Canon Inc. · TSE:7751
Canon — Q2 2019 Earnings Presentation
30 slides from Canon's earnings presentation, Jul 24, 2019
Slide 1: Second Quarter 2019 Results
Canon Canon Inc. Second Quarter 2019 Results July 24, 2019 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 2019 Results P2-4 @ FY 2019 Projection P5-9 ™ Details by Business P10-16 (2Q 2019 Results & FY 2019 Projection) @ Financial Situation P17-18 ™ Canon’s Sustainability Activities P19- 20 @ Supplementary Information P21- 24
Slide 3: Q2 2019 results overview and business environment
We still do not see any signs of improvement in the business environment that surrounds us. In fact, since our last earnings announcement, the situation surrounding U.S.-China trade friction has become more and more chaotic and economic slowdown in China and Europe has worsened. Furthermore, in the
Slide 4: Q2 results by business unit: Office and Imaging
For Office MFDs, in addition to continuing strong sales of next-generation color models, we grew unit sales of high-speed models that are expected to yield even more print volume. For laser printers, however, sales declined, reflecting the impact of actions taken by our OEM partner to adjust the lev
Slide 5: Operating profit change factors versus last year
Changes in exchange rates had a negative impact on both sales and profit, mainly due to the impact of euro depreciation. As for changes in sales volumes, although we increased sales of new businesses such as medical, thanks to new products, and network cameras, by steadily capturing strong demand, t
Slide 6: FY 2019 projection and exchange rate assumptions
The global economy continued to grow at a modest pace, driven by the U.S. economy, which has been buoyed by favorable employment conditions and consumer spending. As for the future direction of the global economy, however, this has become increasingly unclear given the existence of many downside fac
Slide 7: Transforming business portfolio and cost reduction
That said, even in such a challenging business environment, we are making steady progress in transforming our business portfolio, expecting new business net sales to exceed those of last year, thanks to such factors as strong growth in our medical and network camera businesses. Additionally, in the
Slide 8: FY 2019 full-year projection versus last year
Compared with last year, we expect net sales to decline by 206.9 billion yen or 5.2%, operating profit to decline by 128.0 billion yen or 37.3%, and net income to decline by 92.8 billion yen or 36.7%. We expect the yen to be stronger this year compared with last year. The negative impact of this is
Slide 9: FY 2019 projection by business unit
As for Office, on a full-year basis, we expect sales and profit decline. This reflects the impact of actions taken by our OEM partner to adjust the level of inventory of laser printer consumables in the first half of the year. As we do not expect this to be a factor in the second half of the year an
Slide 10: FY 2019 operating profit change factors
As for changes in exchange rates, we expect significant negative impact from the yen’s appreciation against the U.S. dollar and euro, projected to be approximately three and eight yen, respectively. As for changes in sales volumes, despite expectations that new businesses such as medical and network
Slide 11: Changes from previous projection
Changes in exchange rates are projected to have a negative impact on both sales and profit. This reflects our results in the second quarter and our revised projection of euro depreciation in the second half of the year. As for changes in sales volumes, we lowered our projection for all business unit
Slide 12: Office: MFDs
We expect the market to remain solid, supported by demand for models that offer advanced features and high-speed from offices looking to improve productivity and by the growing demand for color equipment, particularly in emerging markets. In the second quarter, we grew unit sales of color models, pa
Slide 13: Office: laser printers and consumables
First, consumables. In the second quarter, sales decreased due to the impact of efforts to adjust inventory levels by our OEM partner, which was also the case in the first quarter. This is largely due to a gradual increase in the use of non-genuine consumables in Europe. In the second half of the ye
Slide 14: Office: commercial printing
We have been focused on launching new products in the rapidly growing spheres of graphic arts and package printing. In the second quarter, we significantly expanded the ability of our ProStream 1000 – a continuous feed press that offers industry-leading high resolution and print speed – to handle th
Slide 15: Imaging System: interchangeable-lens cameras
Looking at interchangeable-lens cameras, in addition to market contraction centered on entry-class DSLRs, in 2018 we launched three new products that led to a high level of sales in the second quarter of last year. As a result, unit sales for the second quarter this year were down 22% to 1.08 millio
