Slide 1: Canon Inc. First Half 2006 Results
Canon Inc. First Half 2006 Results July 27, 2006 Toshizo Tanaka Senior Managing Director, Group Executive Finance and Accounting Headquarters This presentation contains forward-looking statements with respect to future results, performance and achievements that are subject to risk and uncertainties
Slide 2: Agenda
Agenda 2Q&1H 2006 Results P3-11 2H 2006 Projections P12-20 Supplementary Information P21-29 July 27, 2006 Canon Inc. 2
Slide 3: Summary of Results
Summary of Results 2Q&1H 2006 Actual (Billions of yen) 2006 2005 % Change Actual % sales Projection % sales Actual % sales Projection Actual Net sales 1,029.0 1,036.7 912.5 -0.7% +12.8% Gross profit 510.2 49.6% 506.5 48.9% 440.4 48.3% +0.7% +15.9% Op. profit 168.3 16.4% 149.9 14.5% 126.9 13.9% +12.3
Slide 4: Transition in Sales and Op. Profit
Transition in Sales and Op. Profit 2Q 2006 Actual v. 2Q 2006 Projection (Billions of yen) 2Q 2006 Sales Op. Profit Projection (April 27, 2006) 1,036.7 149.9 Change in Exchange Rate Foreign exchange impact 0.0 +1.7 •1USD: 117.00 to 114.44 yen [net sales, cost of sales, expenses] •1EURO: 138.00 to 143
Slide 5: Business Machines
Business Machines 2Q&1H 2006 Actual Sales Operating Profit (Billions of yen) Growth rate y/y (Billions of yen) ( ) Local currency base 1,500 OP ratio 300 30% 1,200 22.9% 21.7% 21.7% 21.0% 19.7% 900 200 20% +7.5%(+1.9%) +13.5% 1,287 295 600 1,197 259 +8.6%(+3.9%) 100 +20.0% 10% 300 603 674 655 142 14
Slide 6: Office Imaging Products
Office Imaging Products 2Q&1H 2006 Actual Sales (Billions of yen) Growth rate y/y Growth rate y/y ( ) Local currency base (Unit base) 500 Others 1,000 Copying machines Color 2Q 1H Monochrome 400 Color +0% +11% +2.1%(-1.9%) 750 +3.1%(-1.2%) Mono- 314 299 -3% -4% 293 568 585 chrome 300 +10.9%(+7.4%) T
Slide 7: Computer Peripherals
Computer Peripherals Growth rate y/y (Unit base) LBP 2Q 1H 2Q&1H 2006 Actual Color +41% +51% Mono- +8% +2% Sales chrome Growth rate y/y Total +12% +7% (Billions of yen) ( ) Local currency base Color ratio (LBP) 500 Others 1,000 2Q 1H IJP Value LBP +15.6%(+9.8%) 34% 34% 400 +11.9%(+4.9%) base* Unit 3
Slide 8: Cameras
Cameras 2Q&1H 2006 Actual Sales Operating Profit (Billions of yen) Growth rate y/y (Billions of yen) ( ) Local currency base 600 OP ratio 150 30% 24.1% 23.6% 400 18.5% 100 20% 17.4% 16.3% +21.4%(+14.9%) +75.8% +22.3%(+16.4%) 460 200 379 109 50 +70.1% 10% 252 268 219 65 62 46 38 0 0 0% 2Q05 2Q06 2Q06
Slide 9: Cameras
Cameras 2Q&1H 2006 Actual Sales Growth rate y/y (Unit base) (Billions of yen) Growth rate y/y ( ) Local currency base Digital 500 600 cameras 2Q 1H Video cameras +21.4%(+14.9%) Digital Digital cameras +29% +25% cameras Film cameras/Lenses 460 400 +4.4%(-1.4%) D SLR ratio* +22.3%(+16.4%) 379 400 2Q 1
Slide 10: Optical and Other Products
Optical and Other Products 2Q&1H 2006 Actual Sales Operating Profit (Billions of yen) Growth rate y/y (Billions of yen) ( ) Local currency base 300 OP ratio 45 12% 8.4% 200 7.9% 30 8% 6.6% 5.6% 5.7% +14.3%(+11.7%) 100 205 +10.2% 180 15 4% +17.3%(+15.4%) +3.7% 21 23 111 105 90 8 9 9 0 0 0% 2Q05 2Q06
Slide 11: Optical and Other Products
Optical and Other Products 2Q&1H 2006 Actual Sales (Billions of yen) Growth rate y/y (Billions of yen) ( ) Local currency base IC Stepper Unit Breakdown 150 Others IC Stepper Unit Breakdown 300 By Light Source SPE +17.3%(+15.4%) By Light Source +14.3%(+11.7%) i-line ArF 111 105 KrF 44% 205 2% 100 90
Slide 12: Assumptions
Assumptions 2H 2006 Average 2H06 FY06 FY05 Exchange Rate Yen-1USD 114.00 yen 114.76 yen 110.58 yen Yen-1EURO 143.00 yen 142.70 yen 137.04 yen Impact of Exchange Rate Movement (2H impact given a one yen change) Net sales Operating profit USD 7.6 billion yen 4.2 billion yen EURO 3.8 billion yen 2.8 bi
Slide 13: Summary of Projected Results
Summary of Projected Results FY 2006 Current Projection v. FY 2005 Actual (Billions of yen) 2006 2005 % Change Current projection Actual 1H 2H FY 1H 2H FY 1H 2H FY Actual Projection Projection Net sales 1,952.3 2,177.7 4,130.0 1,755.8 1,998.4 3,754.2 +11.2% +9.0% +10.0% Gross profit 978.7 1,070.3 2,
Slide 14: Transition in Sales and Op. Profit
Transition in Sales and Op. Profit 2H 2006 Current Projection v. 2H 2006 Previous Projection (Billions of yen) 2H 2006 Sales Op. Profit Previous projection (April 27, 2006) 2,180.0 366.0 Change in Exchange Rate Foreign exchange impact -8.5 -3.8 •1USD: 117.00 to 114.00 yen [net sales, cost of sales,
Slide 15: Office Imaging Products
Office Imaging Products 2H 2006 Current Projection Sales (Billions of yen) Growth rate y/y Growth rate y/y ( ) Local currency base (Unit base) 1,000 Copying machines Others Color +6.2%(+5.2%) 2H Monochrome Color +18% 750 Monochrome -5% 639 622 585 Total -2% +18.9%(+18.0%) 500 Color ratio +17.0%(+15.
