Canon Inc. · TSE:7751
Canon — Q2 2020 Earnings Presentation
28 slides from Canon's earnings presentation, Jul 28, 2020
Slide 1: Canon Inc. Second Quarter 2020 Results
Canon Canon Inc. Second Quarter 2020 Results July 28, 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 as
Slide 2: Agenda
Canon Agenda @ 2Q 2020 Results P2-5 @ FY 2020 Projection P6-9 ™ Business Direction Post-COVID-19 P10 @ Details by Business P11-18 (2Q 2020 Results & FY 2020 Projection) @ Financial Situation P19-20 @ Sustainability Measures P21 @ Supplementary Information P22 -25
Slide 3: COVID-19 spread and its impact on the global economy
The COVID-19 infection that seriously started from March, rapidly spread to over 180 countries and regions around the world. The lockdown of cities, which lasted for about two months from the end of March to May, saw 41 of the 50 U.S. states issue some kind of stay-at-home or shelter-in- place order
Slide 4: Second quarter net sales and operating profit decline
In the second quarter, net sales declined 25.7% to 673.3 billion yen and operating profit and net income were a negative 17.8 billion yen and 8.8 billion yen, respectively. We saw unexpected events originating from COVID-19 occurring around the world, such as the closure of corporations and retail e
Slide 5: Second quarter results by business unit
As of the Office Business Unit, during the time cities were in lockdown, little progress was made in business negotiations and equipment installation, as many companies were closed. Furthermore, as fewer people were coming to the office, demand for printing also declined. As a result, net sales decl
Slide 6: Operating profit change factors: FX, gross profit, expenses
As for changes in foreign exchange rates, the overall impact was a negative 14.4 billion yen on net sales and a negative 5.4 billion yen on operating profit due to the yen’s appreciation against the U.S. dollar and euro. COVID-19 impacted all of our businesses. Gross profit declined 116.2 billion ye
Slide 7: Economic outlook and performance expectations for second half
As economies gradually reopen and thanks to large-scale fiscal-stimulus packages and bold monetary policies of each country, we assume that the future economy will rise from its current bottom. However, we expect the pace of economic recovery in the second half of this year to be constrained as we a
Slide 8: FY 2020 projection and exchange rate assumptions
In the second half of the year, our exchange rate assumptions are 105 yen to the U.S. dollar and 118 yen to the euro, which reflects an appreciation of the yen from current levels. We now expect net sales to decline 14.3% to 3 trillion 80.0 billion yen, operating profit to decline 74.2% to 45.0 bill
Slide 9: FY 2020 outlook by business
As for Office, although the style of work within corporations may not be the same as before, the number of people returning to the office is increasing. From this, we feel the worst is behind us and that we will see a return of business negotiations and print demand. However, we expect recovery in t
Slide 10: FY 2020 operating profit change factors
As for changes in foreign exchange rates, we project a negative impact of 19.3 billion yen on operating profit as we expect the yen to appreciate against the U.S. dollar, from 109.03 yen to 106.60 yen, and against the euro, from 122.03 to 118.72 yen. As for changes in sales volume, although we expec
Slide 11: Business direction post-COVID-19
As for office equipment, print volume in the office will decline as more and more people work from home. With the increase in sales of inkjet printers for remote working and learning, however, we have been able to reconfirm that paper is still essential. Going forward, we will support remote working
Slide 12: Office: market and MFD trends
At the beginning of the year, we expected the office equipment market to remain solid. We now assume significant contraction this year. For hardware, this reflects the closing of offices in many regions due to COVID-19 which limited progress in business negotiation and equipment installation. For co
Slide 13: Office: hardware and consumables outlook
Where we were expecting sales of low-speed models to be impacted by China’s economic slowdown from the beginning of the year, we also saw a significant decline in medium- to high-speed equipment demand, particularly in Europe and the U.S. due to office closures in each country. Our hardware sales in
Slide 14: Office: commercial printing business
In the second quarter, hardware sales declined significantly, showing the effects of stagnate printing equipment installation and limited sales & marketing activity as well as the cancelation or delay of large-scale exhibitions in the major markets of Europe and the U.S. Additionally, due to the can
