Canon Inc. · TSE:7751
Canon — Q3 2021 Earnings Presentation
27 slides from Canon's earnings presentation, Oct 26, 2021
Slide 1: Canon Inc. Third Quarter 2021 Results
Canon Canon Inc. Third Quarter 2021 Results October 26, 2021 Toshizo Tanaka Executive Vice President & CFO This presentation contains forward-looking statements with respect to future results, performance and achievements that are subject to risk and uncertainties and reflect management's views and
Slide 2: Agenda
Canon Agenda @ 3Q 2021 Results P2-4 m@ FY 2021 Projection P5-8 ™ Details by Business P9- 16 (3Q 2021 Results & FY 2021 Projection) @ Financial Situation P17-18 @ Sustainability Measures P19 m@ Excellent Global Corporation Plan Phase VI P20 @ Supplementary Information P21-25
Slide 3: 3Q 2021 Results overview
Looking at the state of global affairs in the third quarter, we see that the number of new COVID-19 cases was on the rise again due to global spread of the Delta variant. However, as more and more people become vaccinated and economic activity returned to normal in many countries, we did not see any
Slide 4: 3Q 2021 results by business
As for Printing, due to suspended production in Southeast Asia, our hardware sales were generally lower than expected. As for the demand for hardware, it continues to steadily recover as an increasing number of people gradually return to the office. As for print volume, which is basically recovering
Slide 5: 3Q 2021 operating profit factors
As for exchange rates, the overall impact was positive as the yen depreciated against both the U.S. dollar and euro. As for sales volume, although printing hardware revenue declined, service and consumable sales increased significantly, contributing to increased profit. As for cost reduction, costs
Slide 6: FY 2021 projection and assumptions
Our exchange rate assumptions for the fourth quarter are 112 yen to the U.S. dollar and 130 yen to the euro. Though the world economy continues to recover, the IMF, earlier this month, slightly lowered its economic outlook, which remained at a high level, to reflect prolonged confusion in the supply
Slide 7: FY 2021 projected net sales and profit
We now project net sales to increase 13.9% to 3.6 trillion yen, operating profit to be 272 billion yen, 2.5 times higher than last year, thanks to significant improvements in both our gross profit ratio and expense ratio, and net income to be 201 billion yen, 2.4 times higher than last year.
Slide 8: FY 2021 projection by business
As for Printing, though we slightly lowered our unit sales projection due to shortages in hardware supply, consumable and service revenue has generally trended in line with plan. Furthermore, by flexibly responding to pricing that reflect the supply and demand balance, we expect our performance to b
Slide 9: FY 2021 operating profit factors
As for changes in sales volume, the negative impact mainly reflects lower volumes of printing hardware and efforts to improve product mix under these conditions. We will also strive to limit price cutting based on the supply and demand balance. As for cost reduction, we expect costs to actually incr
Slide 10: Printing: Office MFDs
As for office MFDs, although some companies have delayed their plans to have workers actively back in the office, the market continued to recover as the number of employees returning to the office is increasing. In the third quarter, although there were regional differences, service revenue was basi
Slide 11: Printing: Prosumer products
The market for prosumer products used in offices, like office MFDs, remained on a path of gradual recovery. For prosumer products used in the home, however, demand remained high, particularly in developed countries. In the third quarter, our hardware sales of prosumer products decreased due to suppl
Slide 12: Printing: Production printing
The production market continues to gradually recover thanks in part to the restart of exhibitions and other events. The recovery, however, has been slightly weaker than we expected due to COVID-19 cases increasing again. Last year, we introduced the varioPRINT iX series of high-speed cut-sheet print
Slide 13: Imaging: Cameras
The camera market remained solid thanks to the strength of personal consumption, particularly in Europe and the United States, and the launch of new full-frame mirrorless cameras by each company that stimulated the need for high-quality image expression. However, due to the global shortage of parts,
Slide 14: Imaging: Network cameras
