Slide 1: Third Quarter 2006 Results
Canon Inc. Third Quarter 2006 Results October 26, 2006 Toshizo Tanaka Senior Managing Director, Group Executive Finance and Accounting Headquarters This presentation contains forward-looking statements with respect to future results, performance and achievements that are subject to risk and uncertai
Slide 2: Agenda
Agenda Third Quarter Results P3 – 4 Fourth Quarter Projection P5 – 7 Details by Product P8 – 17 Full Year Projection P18 – 20 Supplementary Information P21 – 28 Oct. 26, 2006 Canon Inc. 2
Slide 3: Summary of Results
Summary of Results 3Q 2006 Actual (Billios of yen) 3Q 2006 3Q 2006 3Q 2005 % change Actual Projection Actual Projection Actual Net sales 988.0 995.0 878.5 -0.7% +12.5% Gross profit 488.0 498.0 429.9 -2.0% +13.5% [% sales] 49.4% 50.1% 48.9% Op. profit 172.7 172.0 143.6 +0.4% +20.3% [% sales] 17.5% 17
Slide 4: Transition in Sales and Op. Profit
Transition in Sales and Op. Profit 3Q 2006 Actual v. 3Q 2006 Projection (Billions of yen) 3Q 2006 Sales Op. Profit Projection (July 27, 2006) 995.0 172.0 Change in Exchange Rate Foreign exchange impact +13.2 +10.7 •1USD: 114.00 to 116.29 yen [net sales, cost of sales, expenses] •1EURO: 143.00 to 148
Slide 5: Assumptions
Assumptions 4Q 2006 Average 4Q06 FY06 FY05 Exchange Rate Yen-1USD 115.00 yen 115.61 yen 110.58 yen Yen-1EURO 148.00 yen 145.35 yen 137.04 yen Impact of Exchange Rate Movement (4Q impact given a one yen change) Net sales Operating profit USD 4.2 billion yen 2.4 billion yen EURO 2.2 billion yen 1.7 bi
Slide 6: Summary of Projected Results
Summary of Projected Results 4Q 2006 Current Projection (Billios of yen) 4Q 2006 4Q 2006 4Q 2005 % change Current Previous Previous Actual Actual Projection Projection Projection Net sales 1,199.8 1,182.7 1,119.8 +1.4% +7.1% Gross profit 583.2 572.3 539.2 +1.9% +8.2% [% sales] 48.6% 48.4% 48.1% Op.
Slide 7: Transition in Sales and Op. Profit
Transition in Sales and Op. Profit 4Q 2006 Current Projection v. 4Q 2006 Previous Projection (Billions of yen) 4Q 2006 Sales Op. Profit Previous Projection (July 27, 2006) 1,182.7 179.5 Change in Exchange Rate Foreign exchange impact +16.2 +11.1 •1USD: 114.00 to 115.00 yen [net sales, cost of sales,
Slide 8: Business Machines
Business Machines 3Q 2006 Actual Sales Operating Profit (Billions of yen) Growth rate y/y (Billions of yen) ( ) Local currency base 900 OP ratio 300 30% 22.3% 22.1% 21.8% 600 200 20% +6.9%(+2.3%) 656 639 300 598 100 +5.1% 10% 132 146 139 0 0 0% 3Q05 3Q06 3Q06 3Q05 3Q06 3Q06 Projection Projection Oct
Slide 9: Business Machines
Business Machines 4Q 2006 Projection Sales Operating Profit (Billions of yen) Growth rate y/y (Billions of yen) ( ) Local currency base 900 OP ratio 300 30% 21.4% 21.2% 600 21.2% 200 20% +6.1%(+5.4%) 707 747 750 300 100 +6.1% 10% 150 160 159 0 0 0% 4Q05 4Q06 4Q06 4Q05 4Q06 4Q06 Previous Current Prev
Slide 10: Office Imaging Products
