Slide 1: Third Quarter 2020 Results
Canon Canon Inc. Third Quarter 2020 Results October 26, 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
Slide 2: Agenda
Canon Agenda B 3Q 2020 Results P2-4 @ FY 2020 Projection P5-8 —™ Details by Business P9- 16 (3Q 2020 Results & FY 2020 Projection) @ Financial Situation P17-18 @ Sustainability Measures P19 @ Supplementary Information P20 - 24
Slide 3: 3Q 2020 Results overview
As we entered the third quarter, many countries lifted lockdowns and other restrictions on people’s movement, and large-scale economic stimulus measures were implemented to prop up markets. As a result, we saw, among others, a reduction in unemployment and a rise in consumer spending in the United S
Slide 4: 3Q 2020 results by business
As for Office, although sales and profit declined, we did return to profitability as we started to see a resumption of business negotiations and equipment installation, as well as a recovery in print volume from June thanks to the restart of business activity. As for cameras, we saw a faster-than-ex
Slide 5: Operating profit change factors
As for changes in foreign exchange rates, although the yen appreciated against the U.S. dollar, the overall impact was positive thanks to the yen’s depreciation against the euro. As for sales volumes, changes resulted in lower sales in all business units, particularly in Office. However, except for
Slide 6: FY 2020 projection assumptions
As for fourth-quarter foreign exchange rate assumptions, taking into account current conditions, we maintained our outlook of 105 yen to the U.S. dollar and revised our projection for the euro to 125 yen, a depreciation of 7 yen. Although there are regions where we are seeing a resurgence of COVID-1
Slide 7: Revised full-year projection
As our performance in the third quarter was better than our plan and taking into account the current trend of yen depreciation, we raised our full-year projection for net sales by 60.0 billion yen and operating profit by 19.0 billion yen. As a result, we now expect full-year net sales to decrease 12
Slide 8: FY 2020 projection by business
As for Office, although we expect sales to be basically in line with our previous projection, we lowered our projection for profit as the rebound in MFD service revenue is taking longer than expected. For both cameras and inkjet printers, as our performance in the third quarter was better than plann
Slide 9: FY 2020 operating profit change factors
As for changes in foreign exchange rates, we expect the impact to be positive as we assume appreciation of the euro. For changes in sales volumes, we expect the impact to also be positive as a swift recovery in Imaging System and Industry & Others is expected to offset the slower- than-expected reco
Slide 10: Office: market and MFD sales
As for the office equipment market this year, little progress is being seen in business negotiations and equipment installations as offices are closed in many regions. This and an increase in remote working is expected to cause a significant drop in consumable demand. However, as people slowly retur
Slide 11: Office: hardware and consumables
As for hardware in the third quarter, since offices were closed and more people were working from home compared to last year, demand for office printing decreased. As a result, we posted a decrease in revenue due to a decrease in unit sales of mid- to high-speed models, particularly in Europe and th
Slide 12: Office: commercial printing
The market is gradually recovering similar to office equipment. This reflects, mainly large printing companies with an eye on post-COVID starting to purchase equipment. In the third quarter, in addition to installing equipment for which we already had orders, we also resumed face-to-face business ac
Slide 13: Imaging System: cameras
As for camera demand, amid ongoing market contraction, we expect a significant drop in demand due to COVID-19 this year. However, in the third quarter, the camera market was stronger than expected thanks to a gradual increase in image capturing opportunities as people became more active. Taking this
Slide 14: Camera product strategy
