Slide 1: Third Quarter 2008 Results
Canon Inc. Third Quarter 2008 Results October 27, 2008 Masahiro Osawa 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 uncertainties a
Slide 2: Agenda
Agenda FY 2008 Current Projection P3 3Q 2008 Actual P4-6 4Q&2H Current Projection P7-12 Details by Business P13-24 Cash-on-hand & Return to P25 Shareholders Supplementary Information P26-33 Oct. 27, 2008 Canon Inc. 2
Slide 3: Summary of Projected Results: FY 2008 Current Projection
Summary of Projected Results FY 2008 Current Projection (Billions of yen) FY 2008 FY 2008 FY 2007 Pct. change Current Previous Previous Actual Actual projection projection projection Net sales 4,250.0 4,590.0 4,481.3 -7.4% -5.2% Gross profit 2,035.0 2,261.1 2,247.0 -10.0% -9.4% [% sales] 47.9% 49.3%
Slide 4: 3Q 2008 in Summary
3Q 2008 in Summary Environment and special factors 9 Economic weakness that began in the U.S. spreads to Europe and other regions 9 Significant Y/Y appreciation of the yen against the U.S. dollar 9 Steep rise in raw material prices, pushes up cost Results 9 Decrease in net sales and profits, due to
Slide 5: Summary of Results
Summary of Results 3Q 2008 Actual (Billions of yen) 3Q 2008 3Q 2007 Pct. change Pct. change Actual Actual (excluding forex impact) Net sales 986.0 1,050.8 -6.2% -3.1% Gross profit 475.2 528.4 -10.1% [% sales] 48.2% 50.3% Op. profit 129.3 174.2 -25.8% -17.8% [% sales] 13.1% 16.6% Net income 83.0 105.
Slide 6: Transition in Sales and Op. Profit
Transition in Sales and Op. Profit 3Q 2008 Actual v. 3Q 2007 Actual (Billions of yen) Sales Op. Profit 3Q 2007 Actual 1,050.8 174.2 Foreign exchange impact Change in Exchange Rate -32.2 -14.0 •1USD: [net sales, cost of sales, expenses] 117.67 to 107.61 yen •1EURO: 161.82 to 161.29 yen Sales volume i
Slide 7: Assumptions
Assumptions 4Q 2008 Average 4Q08 FY08 FY07 Exchange Rate Yen-1USD 100.00 yen 104.07 yen 117.50 yen Yen-1EURO 135.00 yen 153.23 yen 161.41 yen Impact of Exchange Rate Movement (4Q impact given a one yen change) Net sales Operating profit USD 4.6 billion yen 2.6 billion yen EURO 2.2 billion ye
Slide 8: Key Points
Key Points 4Q 2008 Assumptions 9 Economic weakness spreading globally against a backdrop of financial crisis 9 Significant Y/Y appreciation of the yen 9 Raw material prices remain at a high level Projections 9 Decrease in net sales and profits, amid severe environment 9 Work to improve mobility and
Slide 9: Accelerated Launch of New Product
Accelerated Launch of New Product Core new products announced in Japan this year New Product EOS KISS X2 EOS KISS F EOS 50D EOS 5D MarkII Sales Ratio 70% 66% IXY DIGITAL PowerShot PowerShot ivis HF11 61% 61% 20 IS G10 SX1 IS 60% imagePRESS C6000 imagePRESS C1+ 50% FY06 FY07 2H08 PIXUS PIXUS Satera L
Slide 10: Summary of Projected Results
Summary of Projected Results 4Q 2008 Current Projection (Billions of yen) 4Q 2008 4Q 2007 Current Pct. change Pct. change (excluding forex impact) projection Actual Net sales 1,150.6 1,263.8 -9.0% +1.2% Gross profit 518.4 611.1 -15.2% [% sales] 45.1% 48.4% Op. profit 119.8 193.6 -38.1% -1.1% [% sale
Slide 11: Transition in Sales and Op. Profit
Transition in Sales and Op. Profit 4Q 2008 Current Projection v. 4Q 2007 Actual (Billions of yen) Sales Op. Profit 4Q 2007 Actual 1,263.8 193.6 Foreign exchange impact -128.8 -71.7 Change in Exchange Rate [net sales, cost of sales, expenses] •1USD: 113.19 to 100.00 yen Sales volume impact •1EURO: 16