As for the network camera market, with the normalization of the economy, we are seeing a resumption of infrastructure investment, which is leading to an increase in new installations. Though we are seeing increasing orders from sales partners, due to supply shortages and longer than usual delivery t
Slide 15: Medical
As more people become vaccinated, medical institutions are increasing treatments unrelated to COVID-19 and expanding preventive health services. As they move closer to normal operation, we are seeing a steady return in demand for diagnostic imaging equipment, which is also expected to continue. As f
Slide 16: Industrial: Semiconductor and panel equipment
In 2021, we expect the semiconductor market to be at an all-time high, surpassing 500 billion U.S. dollars for the first time, thanks to expected growth in all semiconductor devices, in particular logic and memory used in IoT related equipment, such as PCs and smartphones. As for the third quarter,
Slide 17: Industrial: OLED deposition equipment
Amid the increasing number of products using OLED panels, demand for OLED vacuum deposition equipment used in the manufacturing of small- and medium-size panels, for which we hold an overwhelming share, remained solid. Currently, due to COVID-19 cases increasing again, the quarantine period after en
Slide 18: Inventory at end of September
As for inventory at the end of September, work-in-process increased as it took longer than usual to manufacture, due to difficulties surrounding parts procurement and COVID-19 infections. Additionally, as we entered the month of September, the utilization rates of factories based in Southeast Asia p
Slide 19: Cash flow projection
We expect to generate 440.0 billion yen in operating cash flow, 10.0 billion yen more than our previous projection. With regard to investment cash flow, we expect this to be 210.0 billion yen, reflecting not only normal capital expenditures, but also the use of funds to welcome Redlen Technology to
Slide 20: Sustainability measures
Under Canon’s corporate philosophy of Kyosei, we are promoting various activities that contribute to regions and cultures, with the aims of solving social issues and achieving Sustainable Development Goals (SDGs). For example, in response to the urgent issue of COVID-19, our testing system for COVID
Slide 21: Excellent Global Corporation Plan Phase VI
Due to COVID-19 and subsequent deterioration in the utilization rates of manufacturing sites as well as the impact of semiconductor and other parts shortages, this year’s performance recovery will be slightly more moderate. However, we are beginning to see the camera markets contraction bottom out a
Slide 22: Supplementary Information
Supplementary Information
Slide 23: FY 2021 Operating Profit Analysis
FY 2021 Operating Profit Analysis Canon (FY 2021 Current Projection versus FY 2020 Actual) (Billions of yen) FX Details +14.4 Net Sales: +100.6 +1717 — 3.9 Cost of Sales: -21.7 . Op. Expenses: -32.5 —- F -67.1 Change in Net Sales, excluding FX impact, for reference +46.4 Printing: +128.6 Imaging: +1
Slide 24: Printing - Net Sales Growth Rate Y/Y
Canon Printing - Net Sales Growth Rate Y/Y (Hardware & Non-hardware) FY 2020 Full Year 3Q Full Year Projection Actual Actual JPY Hardware -17% -21% Office MEDs Non-hardware -21% -20% ic Hardware -17% -20% Non-hardware -21% -20% yey Hardware -16% -21% LPs Non-hardware -38% -19% ic Hardware -17% -20%
Slide 25: Office MFDs - Net Sales Growth Rate Y/Y
Canon Office MFDs - Net Sales Growth Rate Y/Y (Monochrome & Color) FY 2021 FY 2020 Full Year 3Q Full Year Projection Actual Actual spy. Monochrome -21% -22% Color -18% -19% Monochrome -3% +5% -21% -22% id Color -8% +9% -19% -19% Office/Prosumer - Net Sales b io @illions of yen) FY 2021 FY 2020 10) F
Slide 26: Office MFDs/LPs - Color Ratio
Canon Office MFDs/LPs - Color Ratio FY 2021 FY 2020 10) Full Year 3Q Full Year Actual Projection Actual Actual Net Sales 58% 60%) 59% 59% Omics MEDS Units 53% 60%) 60% 59% LPs Net Sales 51% 51% 47% 51% Units 14% 18% 19% 21% Office MFDs/LPs - Unit Sales Growth Rate Y/Y (Monochrome & Color) FY 2021 FY
Slide 27: DILC Ratio & Digital Compact Camera Units
DILC Ratio & Digital Compact Camera (DCC) Units Canon FY 2021 FY 2020 3Q Full Year 3Q Full Year Actual Projection Actual Actual DILC Ratio Net Sales * 90% 90%| 88% 87% Units 70% 71%| 64% 65% [ DCC Units (Millions) 0.28) 1.20) 0.36 1.48 * Net Sales includes interchangeable lenses Semiconductor Lithog