Slide 16: Mirrorless camera lineup and sales initiatives
Specifically, we will enhance our lineup launching 5 new lenses for mirrorless cameras. Through kit sales that leverage our broad range of mirrorless camera lenses and by bundling cameras with accessories like our lens adapter that makes it possible to use our existing rich lens lineup we will promo
Slide 17: Imaging System: inkjet printers
The trend of market contraction continued. This reflects, among others, decreasing demand for home printing, particularly in developed countries, and the impact of economic slowdown in China and Europe. Our sales were also down due to the market’s impact. Despite overall market contraction, the refi
Slide 18: Medical System
This market continues to expand thanks to such factors as increasing replacement demand for equipment in the United States and improvements in healthcare infrastructure in emerging markets. In the second quarter, we posted double-digit sales growth, as the range of new products that we have launched
Slide 19: Medical: profitability improvement
As for profitability, up until now, profit improvement was achieved by leveraging the knowhow that we have cultivated. From a manufacturing perspective, we started by raising the level of cleanliness of cleanrooms. From a product development perspective, we raised efficiency, making use of 3D simula
Slide 20: Industry: lithography equipment
In the second quarter, unit sales of semiconductor lithography equipment declined due to worsening conditions of the memory market. Additionally, we are seeing customer investment towards memory being pushed out into next year and beyond, due in part to U.S.-China trade friction. As a result of thes
Slide 21: Industry: OLED vacuum deposition equipment
Demand for OLED vacuum deposition equipment is being impacted by restrained customer investment. As a result, net sales decreased in the second quarter and is expected to decrease for the full year. Although panel manufacturer investment remains in a phase of adjustment, the trend of incorporating O
Slide 22: Network cameras
As for the network camera market, along with expanding demand, we are seeing diversification in the way network cameras are being used. As a result, having a wide variety of not only cameras, but also video management software and video analytic applications is becoming a must. For example, in the a
Slide 23: Inventory turnover
Inventory turnover at the end of June was 65 days, 9 days longer than it was at the end of the same month last year. In Imaging System, the level of camera inventory was high due to a slowdown in sales. We will, however, work to lower this to an appropriate level by the end of the year, adjusting pr
Slide 24: Cash flow and financial situation
Compared with our previous projection, operating cash flow is projected to be lower as we lowered our outlook for net income. Despite this, through a review of our plan to repay debt, we will work to secure funds that will be used for future growth and maintain our previous projection for cash-on-ha
Slide 25: Environmental & CSR initiatives and SDGs
In order to continue to grow in the future, we realize that environmental & CSR initiatives are also important and we are promoting various activities in these areas. Today, I will discuss two of them, specifically the relationship between Canon’s environmental & CSR activities and Sustainable Devel
Slide 26: Integration of environmental & CSR activities into management
Next, in Canon, we have deeply rooted interlocking structure of environmental & CSR activities and management. One component of this is the Consolidated Performance Evaluation System, which covers each business, manufacturing company, as well as sales company. Evaluating an organization’s performanc
Slide 27: Supplementary Information
Supplementary Information 21
Slide 28: Net Sales Growth Rate of Hardware & Non-hardware
Net Sales Growth Rate of Hardware & Non-hardware Canon FY 2019 FY 2018 ) Full Year 2Q Full Year Actual Projection Actual Actual MFDs spy Hardware -8% -1% +4% -1% Non-hardware -6% -4% 0% -1% ic Hardware -6% +3%| +3%) -2% Non-hardware -4% -1% -2% -2% LPs ipy Hardware -3% -5%) -2% | +1% Non-hardware -2
Slide 29: Color Ratio (MFDs & LPs)
Color Ratio (MFDs & LPs) Canon FY 2019 FY 2018 Full Year 2Q Full Year Actual Projection Actual Actual MFDs Net Sales 59% 60% 59%! 59% QTY 59% 59%) 59% 58% LPs Net Sales 52% 52% 51%: 51% Qiy 20% 20% 16%) 18% Sales Growth by Monochrome & Color MFDs FY 2018 2Q Full Year 2Q | Full Year Actual Projection
Slide 30: Interchangeable Lens
Interchangeable Lens Canon FY 2018 Full Year 2Q Full Year Actual Projecti Actual Actual Value Base 87% 85% Unit Base 62% 61% * Value Base Includes Interchangeable Lenses IC Lithography Equipment Unit Breakdown by Light Source (Units) FY 2019 FY 2018 2Q Full Year 2Q | Full Year Actual Projection Actu