Slide 1: Canon Inc. FY 2019 Results
Canon Canon Inc. FY 2019 Results January 29, 2020 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 assumptions
Slide 2: Agenda
Canon Agenda m@ FY 2019 Results P2-4 m FY 2020 Projection P5-8 ™ Details by Business P9- 16 (FY 2019 Results & FY 2020 Projection) @ Financial Situation P17-18 @ Sustainability Measures P19 m@ Supplementary Information P20 - 33
Slide 3: 2019 economic environment and Canon's sales and profit decline
In 2019, faced with uncertainty about U.S.-China trade friction and the Middle East situation, economic activity centered on manufacturing became stagnant. The IMF projected global growth to be 3.5% at the beginning of 2019, but lowered its outlook with each subsequent update. According to their lat
Slide 4: FY 2019 net sales, operating profit and net income
Compared with last year, net sales declined by 9.1% to 3,593.3 billion yen, operating profit declined by 49.1% to 174.7 billion yen, and net income declined by 50.5% to 125.1 billion yen. Compared with our previous projection, net sales, operating profit, and net income were below our plan because t
Slide 5: FY 2019 results by business unit
As for Office, sales and profit declined. While we posted solid sales of color MFDs that address the need to improve office work, sales of laser printer hardware and consumables declined due to the impact of economic slowdown in Europe and China. In Imaging System, sales and profit also declined. Wh
Slide 6: 2020 exchange rate assumptions and economic outlook
As for our 2020 foreign currency exchange rate assumptions, we assumed 108 yen to the U.S. dollar and 120 yen to the euro. According to the IMF’s recent outlook, in addition to currently waning U.S.-China trade friction and recent moves by the UK to avoid leaving the EU without agreement, a gradual
Slide 7: FY 2020 performance outlook
As for our performance outlook for 2020, we expect net sales to increase by 3.0% to 3,700.0 billion yen, operating profit to increase by 31.7% to 230.0 billion yen, and net income to increase by 27.9% to 160.0 billion yen. We expect sales of cameras, which face continued market contraction, and lase
Slide 8: FY 2020 outlook by business unit
As for Office, with regard to MFDs, we expect sales to be solid for new color models designed for emerging markets and production equipment that capture demand for in- house printing. For laser printers, we expect sales of consumables to stabilize thanks to the expansion of high-quality MIF, by whic
Slide 9: Change in operating profit expected for 2020
As for the change in operating profit compared with last year, we expect the yen to appreciate against both the U.S. dollar and euro, which will have negative impact on our sales and profit. As for changes in sales volume, in addition to lithography and OLED vacuum deposition equipment, where demand
Slide 10: MFD market and Canon's color models
We expect the MFD market to remain firm in 2020, supported by growing demand for advanced feature models that address the need to raise office efficiency, and by the ongoing shift to color models, particularly in emerging markets. In 2019, we grew unit sales of next-generation color models that feat
Slide 11: Laser printer market and consumables
From a medium-term perspective, we expect the laser printer market to continue down a path of gradual contraction. In 2019, however, the decline was more substantial than we expected due to economic slowdown in emerging markets, particularly China. Amid the decline in hardware sales, the more import
Slide 12: Commercial printing market
Despite the impact of economic slowdown in Europe and Asia, the commercial printing market continues to grow thanks to demand to switch from analog to digital. We have been strengthening our lineup for graphic arts applications, including posters and catalogs, where growth is high. In 2019 as well,
Slide 13: Interchangeable-lens camera market
In 2019, the interchangeable-lens camera market shrank 15% to 8.8 million units, as sales of entry-level models, which are being impacted by smartphones, continued to contract. We were also impacted by this. In 2020, although we expect market contraction to continue at a similar rate and the market