Slide 12: Transition in Sales and Op. Profit
Transition in Sales and Op. Profit 2H 2008 Current Projection v. 2H 2008 Previous Projection (Billions of yen) Sales Op. Profit 2H 2008 Previous projection 2,476.6 439.0 (Jul. 24, 2008) Foreign exchange impact Change in Exchange Rate -70.0 -65.7 [net sales, cost of sales, expenses] •1USD: 105.00 to
Slide 13: Business Machines
Business Machines 3Q 2008 Actual Sales Operating Profit (Billions of yen) Growth rate y/y (Billions of yen) ( ) Local currency base 900 OP ratio 300 30% 22.2% 20.6% 600 200 20% -5.1%(-0.3%) 686 651 300 100 -12.0% 10% 152 134 0 0 0% 3Q07 3Q08 3Q07 3Q08 Oct. 27, 2008 Canon Inc. 13
Slide 14: Business Machines
Business Machines 4Q 2008 Current Projection Sales Operating Profit (Billions of yen) Growth rate y/y (Billions of yen) ( ) Local currency base 900 OP ratio 300 30% 600 20.2% 200 16.1% 20% -16.1%(-5.7%) 803 674 300 100 10% 162 -33.0% 109 0 0 0% 4Q07 4Q08 4Q07 4Q08 Current Current projection projecti
Slide 15: Office Imaging Products
Office Imaging Products 3Q 2008 Actual / 4Q 2008 Current Projection Growth rate y/y Sales (Unit base) Copying 3Q 4Q (Billions of yen) Growth rate y/y machines ( ) Local currency base 500 500 Color +2% +2% Others Color Mono- -9% -14% Monochrome chrome 400 400 -17.0%(-7.2%) Total -6% -11% -11.7%(-8.9%
Slide 16: Computer Peripherals
Computer Peripherals 3Q 2008 Actual / 4Q 2008 Current Projection Growth rate y/y (Unit base) Sales LBP 3Q 4Q (Billions of yen) Growth rate y/y Color +6% -37% ( ) Local currency base Mono- -1% -36% 500 Others 500 chrome IJP +1.3%(+8.0%) -15.3%(-4.1%) 421 Total 0% -36% LBP 400 361 400 356 356 Color ra
Slide 17: Cameras
Cameras 3Q 2008 Actual Sales Operating Profit (Billions of yen) Growth rate y/y (Billions of yen) ( ) Local currency base 500 OP ratio 120 30% 400 28.7% 300 80 18.1% 20% 200 -6.8%(-2.2%) 268 40 77 -41.3% 10% 250 100 45 0 0 0% 3Q07 3Q08 3Q07 3Q08 Oct. 27, 2008 Canon Inc. 17
Slide 18: Cameras
Cameras 4Q 2008 Current Projection Sales Operating Profit (Billions of yen) Growth rate y/y (Billions of yen) ( ) Local currency base 500 OP ratio 120 30% 25.5% 400 20.4% 300 80 20% -5.7%(+7.5%) 200 -24.7% 365 344 93 40 10% 70 100 0 0 0% 4Q07 4Q08 4Q07 4Q08 Current Current projection projection Oct.
Slide 19: Cameras
Cameras 3Q 2008 Actual / 4Q 2008 Current Projection Sales Growth rate y/y (Unit base) (Billions of yen) Growth rate y/y 3Q 4Q ( ) Local currency base 500 Video cameras 500 Digital +4% +18% cameras Digital cameras -5.7%(+7.5%) Interchangeable lenses 400 and others 400 365 344 D SLR ratio* -6.8%(-2.2%
Slide 20: High-performance DIGIC 4 Image Processor
High-performance “DIGIC 4” Image Processor Faster Processing Speeds Higher Image Quality Note: Product names are those used in the Japanese market Oct. 27, 2008 Canon Inc. 20
Slide 21: Optical and Other Products
Optical and Other Products 3Q 2008 Actual Sales Operating Profit (Billions of yen) Growth rate y/y (Billions of yen) ( ) Local currency base 150 OP ratio 20 10% 100 10 5% -12.2%(-10.6%) 50 97 2.4% 85 1.4% +47.0% 2 3 0 0 0% 3Q07 3Q08 3Q07 3Q08 *Excluding inter-segment sales *Calculation of operating
Slide 22: Optical and Other Products
Optical and Other Products 4Q 2008 Current Projection Sales Operating Profit (Billions of yen) Growth rate y/y (Billions of yen) ( ) Local currency base 150 OP ratio 5 5% 100 0.8% +39.0%(+44.6%) 2 133 0% -1.7% 50 96 -3 0 -5 -5% 4Q07 4Q08 4Q07 4Q08 Current Current projection projection *Excluding int
