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Canon Reports Sharp Sales, Income Declines for First Quarter

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Canon Inc. of Tokyo, Japan, has reported results for its first quarter, the three months ending on March 31, 2020. Net sales decreased by 9.5 percent year-over-year to ¥782.3 billion, while operating profit decreased by 18.7 percent year-over-year to ¥32.9 billion. Net income decreased by 30.0 percent year-over-year to ¥21.9 billion. Basic net income attributable to Canon Inc. shareholders per share was ¥20.69 for the quarter, a year-over-year decrease of ¥8.31.

Gross profit as a  percentage of net sales rose by 0.6 points year-over-year to 45.8 percent. Operating expenses decreased by 6.9 percent year-over-year to ¥325.8 billion, thanks to improved productivity and the further promotion of selection and focus for expenses as well as effects of foreign-currency fluctuation. Other income (deductions) decreased by ¥4.1 billion, mainly due to valuation losses on securities
compared with the previous year, while income before income taxes decreased by 25.2 percent year-over-year to ¥34.5 billion.

Results by Business Group

Sales of office MFP/copiers were below those of first-quarter 2019, due to delays in business negotiations and equipment installations. The decline also reflected the impact of office closures due to the spread of COVID-19.

Conversely, in the  production-printing market, sales grew thanks to the imagePRESS C165, a new model that Canon says has been well-received by the market for its ability to provide high-speed and high-volume printing in a compact form factor.

As for laser printers, sales were below those of last year in the same period, despite being led by new products that feature not only low-energy consumption and compact form factors, but also high productivity. This also reflected a decline in sales of low-speed models in China due to the ongoing economic slowdown as well as the impact that COVID-19 had on production. Sales of consumables also declined, reflecting impact from the global economic slowdown.

These factors resulted in total sales for the Office Imaging business unit of ¥397.6 billion, a year-over-year decrease of 9.4 percent, while income before income taxes increased by 2.4 percent year-over-year to ¥47.3 billion thanks to cost reductions.

As for the Imaging System Business Unit, unit sales of interchangeable-lens digital cameras were below those of first-quarter 2019. Canon says this reflected contraction of the Japanese market after the consumption tax hike and the impact of COVID-19 on Canon’s supply chain and marketing activities in each country.

As for inkjet printers, sales in emerging markets were down year-over-year due to the impact of economic slowdown. In developed countries and China, however, sales grew due to expanding demand resulting from remote working and learning. As a result, overall sales were above those of last year in the same period. Consequently, sales for the business unit decreased by 13.9 percent year-over-year to ¥151.7 billion, while income before income taxes decreased by 81.6 percent year-on-year to ¥0.9 billion.

As for the Medical System Business Unit, although sales of Diagnostic X-ray systems and related components grew, there were fewer opportunities to hold business discussion with customers owing to the cancellation of academic conferences and trade shows due to COVID-19. Additionally, sales were hindered as, particularly in Europe and the U.S., entry restrictions were tightened from the beginning of March, delays in equipment installation at medical institutions were caused and sales & marketing activities were limited. Consequently, sales for this business unit decreased by 3.0 percent year-over-year to ¥106.1 billion, while income before income taxes decreased by 36.8 percent year-over-year to ¥4.1 billion.

As for the Industry & Others Business Unit, although capital investment towards memory devices remained in a phase of adjustment, capital investment towards IoT related image sensors remained solid. As a result, unit sales were above those recorded for first-quarter 2019.

As for FPD (Flat Panel Display) lithography equipment, manufacturers continued to hold back capital investment towards small- and medium-size panels due to sluggish demand for smartphones. At the same time, the installation of some FPD lithography equipment for large-size panels was postponed due to the impact of COVID-19. As a result, unit sales were below those of last year in the same period.

Sales of network cameras increased reflecting the growth of Axis and the contribution of relevant software, driven by the market’s continued expansion based on diversifying market needs and replacement demand. Consequently, sales for the business unit decreased by 9.8 percent year-over-year to ¥147.1 billion, while income before income taxes decreased by 28.4 percent year-over-year to ¥4.1 billion.

Forecast

Due to the COVID-19 pandemic and the resulting economic instability, Canon is declining to forecast financial results for the coming quarter and fiscal year.