Slide 14: Camera profitability and compact cameras
Additionally, we will improve profitability, conducting a comprehensive review of our business structure, including development, production, and sales. In production, amid shrinking volumes, we will work for efficiency, reviewing our manufacturing structure with the aim of optimization, taking into
Slide 15: Inkjet printer market
In 2019, the overall inkjet printer market shrank. This reflects not only market contraction in developed countries, but also economic slowdown in emerging markets, regions that have supported the market up to now. In 2020, we expect to see a moderation in market contraction, thanks to steady pickup
Slide 16: Medical market and diagnostic imaging 2019
We expect the market to grow at a rate of around two to three percent over the medium term thanks to the need for advanced medical care and improvements being made to medical infrastructure in emerging markets. In 2019, however, the market was basically flat, due to the economic situation of some em
Slide 17: Medical System 2020 sales plans
In 2020, in addition to the full contribution to sales of high-end CT and MRI systems that were launched in the second half of last year, we expect sales to grow significantly through measures focused on strengthening our sales capability, particularly in overseas markets. Particularly in the United
Slide 18: Semiconductor lithography equipment
In 2019, our full-year unit sales of semiconductor lithography equipment were below those of last year due to the impact of weak market conditions for memory. Currently, however, memory investment is recovering as prices have stopped falling thanks to a better balance between supply and demand. Addi
Slide 19: OLED vacuum deposition equipment
As for OLED vacuum deposition equipment, in 2019, investment towards smartphone panels was in a phase of adjustment. As a result, our net sales of OLED vacuum deposition equipment was down for the full year. In 2020, we expect the use of OLED panels to expand into lower priced smartphones. We also e
Slide 20: Network camera market
The network camera market continues to expand mainly driven by surveillance applications due to the increasing need to respond to people’s safety and security. Over the medium- term as well, we expect high growth to continue thanks to technological advancement, which has made possible advanced image
Slide 21: Inventory management
To be thorough in cash flow management, keeping inventory at an appropriate level is essential. At the end of December, inventory was lower than it was at the end of September in both value and turnover in days. When compared with the end of December 2018, however, although the value was lower, turn
Slide 22: Cash-on-hand and liquidity
At the end of 2019, cash-on-hand was 412.8 billion yen or 1.4 months of net sales, which represents a level that provides sufficient liquidity. In 2020, in addition to expanding profit, we will work to improve the efficiency of working capital use, in areas such as inventory to improve operating cas
Slide 23: Low-carbon society and CO2 emissions improvement
With the aim of realizing a low-carbon society, we established lifecycle CO2 emissions improvement index per product as a key measure of our success in the environment field, and are promoting activities that target an average yearly improvement of 3%. Last year as well, we achieved our target, real
Slide 24: Supplementary Information
Supplementary Information 20
Slide 25: FY 2019 Operating Profit Analysis (vs FY 2018)
FY 2019 Operating Profit Analysis Canon (FY 2019 Actual versus FY 2018 Actual) Change in Net Sales, excluding FX impact, for reference ae Office: -52.4 (Billions of yen) Imaging System: -107.6 Medical System: +10.3 Industry & Others: -81.8 Total: -231.5 —————— 7 -39.0 — +23.6 “134.2 +17.7 | —_——_ FX
Slide 26: FY 2019 Operating Profit Analysis (vs previous projection)
FY 2019 Operating Profit Analysis Canon (FY 2019 Actual versus FY 2019 Previous Projection) _ Change in Net Sales, excluding (Billions of yen) FX impact, for reference Office: -6.8 FX Details Imaging System: -21.3 Net Sales: +21.6 Medical System: -15.7 Cost of Sales: -6.0 Industry & Others: 10.1 Op.