Slide 23: Optical and Other Products
Optical and Other Products 3Q 2008 Actual / 4Q 2008 Current Projection Sales Growth rate y/y (Billions of yen) ( ) Local currency base +39.0%(+44.6%) 150 Others 150 SPE 133 -12.2% (-10.6%) 97 IC Stepper Unit Breakdown 100 85 IC Stepper Unit Breakdown 100 96 by Light Source by Light Source +16.9%(+24
Slide 24: Operating Profit by Segment
Operating Profit by Segment FY 2008 Current Projection (Billions of yen) FY 2008 FY 2008 FY 2007 Pct. Change Current Previous Previous Actual Actual Projection Projection Projection Business 545.8 648.9 650.3 -15.9% -16.1% machines [% sales] 20.1% 22.1% 22.2% Cameras 227.9 297.1 307.4 -23.3% -25.9%
Slide 25: Cash on Hand and Return to Shareholders
Cash on Hand and Return to Shareholders Cash on Hand (Year-end) Dividend *Figures in parenthesis represent dividend per share expressed on a pre- 3-for-2 forward stock split basis (effective date July 1, 2006) Dividends per share 36.8% (Billions of yen) Payout ratio (Consolidated basis) 1,156 (Yen)
Slide 26: Supplementary Information
Supplementary Information Oct. 27, 2008 Canon Inc. 26
Slide 27: Gross Profit Variance Analysis
Gross Profit Variance Analysis 3Q 2008 Actual v. 3Q 2007 Actual (Billions of yen) 3Q08 3Q07 Change (Billions of yen) Gross Profit 475.2 528.4 -53.2 60 % sales 48.2% 50.3% -2.1 pt. 30 11.4 5.8 0 -1.7 -7.4 -30 -32.2 -29.1 -53.2 -60 Forex Sales Price Forex Cost Others impact volume change impact reduct
Slide 28: Operating Profit Variance Analysis
Operating Profit Variance Analysis 3Q 2008 Actual v. 3Q 2007 Actual (Billions of yen) 3Q08 3Q07 Change (Billions of yen) Op. Profit 129.3 174.2 -44.9 60 % sales 13.1% 16.6% -3.5 pt. 30 6.8 1.5 0 -30 -44.9 -53.2 -60 Total change in Change in Change in SG&A Total change in gross profit SG&A forex impa
Slide 29: Sales by Product
Sales by Product FY 2008 Current Projection (Billions of yen) Growth rate y/y ( ) Local currency base 5,000 -5.2%(+2.0%) 4,481 4,250 393 4,000 413 +5.1%(+8.4%) -2.5%(+5.9%) 1,153 1,123 3,000 107 92 -14.3%(-11.1%) -5.0%(+4.0%) Optical and Other Products 2,000 1,538 1,460 Cameras Business Information
Slide 30: Transition in Sales and Op. Profit
Transition in Sales and Op. Profit FY 2008 Current Projection v. FY 2007 Actual (Billions of yen) Sales Op. Profit FY 2007 Actual 4,481.3 756.7 Foreign exchange impact -278.3 -156.8 Change in Exchange Rate [net sales, cost of sales, expenses] •1USD: 117.50 to 104.07 yen Sales volume impact •1EURO: 1
Slide 31: Inventories 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 58 600 60 150 6% 49 47 45 44 400 40 100 4% 664 563 539 510 489 200 20 50 1.1% 0.8% 0.7% 2% 0.6% 0.4% 39 32 31 27 0 0 0 15 0% FYE04 FYE05 FYE06 FYE07 3QE08 FYE
Slide 32: Capital Expenditure Free Cash Flow
Capital Free Cash Flow Expenditure (Billions of yen) (Billions of yen) 1,000 Capex 1,000 Operating C/F Net income Free C/F Depreciation Investing C/F 800 750 407 488 234 175 600 375 205 455 500 384 839 400 695 660 606 485 461 250 429 432 410 401 384 380 360 342 200 262 226 0 0 FY05 FY06 FY07 FY08 FY
Slide 33: Financial Ratios
Financial Ratios * Common stock held by stockholders as of June 30, 2006, were split on a 3-for-2 basis. EPS (Basic) has been adjusted to retroactively reflect the forward stock split. (Yen) 1,000 16.8% 16.5% 20% 15.9% 16.0% 16.3% 800 12.7% 15% 10.1% 10.1% 10.6% 10.8% 600 9.0% 10% 377.59 8.5% 400 34