Slide 15: Imaging System: cameras
As for the second quarter, due to restrictions placed on people’s movement, there were fewer image capturing opportunities, such as travel and other events. As a result, the willingness of consumers to purchase cameras dropped significantly, leading to a large decline in our sales as well. As for ca
Slide 16: Imaging System: new camera roles and demand
Triggered by COVID-19, cameras, which have traditionally been used for image capturing and image sharing, are taking on even more roles, including communication. For example, as the world of telecommunication expands to include remote meetings etc., the need for even higher precision and accuracy wi
Slide 17: Imaging System: inkjet printers
As for the market, although we expect the trend of gradual contraction to continue over the medium- to long-term, this year, we expect inkjet printer demand to be underpinned by the expansion of remote working and learning in developed countries and China. In the second quarter, amid continuing meas
Slide 18: Medical System
In addition to restrained sales & marketing activity and equipment installation due to COVID-19, we are seeing a general review of medical equipment purchasing plans as medical institutions focus human resources and funds on treating patients and preventing the spread of infection. In the second qua
Slide 19: Industry & Others: semiconductor lithography equipment
As for the semiconductor lithography equipment market, despite concerns that demand will shrink for such things as cars and smartphones due to macroeconomic deterioration caused by COVID-19, we expect unit sales to expand thanks to recovery in investment for memory chips used in datacenters, compute
Slide 20: Industry & Others: OLED vacuum deposition equipment
We expect demand for OLED vacuum deposition equipment to be higher than last year as the number of smartphones incorporating OLED panels that display highly vibrant colors increases, and the full-scale roll out of 5G, the next-generation of wireless network technology, stimulates replacement demand.
Slide 21: Inventory turnover
Inventory turnover in days was longer at the end of June due to lower sales. However, in value term, we were able to hold inventory down to around the same level as the end of March even though we faced a significant decline in sales in a short period of time. As for Imaging System, in cameras where
Slide 22: Cash flow and interim dividend
Canon continues to prioritize cash flow and take steps to comprehensively manage expenses and reduce capital expenditures as well as inventory. However, this year, due to the unprecedented economic downturn, we project a significant drop in free cash flow. In order to allow investment in new busines
Slide 23: COVID-19 sustainability measures
Canon Group companies are working to prevent the spread of infection and protecting the safety of employees based on the government policies of each country. At the same time, they are actively providing locally rooted support and services around the world. For example, in Japan, Canon joined the CO
Slide 24: Structural reform and sixth five-year plan
Although volatility in the global economy seems to be settling down, we remain in a highly unpredictable situation. We are seeing a big change in people’s lives and ways of working. We will be left behind if we merely follow the strategy we have used so far. As we embark on our sixth 5-year plan nex
Slide 25: Supplementary Information
Supplementary Information 22
Slide 26: Net Sales Growth Rate of Hardware & Non-hardware
Net Sales Growth Rate of Hardware & Non-hardware Canon FY 2020 FY 2019 Full Year 2Q Full Year Actual Projection Actual Actual MFDs spy Hardware -40%| -22%| -8% -7% Non-hardware -40%| -20%| -6% -5% ic Hardware -39% -20%| -6% -4% Non-hardware -39%| -18%| -4% -2% LPs spy Hardware -31%| -21%| -3% -5% No
Slide 27: Color Ratio (MFDs & LPs)
Color Ratio (MFDs & LPs) Canon FY 2019 Full Year 2Q Full Year Pro Actual Actual MEDs Net Sales 59% 60%| 59% 59% QTY 60%) 58%| 59% 59% LPs Net Sales 52% 52% 52% 52% QTY 23%) 21% 20% 20% Sales Growth by Monochrome & Color MFDs FY 2020 FY 2019 2Q Full Year 2Q Full Year Actual Projection Actual Actual s
Slide 28: Interchangeable Lens Digital Camera and IC Stepper Breakdown
Interchangeable Lens Di Canon FY 2019 2Q Full Year 2Q Full Year Actual Projection Actual Actual Value Base 85% 85% Unit Base 61% 62% * Value Base Includes Interchangeable Lenses IC Stepper Unit Breakdown by Light Source (Units) FY 2020 FY 2019 ~~ Full Year 2Q Full Year Actual Actual KrF 4 27 8 22 i-