales results in gross profit, with “selling, general, administrative, and other” costs further deducted to determine the operating profit.
It is clear that costs are higher across the board, leading to a smaller year-over-year increase in operating profit compared to the increase in sales revenue.
Makita still reported a 3.7% increase in operating profit from 2020 to 2021.
However, their North America segment reported an approximately 78.2% decrease in profit, despite a 23.5% increase in revenue. Note that these calculations are made using Makita’s segment information, as they do not include corresponding profit figures for their breakdown by geographic region.
This warranted a closer look at Makita North America’s profit history.
Makita North America Revenue & Profit History
The revenue figures represent revenue from external customers.
- 2021
- Revenue: ¥115B ($830M)
- Operating Profit: ¥803M ($5.82M)
- 2020
- Revenue: ¥92.8B ($672M)
- Operating Profit: ¥3.68B ($26.7M)
- 2019
- Revenue: ¥74.1B ($537M)
- Operating Loss: ¥201M ($1.46M)
- 2018
- Revenue: ¥74.9B ($542M)
- Operating Profit: ¥267M ($1.93M)
- 2017
- Revenue: ¥76.3B ($553M)
- Operating Profit: ¥2.26B ($16.4M)
- 2016
- Revenue: ¥68.1B ($493M)
- Operating Profit: ¥1.59B ($11.5M)
- 2015
- Revenue: ¥69.8B ($505M)
- Operating Income: ¥1.03B ($7.45M)
- 2014
- Revenue: ¥59.0B ($427M)
- Operating Income: ¥1.59B ($11.5M)
Makita North America has seen a year-over-year increase almost every year, with an overall upwards trend. Their operating profit seems to fluctuate, mostly in alignment with Makita’s other regional business segments and overall, but not ever year, such as 2021.
A Makita USA dealer announced that prices increases went into effect April 1st this year, and we have also seen Makita USA updating more 18V and 18V X2 cordless power tool kits with lower capacity batteries.
It seems that they are trying to manage costs the best they can, whilst still striving to remain competitive.
What I find curious is that it seems more difficult for Makita to do this in North America than in other regions. For instance, Makita’s Europe segment saw a 24.7% increase in revenue and more than 32% increase in profit from 2020 to 2021.
Is it because of different transportation needs and costs that North America saw a 23.5% increase in revenue and 78.2% decrease in profit for the same period?
Or are there other factors contributing to higher costs of doing business in North America?
Jared
The operating profit seems wildly inconsistent. Makes me wonder if that is because operating costs are terribly unpredictable or if there is some other reason for the big swings, especially when revenue experiences relatively consistent growth.
Stacey Jones
The USA quickly moved to one of the 15 worst countries in the world in both Covid cases and deaths during the Trump administration. Thats out of 220 countries. We definitely get an F- grade on that. I’d bet that contributed heavily.
Stuart
Please, no politics.
As far as Covid influences, that might help to explain lower revenue, but there’s no obvious tie-in to lower profit.
Raycr
Some people ant’t help themselves.
However, the US dollar continues to strengthen almost by the day.
Paul Davis
2021 is the year’s results that stand out as poor profitability. Politics aside, Trump was not President then. Biden took office in Jan 2021.
Stuart
2018 and 2019 also saw lower profits.
2021 profits were actually 3X higher than in 2018, and there was a loss in 2019.
But, we also don’t see how Makita gets from segment revenue to segment profit. It’s impossible to correlate profit to politics without knowing what costs or expenses factor into things, and Makita does not disclose this for their different regional business segments.
Rog
That outlook is not exciting for those in the LXT line. Nothing about 18v, battery updates/upgrades, and a lot of talk of more “lifestyle” tools.
Are they now the fancy Ryobi?
Franck B.
Just a note about exchange rates… the JPY was at 110-115 for most of the reporting period. It might be more relevant to quote the USD equivalents in that frame, as the dollar’s strength (well, actually the yen/Euro/Swiss Franc’s greater weakness compared to the dolar’s) has been a recent thing.
I know it’s not a huge deal but seeing the dollar numbers inflated 10-20% was a little surprising.
Stuart
Using present-day valuation is done for the sake of context and easier comparison. JPY are reported figures, USD are calculated in the manner I mentioned.
In my opinion, using historical exchange rate data would warrant additional explanations and complexity, and without contributing anything extra to the post.
fred
As you allude to $5.82 million profit on $830 million revenue is abysmally poor performance. If it continues at this 1% rate – it does not bode well for Makita remaining in the North American market. I wonder if there were other unusual expenses/capital investments/write-offs attributed to the North American market that pulled down short term profits here.
