Canon Cuts Forecast as Sales, Income, Decline in Second Quarter

Canon Inc. Headquarters - Tokyo, Japan

Canon Inc. Headquarters – Tokyo, Japan

Canon Inc. of Tokyo reported results for its fiscal second quarter that ended on June 30th, with net sales down 11.7 percent to ¥860,246 billion, and net income down 21.6 percent to ¥53,448 billion, both versus the same quarter a year ago. Taking into account, “the prolonged economic slowdown in developing countries, along with the negative impact of the revised foreign-exchange rate assumptions,” Canon projects full-year 2016 net sales of ¥3,520.0 billion, a year-over-year decline of 7.4 percent; operating profit of ¥265.0 billion, a year-over-year decline of 25.4 percent; and net income of ¥180.0 billion, a year-over-year decline of 18.3 percent.

Canon says demands for its office MFPs remained “at around the same level” as during the previous year, while the market for laser printers shrunk mainly in emerging countries. As for cameras, although demand for interchangeable-lens digital cameras continued to gradually recover in developed countries, sales of digital compact cameras declined in all regions “due to the increasing popularity of smartphones.” Canon says demand for its inkjet printers continued to decline in all regions. Within Canon’s Industry and Others 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.”

Net sales for the six months that ended June 30, 2016 totaled ¥1,657.5 billion, a year-over-year decline of 9.5 percent. Canon’s gross-profit ratio in the second quarter declined by 1.4 points year-over-year to 50.3 percent, “due to the negative effect of the yen’s appreciation.”

Despite a reduction in operating expenses of 8.8 percent year-over-year “thanks to group-wide efforts to reduce spending,” second-quarter operating profit declined by 34.5 percent to ¥68.6 billion.

Office-Business Group Results

During the second quarter, although Canon’s office MFPs “enjoyed solid demand,” mainly for color MFPs, total sales of laser printers declined “due to the contraction of the market.”

Sales of office MFPs overall increased from the same period of the previous year, “thanks to strong sales of color models led by small-office/home-office color A3 (print and scan on up to 12”x18”) imageRUNNER ADVANCE C3300-series” MFPs that Canon launched in the previous year, and the imagePRESS C10000VP series, which targets the production-printing market. Among its high-speed continuous-feed printers and wide-format printers, Canon says the Océ-produced VarioPrint i300, a high-speed sheet-fed color inkjet press, has been steadily receiving orders.

As for laser printers, although sales continued to “decline significantly” from the first quarter of 2016 “due to the impact of economic stagnation in emerging countries,” in order to ensure profitability, Canon says it shifted its sales strategy from a focus on expanding sales volume of low-end models to expanding sales of high-value-added-models mainly in developed countries. It says these factors, coupled with the negative effect of unfavorable currency-exchange rates, resulted in total sales for the business unit of ¥456.4 billion, a year-over-year decrease of 15.0 percent, while operating profit totaled ¥47.6 billion, a year-over-year decrease of 40.0 percent.

Sales for Canon’s combined first six months of the year totaled ¥910.7 billion, a year-over-year decline of 14.6 percent, while operating profit totaled ¥92.3 billion, a year-over-year decline of 38.9 percent.

Appreciation of Japanese Yen

Canon states that the average value of the Japanese yen during the second quarter was ¥108.08 against the U.S. dollar, a year-over-year appreciation of approximately ¥13; and ¥121.94 against the euro, a year-on-year appreciation of approximately ¥13, which had a negative impact on net sales of ¥75.8 billion and on operating profit of ¥30.2 billion.

As for the first half of the year, the average value of the yen was ¥111.28 against the U.S. dollar, a year-over-year appreciation of approximately ¥9; and ¥124.33 against the euro, a year-over-year appreciation of approximately ¥10, which had a negative impact on net sales of ¥106.8 billion and on operating profit of ¥43.5 billion.

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