In addition to shifting to high value-added interchangeable-lens cameras like the EOS R5, we will expand sales of other cameras based on new design concepts that actively incorporate the various ideas of our young employees. A recent example of this is the PowerShot Zoom, a hand held camera that com
Slide 15: Imaging System: inkjet printers
As for the inkjet printer market, we are seeing a recovery in printer demand thanks to robust demand in developed countries where remote working and online learning persist, and a gradual rebound in economic activity in emerging markets. Under this situation, we have been able to significantly grow
Slide 16: Medical System
Impacted by the spread of COVID-19, medical institutions have strived to balance prevention and medical treatment and are now starting to consider the purchase of medical equipment again. However, the virus has started to again spread in certain regions. In light of this, we feel it will take a litt
Slide 17: Industry & Others: lithography equipment
As for semiconductor lithography equipment, in light of growing demand for datacenters and computers, investment towards memory production is generally on a recovery trend. As for the third quarter, in response to strong equipment demand, we achieved unit sales that exceeded the previous year. As fo
Slide 18: OLED deposition and network cameras
As for OLED vacuum deposition equipment, despite current concerns over demand for smartphones, we expect demand for this equipment to increase even in the future, thanks to a steady increase in the number of smartphones using OLED screens. In the third quarter, sales were broadly in line with last y
Slide 19: Inventory
At the end of September, total inventory turnover in days was longer, reflecting the low level of sales over the past six months. However, in value terms, we show a general decrease, particularly in Imaging System. For cameras and inkjet printers, as the level of sales is exceeding our plan, we are
Slide 20: Cash flow and dividend
Compared with our previous projection, we expect an increase in net income. Thanks to this and measures such as reviewing our investment plan and improving working capital, we expect free cash flow to be a positive 102.0 billion yen. As for cash-on-hand at the end of the year, we expect to maintain
Slide 21: COVID-19 related measures
As more people continue to be infected by COVID-19, we are not only expeditiously providing medical equipment, but also using our technology in products that support medical institutions, and actively promoting new lifestyles. For example, our genetic testing system for COVID-19, which is based on t
Slide 22: Outlook and next five-year plan
Due to COVID-19, we are seeing a significant change in people’s life- and work- styles. Although it is difficult to accurately predict the future under such tough conditions, our performance is improving after bottoming out in the second quarter. Next year will be the first year of our sixth five-ye
Slide 23: Supplementary Information
Supplementary Information 20
Slide 24: FY 2020 Operating Profit Analysis
FY 2020 Operating Profit Analysis (FY 2020 Current Projection versus FY 2019 Actual) Canon Change in Net Sales, excluding ili f FX Details FX impact, for reference @illionsofyen) | Net sales: -26.7 Office: -298.0 Cost of Sales: +11.0 Imaging System: -114.1 Op. Expenses: +8.6 Medical System: -0.4 7 r
Slide 25: Net Sales Growth Rate of Hardware & Non-hardware
Net Sales Growth Rate of Hardware & Non-hardware Canon FY 2020 FY 2019 Full Year 3Q Full Year Actual Projection Actual Actual MFDs spy Hardware -18%| -21%| -4% -7% Non-hardware -21%| -20%| -6% -5% ic Hardware -18% -20%| +1% -4% Non-hardware -21%| -20%| -2% -2% LPs spy Hardware -16%| -22%| -2% -5% No
Slide 26: Color Ratio
Color Ratio Canon FY 2020 FY 2019 3Q.—s Full Year 3Q Full Year Actual Projection Actual Actual MFDs Net Sales 60%| 60% 59% 59% QTY 60% 59% 60% 59% LPs Net Sales 47% 51% 52% 52% QTY 19% 21% 23% 20% Sales Growth by Monochrome & Color MFDs FY 2020 FY 2019 3Q Full Year 3Q Full Year Actual Projection Act
Slide 27: Interchangeable Lens Digital Cameras and IC Stepper Units
Interchangeable Lens Di Canon FY 2019 Full Year 3Q Full Year Actual Projection Actual Actual Value Base 84% 85% Unit Base 60% 62% * Value Base Includes Interchangeable Lenses IC Stepper Unit Breakdown by Light Source (Units) FY 2020 FY 2019 ~~ Full Year 3Q Full Year Actual Actual KrF 8) 24 1 22 i-Li