Perry
It wouldn’t surprise me if higher shipping costs, XGT rollout and warehousing costs of the new line contributed to the decreased profit percentage. That, along with what seem to be a lackluster response to the new line compared to continuing LXT sales could mean a higher inventory balance as well
Franco
I agree in part with Perry’s answer. Shipping costs, the new XGT line, which I do not have numbers for, but guessing that it has not been embraced by contractors and consumers with the numbers Makita was projecting.
Then, of course, the last 18-24 months have been difficult for all businesses and economies, with the exceptions being those that had a connection to COVID. (like masks, hand sprays, disinfectant wipes, etc.)
I know that in Europe, as well as worldwide minus NA, Makita has always done much better. I do not believe they will pull out of the NA market as long as they show profits, miniscule as they may be.
MFC
I can’t say that I’m a great businessman, but if you want to grow, I do know that you need to reinvest what you earn, back into the company. If that is what they are doing, then a small profit means that they are strategic in their reserves and have a lot of guys that are doing their job well (only spending what they need to for tax purposes and growth and not overextending).
If they weren’t growing anywhere or investing in themselves, then yes, that’s a poor return.
Stuart
Milwaukee and Stanley Black & Decker have been opening new factories and Milwaukee has been expanding their R&D and engineering efforts, and you can be sure they’re vocal about it.
Even if there was some type of reinvestment project, it wouldn’t be paid for all at once.
dstblj52
I think Makita as an independent is a dead man walking it’s simply too much investment to keep up on the tiny margins they make and without the pricing power sbd leverages over everyone and tti leverages with home Depot their likely not making any real money to reinvest.
Stuart
Makita’s North America segment is of interest because it’s these efforts USA tool users are exposed to, but it’s a relatively small part of their overall efforts.
Overall, Makita is still a billion-dollar company with consistent revenue growth.
Makita earned greater revenue in 2021 than Snap-on – not Snap-on the tool brand, but the Snap-on Incorporated the tool group that owns several tool brands including their namesake.
Makita is nowhere close to competing on even ground with Stanley Black & Decker and TTI (Milwaukee Tool and others), but their independence doesn’t seem to be slowing them down.
Makita being owned by a larger company – which one?? – would not automatically enable it to overcome its competitive and retail space challenges.
Aaron SD
One other possibility is that it is tough for a Japanese company to market to the USA without strong local (USA) input and influence. It really depends how much freedom they have in USA. I’ve worked at a couple multi-national consumer product companies (not tools) that also had problems like this – poor understanding of USA market; one from Europe and the other from Japan. The Japanese company made all decisions in Japan when I worked in San Diego,CA for them. The European company gave us a little more freedom but not enough.
Seems 15% contribution from NA is good, but might not be enough to get corporate support for the marketing and potential unique tools USA needs.
John
I have a lot of Makita tools, hand power tools, routers, planers, cordless hand tools and sanders. I would say they have all given me at or above the quality I expected except with their current line of cordless mowers, had to return an XML08 mower, just crap compared to a Honda gas push mower. They are pushing hard to sell OPE but not sure if it is all really ready for primetime. Their cordless trimmer, blower and chainsaw are good though that I own. Hope they continue pushing forward.
WastedP
I have the XML03, which replaced a Husqvarna with a Honda engine (started on the first pull for over a decade). My experience was different than yours. The only category it comes up a little short in is suction, so I’m not mulching and bagging leaves with it like I did with the Husky. It will chew through anything the gas mower did, without the noise and smell.
James
Could this be a strategic decision by Makita to move the profit to other business units through the use of transfer pricing?
Perhaps there are greater tax concessions in other markets, so those business units ‘sell’ the tools to Makita North America at an inflated price to drive up their own profits?
Aaron SD
Unlikely since I’d expect each BU (region?) has their own P/L sheet.
James
I’ve worked for a number of multi-nationals that do this, it’s very common as it makes it much easier to move the cash to where it needs to be
Bob
Are 2014-2020 years corrected for the exchange rate at that time or did you use the current rate? I wonder how this would compare to metabo/hitachi or another company from outside the US? Wondering how much of this is just corporate tax strategy or similar accounting.
Stuart
As mentioned, I only used the current exchange rate. The JPY values are as reported in financial documents.
Other tool companies are more difficult to analyze. Metabo and Metabo HPT, for instance, are owned by an investment company, which doesn’t break things down in the same way.
mla
Doesn’t that affect the result though? JPY has weakened tremendously.