Office Imaging Products 3Q 2006 Actual / 4Q 2006 Projection Sales (Billions of yen) Growth rate y/y Growth rate y/y ( ) Local currency base (Unit base) 500 Others 500 Copying machines Color 3Q 4Q Monochrome +8.9%(+7.6%) 400 400 Color +3% +34% -1.9%(-5.8%) 333 338 Mono- 310 -6% -5% 288 chrome 300 275
Slide 11: Computer Peripherals
Computer Peripherals Growth rate y/y (Unit base) LBP 3Q 4Q 3Q 2006 Actual / 4Q 2006 Projection Color +50% +53% Mono- +22% +15% Sales chrome Growth rate y/y Total +26% +19% (Billions of yen) ( ) Local currency base Color ratio (LBP) 500 Others 500 +4.6%(+4.5%) 3Q 4Q IJP Value LBP +15.3%(+9.9%) 387 38
Slide 12: Cameras
Cameras 3Q 2006 Actual Sales Operating Profit (Billions of yen) Growth rate y/y (Billions of yen) ( ) Local currency base 300 OP ratio 28.7% 90 30% 26.1% 24.0% 200 60 20% +15.7%(+10.1%) +38.1% 227 235 100 203 67 30 59 10% 49 0 0 0% 3Q05 3Q06 3Q06 3Q05 3Q06 3Q06 Projection Projection Oct. 26, 2006 Ca
Slide 13: Cameras
Cameras 4Q 2006 Projection Sales Operating Profit (Billions of yen) Growth rate y/y (Billions of yen) ( ) Local currency base 500 OP ratio 90 30% 400 23.7% 21.3% 21.2% 300 60 20% +26.8% 200 +13.8%(+12.6%) 80 326 338 69 297 30 63 10% 100 0 0 0% 4Q05 4Q06 4Q06 4Q05 4Q06 4Q06 Previous Current Previous
Slide 14: Cameras
Cameras 3Q 2006 Actual / 4Q 2006 Projection Sales Growth rate y/y (Unit base) (Billions of yen) Growth rate y/y ( ) Local currency base Digital 400 400 +13.8%(+12.6%) cameras 3Q 4Q Video cameras Digital Digital cameras 338 +29% +15% 326 cameras Film cameras/Lenses 297 +10.0%(+8.4%) 300 +15.7%(+10.1%
Slide 15: Optical and Other Products
Optical and Other Products 3Q 2006 Actual Sales Operating Profit (Billions of yen) Growth rate y/y (Billions of yen) ( ) Local currency base 150 OP ratio 30 15% 100 9.3% 8.8% 20 10% 7.8% +46.9%(+44.3%) 112 113 50 +55.6% 10 5% 77 15 14 9 0 0 0% 3Q05 3Q06 3Q06 3Q05 3Q06 3Q06 Projection Projection *Exc
Slide 16: Optical and Other Products
Optical and Other Products 4Q 2006 Projection Sales Operating Profit (Billions of yen) Growth rate y/y (Billions of yen) ( ) Local currency base 150 OP ratio 20 10% 100 5.9% 6.3% 5.3% -3.5%(-3.9%) 10 5% 116 110 112 50 +15.1% 9 10 9 0 0 0% 4Q05 4Q06 4Q06 4Q05 4Q06 4Q06 Previous Current Previous Curre
Slide 17: Optical and Other Products
Optical and Other Products 3Q 2006 Actual / 4Q 2006 Projection Sales (Billions of yen) Growth rate y/y (Billions of yen) ( ) Local currency base IC Stepper Unit Breakdown 150 Others IC Stepper Unit Breakdown 150 -3.5%(-3.9%) By Light Source SPE +46.9% (+44.3%) By Light Source i-line 116 ArF 112 113
Slide 18: Summary of Projected Results
Summary of Projected Results FY 2006 Current Projection (Billios of yen) FY06 FY06 FY05 % change Current Previous Previous Actual Actual Projection Projection Projection Net sales 4,140.0 4,130.0 3,754.2 +0.2% +10.3% Gross profit 2,050.0 2,049.0 1,819.0 +0.0% +12.7% [% sales] 49.5% 49.6% 48.5% Op. p
Slide 19: Sales by Product