Slide 27: Dividend
Dividend (Yen) 200 150 100 50 Regular Dividend m= Commemorative Dividend ~o= Dividend Payout Ratio 160 150 80 150 160 FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 Plan 23
Slide 28: Change in New Businesses Sales Composition Ratio
Change in New Businesses Sales Composition Ratio @ New Businesses Exsiting Businesses 100% 80% 60% 40% 20% 24% 25% 28% 0% FY 2018 FY 2019 FY 2020 Actual Actual Projection Canon 24)
Slide 29: Net Sales Growth Rate of Hardware & Non-hardware
Net Sales Growth Rate of Hardware & Non-hardware Canon FY 2019 FY 2018 4Q Full Y 4Q Full Year Actual Actual Actual Actual MFDs spy Hardware +5%| -10%! -7%| -1% -1% Non-hardware 0% -5% -5% -6% -1% Lc Hardware +6%| -6% -4% 0% -2% Non-hardware +1% -2% -2% -5% -2% LPs spy Hardware -9%) -13%| -5% +4% +1%
Slide 30: Color Ratio (MFDs & LPs)
Color Ratio (MFDs & LPs) Canon FY 0 FY 2019 FY 2018 Full Y Full Year 4Q Full Year Projection Actual Actual Actual Net Sales 60% 59% Units 58% 58% LPs Net Sales 51% 51% 52% 51% 51% Units 21% 21%! 20%! 19% 18% Sales Growth by Monochrome & Color MFDs FY 2020 FY 2019 FY 2018 4Q Full Year 4Q Full Year Ac
Slide 31: Interchangeable Lens Camera Ratio and Lithography Units
Canon Interchangeable Lens Digital Camera Ratio FY FY 2018 Full Y: Full Year 4Q Full Year ‘ojection Actual Actual Actual Actual Net Sales 85% 85% Units 60% 61% * Net Sales Includes Interchangeable Lenses IC Lithography Equipment Unit Breakdown by Light Source (Units) FY 2018 Full Year 4Q Full Year A
Slide 32: 4Q 2019
4Q 2019
Slide 33: FY 2019 Financial Results (4Q 2019)
FY 2019 Financial Results (4Q 2019) Canon ane 4Q 2019 4Q 2018 ° (Billions of yen) Actual Actual % Change Net Sales 953.5 1,058.3 -9.9% Gross Profit 423.4 489.3 -13.5% (% of Net Sales) 44.4% 46.2% Op. Expenses 370.7 389.7 Op. Profit 52.7 99.6 -47.1% (% of Net Sales) 5.5% 9.4% IBT 51.5 100.0 -48.5% Ne
Slide 34: FY 2019 Financial Results by Business Unit (4Q 2019)
FY 2019 Financial Results by Business Unit Canon (4Q 2019) 4Q 2018 (Billions of yen) Aciual % Change Office Net Sales 435.3 471.6 -7.7% Op. Profit 40.6 60.7 -33.1% Imaging Net Sales 237.2 287.2 -174% System Op. Profit 20.7 42.5 -51.3% Medical Net Sales 110.0 118.2 -6.9% System Op. Profit 7.6 8.8 -13
Slide 35: FY 2019 Operating Profit Analysis (4Q)
FY 2019 Operating Profit Analysis Canon (4Q 2019 Actual versus 4Q 2018 Actual) FX Details Net Sales: -33.3 ae Cost of Sales: +8.4 Change in Net Sales, excluding (Billions of yen) Op. Expenses: +11.0 FX impact, for reference Office: -17.9 Imaging System: -34.9 Medical System: -4.3 — Industry & Others
Slide 36: Office / Imaging System (4Q 2019)
Office / Imaging System (4Q 2019) Canon Office (Billions of yen) 4Q Net Sales Growth Rate Y/Y Unit Growth Rate Y/Y 218 % (Local Currency) Actual Change 4Q 2019 4Q 2019 4Q 2019 - newt MOS | petal MFDs 167.8) 1813 -7.5%| LPs 156.2) 1773 -11,9% MFDs -38% | Monochrome +1% | Monochrome -16% Others 111.3)
Slide 37: Medical System / Industry & Others (4Q 2019)
Medical System / Industry & Others Canon (4Q 2019) Medical System @illions of yen) 4Q Net Sales Growth Rate Y/Y 2018 °% (Local Currency) Actual | Change 42.2019 Actual Net Sales 110.0] 118.2 69% cua Op. Profit 76 a8] -135%| Total | -36% (% of Net Sales) 6.9% 7.5%] Industry & Others (Billions of yen)