Stuart
If you get hung up on currency valuations and conversions, focus instead on unitless ratios, percentages, and trends.
mla
“In North America, sales of power tools accompanied by strong housing demand and sales of cordless outdoor
power equipment were strong, resulting in an increase in sales of 23.4% year on year to 112,248 million yen.
Excluding the effect of currency fluctuations, net sales in North America increased by 15.8%”
+15.8% net sales backing out currency effect does not seem like a bad result.
Jim Felt
Years ago I was asked to meet with Makita’s NA ad agency. And honestly all I remember was how obviously underwhelmed they were with direction of any sort from their Japanese client counterparts.
I actually felt badly for the agency. Something I’ve seldom seen. And at the time both were located on the south. No idea why then or where now. (Not worth the effort to Google).
ChrisP
Look at the Makita websites around the world. No consistency. Seems each region/country develops their own site (maybe out of frustration) without any overall direction from Japan. Compare that to Milwaukee and all of their websites are the same but adjusted for the SKU’s available in that region/country. Clearly controlled by Milwaukee head office and seen as critical to managing the brand.
Hon Cho
International corporations can and do play lots of games with internal transfer pricing (the prices that are used internally moving products across international boundaries) that may account for the some of the disparity between North America and the rest of the world.
While N. American performance may be lagging, it looks like they’re doing ok elsewhere. As long as the USA market doesn’t require a lot of capital investment, even the relatively profitability won’t be an impediment to ongoing presence in N. America.
As for them being an acquisition target, maybe, maybe not. who would buy them? Probably not another tool group. Most likely would be some sort of investment group like Bain or KKR.
On a related note, another Japanese company of similar size, Shimano garners a much larger percentage of it’s profits in N. America where it’s sales are much larger (but profitability lower) in other markets.
Badger12345
I think Makita has a long-term strategic problem and that is mindshare of consumers and shelf-space at retailers. For the higher quality power tool brands (e.g. Dewalt, Milwaukee, Bosch) they are in many respects quite similar. Therefore, it is hard for one to really stand out over the others. An excellent drill from Makita may not be materially different than the top models from Dewalt or Milwaukee. At the retailer level, the stores can only stock so many brands with Home Depot being an exception that has many brands. For example, at our local ACE they sell three powertool brands: Dewalt, Milwaukee, and Craftsman. Makita has no shelf-space nor does Festool or Bosch or many other brands. The store manager told me that Craftsman is the budget brand for the occasional use homeowner. They sell a fair amount of Dewalt and Milwaukee to homeowners, but also to contractors who have a tool fail in the middle of the job and need a quick replacement that fits with their existing system of batteries and chargers. My hunch is that a few dominant players will grow even larger and a number of smaller brands will cease or will get bought out. I’m not making any forecasts however.
G
I don’t know what their transfer cost model is (i.e., what do they ‘charge’ the NA group when they ship product to NA.) What I do know is that when I was in charge of a European subsidiary of my company, we used high transfer pricing when shipping US goods to Europe in order to repatriate profits, because it was the only way to return European profits to the US. Conceivably, Makita could be doing something similar. There may also be tax implications to how they model this as well. In that sense, their financial statements aren’t ‘black & white’ until you understand the underlying principles of the business.
TomD
Makita ended their gas motor division(s) this year: https://www.powersys.com/2020/11/makita-engine-products-to-be-discontinued-in-march-2022/
Perhaps some of the reporting inconsistency is due to writedowns and other financial stuff related to shutting that down?
Paul C
This could be a simple tax strategy at work. Unless they e change recently Apple “buys” phones for say $950 from Apple HK then sells them for $750 at a “loss”. In reality they are transferring revenue out of the country from their App Store business to a lower tax country.
Patrick McIntosh
I used to work for Makita in a Mid Management role. To my way of thinking the 2021 figures are a result of a strategy put in place by the US CEO to grow market share at a cost to the bottom line. A sales growth of 23% in the current climate is a great result, however to get that sort of growth comes at a cost and that can be seen by the resultant profit figure. The CEO may have put in place a strategy to grow sales at a cost to profit, then in the 2022 year, hold those sales without affecting the bottom line thereby seeing the profit line grow substantially. Each time Japan appoints a new CEO to a country a new strategy is set in place, each CEO wants to show that he is better than the previous CEO and to that end he will normally cancel any programs that were in place and install his programs no matter whether the previous CEOs programs were successful or not. It’s a mindset that creates confusion and chaos in the Makita workplace and in the customer base every few years.