Shimano lost £93 million in sales from its crank inspection programme and total sales down 30% on previous year

Shimano has published its financial report for 2023, detailing the major cost of its crank inspection programme, the full-year cost for which came in at 17,625 million Japanese yen (just under £93 million) and costing the company around £14.5 million (2,762 million yen).

Despite the financial blow, labelled in the accounts as "extraordinary losses", and further reduction in bicycle-related sales, Shimano still posted a £322 million profit in 2023.

In September, the company announced a voluntary inspection and replacement recall notice for 760,000 Dura-Ace and Ultegra bonded 11-Speed road cranksets in North America, and an "inspection and replacement" programme in Europe and the United Kingdom.

> Investigating Shimano's snapping cranksets: What happened, unanswered questions and an engineer's report

A note included in Shimano's accounts states: "Loss on free inspection  FY2023 (Jan. 1, 2023 - Dec. 31, 2023) Some bonded 11-speed HOLLOWTECH II road cranksets produced by the company on and before June 30, 2019 show bonding separation and delamination, which may produce gap and clearance.

"The Shimano Group therefore recorded expenses associated with free inspection and replacement. The amount of loss recorded includes provision for free inspection and replacement, as reasonably estimated based on information currently available to the company."

As per the company's consolidated statements of income, the "loss on free inspection" totalled 17,625 million yen (£92,795,625), at a cost of 2,762 million yen (£14,537,600) to Shimano.

The world's leading components manufacturer also reported a 24.6 per cent decline in revenue in 2023 compared with 2022, and a 52.3 per cent drop in net profits.

Demand for bicycles remained weak, the company stated in its annual financial report, net sales decreasing 29.5 per cent to £1.92 billion, with net sales for bike components coming in at £1.57 billion, which despite the poor year-on-year performance remains higher than pre-pandemic levels.

"Although the booming popularity of bicycles cooled down, interest in bicycles continued to be high as a long-term trend," Shimano reported. "On the other hand, market inventories generally remained high, despite ongoing supply and demand adjustments.

"Overseas, in the European market, the strong interest in bicycles continued in our major market, namely, Germany and Benelux countries, and retail sales of completed bicycles were strong. On the other hand, in other countries, consumer demand waned on account of inflation and an economic slowdown, and market inventories remained at high levels." 

Shimano outlined challenges faced in 2023, when despite "tight monetary policies to tame inflation that had been adopted mainly in Europe and the U.S [being] largely projected to end", the "pace of global economic recovery remained at a standstill as turmoil in Ukraine and the Middle East and a slowdown in economic recovery in China exerted downward pressure on economy". 

Commenting on the economic situation in its main markets, Shimano suggested the European economy "remained lacklustre" despite an "easing" in hikes in energy costs and raw material prices.

Looking ahead, the company said interest in bicycles will continue "to be high as a long-term trend", despite the fact the "booming popularity of bicycles cooled down" in the short-term.

Tempering some of the positivity about the bike industry in 2024 that has been heard in recent times, notably a recent market intelligence agency report that predicted the bike industry is "on the road to recovery", Shimano predicted a further fall in sales during the year ahead.

The predicted decrease in revenue for bicycle components is expected to be around 10.8 per cent, with the European market expected to be hit hardest, with an 18 per cent fall in sales due to the brand's high inventory level.

Shimano also pointed out global supply chains may face further disruption due to conflicts in Ukraine and the Middle East, and that the US presidential election may influence the economy.

2023 represented a challenging year for Shimano, with a class-action lawsuit filed against the components giant, following the recall announcement, for "inadequate" cranksets that put "cyclists nationwide at risk of injury".

In November, the company was allegedly hit by a massive ransomware attack threatening to release confidential data, while an investigation published a month later suggested that workers at Shimano's Malaysian supplier were subjected to "slavery-like" conditions.

Last week, a cyclist sued the components brand, and bicycle manufacturer Trek, for $2 million after a brake lever "impaled" a foot-long wound in their thigh.