Sales by Product FY 2006 Current Projection (Billions of yen) Growth rate y/y ( ) Local currency base 5,000 +10.3%(+6.4%) 4,130 4,140 4,000 3,754 428 430 +15.5%(+13.6%) 373 +17.5%(+13.0%) 1,013 1,033 3,000 879 +2.2%(+0.4%) 105 107 104 +10.6%(+6.0%) Optical and Other Products 2,000 1,378 1,377 Camera
Slide 20: Operating Profit by Segment
Operating Profit by Segment FY 2006 Current Projection (Billios of yen) FY06 FY06 FY05 % change Current Previous Previous Actual Actual projection projection projection Business 593.0 600.6 542.0 -1.3% +9.4% machines [% sales] 22.2% 22.3% 21.7% Cameras 256.1 237.1 173.7 +8.0% +47.4% [% sales] 24.8%
Slide 21: Supplementary Information
Supplementary Information Oct. 26, 2006 Canon Inc. 21
Slide 22: Transition in Sales and Op. Profit
Transition in Sales and Op. Profit 3Q 2006 Actual v. 3Q 2005 Actual (Billions of yen) 3Q Sales Op. Profit 2005 actual 878.5 143.6 Change in Exchange Rate Foreign exchange impact +36.1 +20.9 •1USD: 111.23 to 116.29 yen [net sales, cost of sales, expenses] •1EURO: 135.73 to 148.19 yen Sales volume imp
Slide 23: Gross Profit Variance Analysis
Gross Profit Variance Analysis 3Q 2006 Actual v. 3Q 2005 Actual (Billions of yen) 3Q06 3Q05 Change (Billions of yen) Gross Profit 488.0 429.9 +58.1 90 % sales 49.4% 48.9% +0.5 pt. 58 60 36 35 29 30 9 0 -8 -30 -43 -60 Forex Sales Price Forex Cost Others Total impact volume change impact reduction cha
Slide 24: Operating Profit Variance Analysis
Operating Profit Variance Analysis 3Q 2006 Actual v. 3Q 2005 Actual (Billions of yen) 3Q06 3Q05 Change (Billions of yen) Op. Profit 172.7 143.6 +29.1 90 % sales 17.5% 16.3% +1.2 pt. 58 60 29 30 0 -8 -30 -21 -60 Total change in Change in Change in SG&A Total change in gross profit SG&A forex impact o
Slide 25: Transition in Sales and Op. Profit
Transition in Sales and Op. Profit FY 2006 Current Projection v. FY 2005 Actual (Billions of yen) FY Sales Op. Profit 2005 Actual 3,754.2 583.0 Change in Exchange Rate Foreign exchange impact +121.2 +72.1 •1USD: 110.58 to 115.61 yen [net sales, cost of sales, expenses] •1EURO: 137.04 to 145.35 yen S
Slide 26: Inventories and Interest Bearing Debt
Inventories Interest Bearing Debt (Billions of yen) (Days) (Billions of yen) 800 Inventories 80 200 Debt 8% Turnover (Days) Debt/Total Assets 600 53 60 150 6% 51 49 49 5.0% 47 3.1% 400 40 100 4% 581 148 510 489 444 432 200 20 50 98 1.1% 2% 0.8% 0.7% 39 32 29 0 0 0 0% FY02 FY03 FY04 FY05 3Q06 FY02 FY
Slide 27: Capital Expenditure and Free Cash Flow
Capital Free Cash Flow Expenditure (Billions of yen) (Billions of yen) 800 Capex 800 Operating C/F Net income Free C/F Depreciation Investing C/F 600 600 260 205 440 384 309 400 400 343 690 266 276 606 562 466 430 401 405 384 200 200 319 253 245 226 210 200 193 184 0 0 FY03 FY04 FY05 FY06 FY03 FY04
Slide 28: Financial Ratios
Financial Ratios * Common stock held by stockholders as of June 30, 2006, were split on a 3-for-2 basis. EPS (Basic) and dividend per share have been adjusted to retroactively reflect the forward stock split. (Yen) EPS (Basic) 800 20% Dividend per share 16.8% ROE 15.9% 16.0% 15.8% ROA 600 15% 12.5%