Sharp Drop in Earnings for Canon’s Third Quarter, Lowers Outlook

On October 28th, Canon Inc. of Tokyo, Japan, announced results for its third quarter that ended on September 28, 2019, with net sales down 6.2 percent year-over-year to ¥869.5 billion  and net income down 42.7 percent year-over-year to ¥26.5 billion.

Net sales for the first nine months of Canon’s fiscal year were down by 8.8 percent year-over-year to ¥2,639.8 billion. Gross profit decreased by 8.7 percent year-over-year to ¥389.9 billion, which Canon says was due mainly to the negative effects of currency-exchange rates.

Third-quarter operating profit decreased by 43.7 percent year-over-year to ¥38.4 billion.

Income before income taxes for the third quarter decreased by 29.9 percent year-over-year to ¥47.0 billion, with net income, as noted, down 42.7 percent year-over-year to ¥26.5 billion.

Basic net income attributable to Canon Inc. shareholders per share was ¥24.93 for the third quarter, a year-over-year decrease of ¥17.91.

First Nine Months 

Canon’s operating profit for the first nine months of its fiscal year decreased by 49.9 percent year-over-year to to ¥122.0 billion, while income before income taxes decreased by 45.2 percent year-over-year to ¥144.2 billion.

Net income attributable to Canon Inc. for the first nine months of the year decreased by 49.0 percent year-over-year to ¥92.3 billion.

Basic net income attributable to Canon Inc. shareholders per share was ¥86.16 for the first nine months, a year-over-year decrease of ¥81.51.

Business Overview

During the third quarter, overall sales of Canon office MFPs decreased slightly compared with the same period of the previous year, owing, Canon says, to the sales decline of monochrome office MFPs. However, color office MFPs exceeded the growth of the market.

Sales of laser printers decreased compared with the same period of the previous year, due to a slowdown in sales of low-speed models, although sales were strong for new models.

Looking at Canon inkjet printers, overall unit sales decreased compared with the same period of the previous year due mainly to a slowdown in emerging markets.

While Canon has been working towards expanding sales of its mirror-less cameras, sales of its interchangeable-lens digital cameras decreased compared with the same period of the previous year amid the shrinking market for entry-class models.

Sales of Canon medical equipment increased compared with the same period of the previous year, due to solid overseas sales in Europe and in some emerging economies, as well as expanded sales in Japan.

For Canon industrial equipment, sales of its semiconductor lithography equipment and manufacturing equipment for organic LED (OLED) panels decreased compared with the same period of the previous year, due to the prolonged sluggishness of capital investments in semiconductor memory and small- and mid-size display panels.

On the other hand, sales of Canon network cameras increased steadily amid an expanding market.

Office Business Unit

With its Office Business Unit, Canon says that although there was solid demand for new color MFPs that feature enhanced security functions, as well increased demand for the  newly launched Canon imagePRESS C910 production-printer series, sales of monochrome office MFPs decreased due to the economic slowdown in emerging economies, and, overall, sales of office MFPs  decreased slightly compared with the same period of the previous year.

As for Canon laser printers, although sales were strong for new models that provide lower power consumption, compact body designs, and higher productivity, sales of laser printers decreased compared with the same period of the previous year, due, stated Canon mainly to decreasing sales of low-speed models in emerging markets.

Sales of consumables also decreased, which Canon attributes to the slowdown of the European economy.

These factors resulted in total sales for the Office Business Unit of ¥413.8 billion, a year-over-year decrease of 3.9 percent, while income before income taxes decreased by 16.5 percent year-over-year to ¥41.6 billion.

Sales for Canon’s Office Business Unit for the first nine months of Canon’s fiscal year totaled ¥1,267.3 billion, a year-over-year decrease of 5.1 percent, while income before income taxes totaled ¥132.4 billion, a year-over-year decrease of 20.4 percent.

For inkjet printers, although unit sales in Japan increased compared with the same period of the previous year, unit sales decreased overall compared with the same period of the previous year, mainly due to the slowdown in emerging markets affected by the sluggish economy, according to Canon. As a result, sales for this business unit decreased by 13.9 percent to ¥189.2 billion year-over-year, while income before income taxes decreased by 57.8 percent year-over -year to ¥10.4 billion.

Forecast

Canon forecasts that sales of its office MFPs are expected to be slightly below level compared with the previous year, supported by  solid demand for its color models.

Demand for laser printers is expected to remain below that of the previous year due to prolonged economic slowdown. As for interchangeable-lens digital cameras, although demand for entry-class models is expected to continue to shrink, demand for mirror-less cameras is expected to grow steadily, particularly for advanced amateur models, including those equipped with full-frame sensors.

Canon’s projections indicate the overall inkjet-printer market is expected to continue to shrink.

As for the medical-equipment market, although capital expenditure for medical equipment is expected to be postponed in emerging markets due to sluggish economic conditions, demand is expected to continue growing in developed markets.

For semiconductor lithography equipment, the market is expected to improve as the price of memory products shows signs of bottoming out. For OLED panel manufacturing equipment, capital investment in small- and mid-size display panels is expected to recover.

As for network cameras, the market is expected to continue expanding due mainly to the increasing demand for enhanced security and replacement demand from users shifting from analogue to digital models.

Considering this, Canon lowered its forecast for net sales, operating profit, income before taxes, and net income.

It now projects full-year 2019 net sales of ¥3,625.0 billion, a year-over-year decrease of 8.3 percent; operating profit of ¥188.0 billion, a year-over-year decrease of 45.2 percent; income before income taxes of ¥216.0 billion, a year-over-year decrease of 40.5 percent; and net income attributable to Canon Inc. of ¥140.0 billion, a year-over-year decrease of 44.6 percent.

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