Tough Year for Canon with Revenue Declines in Many Segments

Canon Inc. of Tokyo, Japan, today reported financial results for its fiscal year 2016 that ended on December 31, 2016, with net sales for the year declining 10.5 percent year-over-year to ¥3,401.5 billion. Net income decreased by 31.6 percent to ¥150.7 billion. Basic net income to shareholders per share for the year was ¥137.95, a year-over-year decrease of ¥63.70.

Gross profit ratio decreased by 1.7 points year-over-year to 49.2 percent. Despite a reduction in operating expenses of 8.5 percent year-over-year, partly due to company efforts to reduce spending, operating profit decreased by 35.6 percent to ¥228.9 billion.

Canon stated that, among other factors, lower sales and profits can be attributed to the negative impact of the appreciation of the Japanese yen, which, among other things, makes Japan products less price-competitive outside of Japan. The firm notes that the average value of the yen during the year was ¥108.58 against the U.S. dollar, a year-over-year appreciation of approximately ¥13, and ¥120.25 against the euro, a year-over-year appreciation of approximately ¥14, which had a negative impact of ¥280.4 billion on net sales and of ¥101.8 billion on operating profit.

Overall, Canon says that within demand for office copier/MFPs and laser printers, demand for color MFPs and printers enjoyed “strong growth” due to the trend of shifting from monochrome to color machines, while demand for monochrome shrunk due to the continued economic slowdown in emerging countries. As for cameras, along with the ongoing contraction of the market, especially for digital compact cameras, the market suffered from a shortage of components arising from the earthquake in Kumamoto earlier in the year.

Demand for Canon inkjet printers continued to decline. Within the Industry and Other sector, demand for lithography equipment used in the production of flat-panel displays (FPDs) and manufacturing equipment for organic LED (OLED) displays enjoyed “strong growth thanks to active capital investment by panel manufacturers.”

During 2016, color-model office MFFs “achieved higher growth than the market average, making up for the continued decline of monochrome models,” which Canon says led to the same level of unit sales as the previous year overall. Although the unit sales of laser printers were below level compared with the same period of the previous year until the third quarter, due to the sluggish economic conditions in emerging countries, “signs of bottoming out” started to appear in the fourth quarter.

In the interchangeable-lens digital cameras, Canon sales volume for the year exceeded that of the previous year, supported by sales of new products, while sales volume for digital compact cameras declined compared with the previous year amid the ongoing contraction of the market.

Sales volume for Canon inkjet printers declined for consumer products, while sales volume of Canon wide-format inkjet printers for business use exceeded that of the previous year. In contrast, sales of Canon FPD lithography equipment and OLED panel manufacturing equipment increased, boosted by increased capital investment by panel manufacturers.

Canon also notes that in December 2016, all shares of Toshiba Medical Systems Corporation (TMSC) were obtained by Canon following the completion of necessary clearance procedures by antitrust authorities, and TMSC joined the Canon Group.

Results for Office- and Production-Imaging Segments

In Canon’s Office Business Unit, sales of office MFPs “increased overall from the previous year, thanks to strong sales of color models, even with the continued decrease in sales of monochrome models.” This growth was supported by steady sales of the color A3 (12” x 18”) Canon imageRUNNER ADVANCE C5500-series models, which were released this year, and the small-office/home-office color A3 (12” x 18”) Canon imageRUNNER C3300-series models, which were launched in the previous year, along with expanded sales of Canon imagePRESS C10000VP-series models, which target the production-printing market. Among high-speed continuous-feed printers, unit sales of the Canon Océ-produced VarioPrint i300, a high-speed sheet-fed color inkjet press, increased year-over-year.

Although sales of Canon laser printers had been “below level” versus the same period of the previous year, until the third quarter, “due to the sluggish economic conditions in the emerging countries,” unit sales exceeded the same period of the year in the fourth quarter, along with a smooth transition to new models as planned. These factors, “coupled with the negative effect of unfavorable currency exchange rates,” resulted in total sales for the business unit of ¥1,807.8 billion, a year-over-year decline of 14.4 percent, while operating profit totaled ¥169.5 billion, a year-over-year decline of 41.7 percent.

As for Canon inkjet printers, although sales volume declined compared with the previous year, “due to a shrinking market for consumer products,” sales of models equipped with large-capacity ink tanks that were launched in the fourth quarter of 2015 experienced “healthy demand,” mainly in emerging countries, while demand was high mainly in Japan for newly designed models for home use that were launched in 2016.

Canon’s wide-format inkjet printers, including new imagePROGRAF PRO-series models, which target the professional photo and graphic-arts printing market, saw an increase in sales. As a result of these factors, along with the negative effect of unfavorable currency exchange rates, sales for this business unit decreased by 13.3 percent to ¥1,095.3 billion, while operating profit totaled ¥144.4 billion, a year-over-year decline of 21.3 percent.

Fourth-Quarter 2016

For its fourth quarter that ended on December 31, 2016, Canon reported net income of ¥49,884 million, down 31.9 percent versus fourth-quarter 2015.

Within the fourth quarter, sales within Canon’s Office group were down 9.0 percent versus fourth-quarter 2015. Products in the Office group include office MFPs, laser MFP/printers,laser printer, digital produciton printers, high-speed continuous-feed printers,  wide-format printers, and document solutions.

Forecast

In 2017, Canon expects demand for color MFPs to make up for the market contraction of monochrome MFPs, and demand is expected to remain in line with that of the previous year overall. Although demand for laser printers is expected to remain at the same level as that for the previous year, demand for color and laser MFPs with high potential for consumable sales is expected to increase. As for inkjet printers, Canon expects demand to continue declining mainly for consumer models.

As for interchangeable-lens digital cameras, Canon says that although demand is waning mainly in developed countries, “the sluggish demand condition is improving gradually,” which is expected to “bottom out.”

Canon’s projections for digital compact cameras indicate continued market contraction, centered mainly on low-priced models.

Canon anticipates exchange rates of ¥110 to the U.S. dollar and ¥120 to the euro, representing a depreciation of approximately ¥1 against the U.S. dollar and approximately the same level against the euro compared with the annual average rates of the previous year.

Based on these factors, Canon is projecting full-year 2017 net sales of ¥4,000.0 billion, a year-over-year increase of 17.6 percent; operating profit of ¥255.0 billion, a year-over-year increase of 11.4 percent; income before income taxes of ¥260.0 billion, a year-over-year increase of 6.3 percent; and net income attributable to Canon Inc. of ¥170.0 billion, a year-over-year increase of 12.8 percent.

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