Slide 16: 2H 2006 New Product Launch
2H 2006 New Product Launch • Third-generation iR Medium- to High-speed For Office-Use imageRUNNER C5180/N (Color 51/Mono 51 ppm) Controller • Enhanced security imageRUNNER C4580/F function (40/45 ppm) Models imageRUNNER C3880/F (36/38 ppm) imagePRESS C1 • High image-quality For Digital Commercial Pr
Slide 17: Computer Peripherals
Computer Peripherals 2H 2006 Current Projection Growth rate y/y (Unit base) LBP 2H Sales Color +45% (Billions of yen) Growth rate y/y Monochrome +23% ( ) Local currency base Total +26% 1,000 Others IJP +9.6%(+8.9%) Color ratio (LBP) LBP 2H 742 731 750 667 Value base* 34% Unit base 14% +13.8%(+12.5%)
Slide 18: Cameras
Cameras 2H 2006 Current Projection Sales (Billions of yen) Growth rate y/y Growth rate y/y ( ) Local currency base (Unit base) 750 Video cameras 2H Digital cameras +10.5%(+9.6%) Digital Film cameras/Lenses +13% cameras 536 552 500 +12.2%(+11.1%) 500 D SLR ratio* 2H Value base 38% Unit base 12% 250 +
Slide 19: Optical and Other Products
Optical and Other Products 2H 2006 Current Projection (2H) IC Stepper Unit Breakdown IC Stepper 300mm Ratio By Light Source (Units) ArF 2% Sales KrF 37% 61% i-line 75% (Billions of yen) Growth rate y/y ( ) Local currency base 300mm SPE (Unit sales) 300 2H05 2H06 2H06 Others +15.3%(+14.9%) Previous C
Slide 20: Operating Profit by Product
Operating Profit by Product FY 2006 Current Projection v. FY 2005 Actual (Billions of yen) 2006 Current Projection 2005 Actual % Change 1H 2H FY 1H 2H FY 1H 2H FY Actual Projection Projection Business machines 294.6 306.0 600.6 259.5 282.6 542.0 +13.5% +8.3% +10.8% % sales 22.9% 21.8% 22.3% 21.7% 21
Slide 21: Supplementary Information
Supplementary Information July 27, 2006 Canon Inc. 21
Slide 22: Summary of Projected Results
Summary of Projected Results 3Q 2006 Current Projection v. 3Q 2005 Actual (Billions of yen) 3Q06 3Q05 % Change Current Projection Actual Actual Net sales 995.0 878.5 +13.3% Gross profit 498.0 429.9 +15.9% [% sales] 50.1% 48.9% Op. profit 172.0 143.6 +19.8% [% sales] 17.3% 16.3% Net income 113.0 100.
Slide 23: Transition in Sales and Operating Profit
Transition in Sales and Operating Profit 2Q&1H 2006 Actual v. 2Q&1H 2005 Actual (Billions of yen) 2Q 1H Sales Op. Profit Sales Op. Profit 2005 Actual 912.5 126.9 1,755.8 270.2 Foreign exchange impact +33.8 +17.9 +76.6 +43.0 [net sales, cost of sales, expenses] Change in Exchange Rate (2Q) Sales volu
Slide 24: Gross Profit Variance Analysis
Gross Profit Variance Analysis 2Q 2006 Actual v. 2Q 2005 Actual (Billions of yen) 2Q06 2Q05 Change (Billions of yen) Gross Profit 510.2 440.4 +69.8 90 % sales 49.6% 48.3% +1.3 pt. 70 60 49 34 33 30 1 0 -8 -30 -39 -60 Forex Sales Price Forex Cost Others Total impact volume change impact reduction cha
Slide 25: Operating Profit Variance Analysis
Operating Profit Variance Analysis 2Q 2006 Actual v. 2Q 2005 Actual (Billions of yen) 2Q06 2Q05 Change (Billions of yen) Op. Profit 168.3 126.9 +41.4 90 % sales 16.4% 13.9% +2.5 pt. 70 60 41 30 0 -8 -30 -21 -60 Total change in Change in Change in SG&A Total change in gross profit SG&A forex impact o
Slide 26: Transition in Sales and Operating Profit
Transition in Sales and Operating Profit 2H&FY 2006 Current Projection v. 2H&FY 2005 Actual (Billions of yen) 2H FY Sales Op. Profit Sales Op. Profit 2005 Actual 1,998.4 312.9 3,754.2 583.0 Foreign exchange impact +15.0 +11.4 +91.6 +54.4 [net sales, cost of sales, expenses] Change in Exchange Rate (
Slide 27: Inventories Interest Bearing Debt
Inventories Interest Bearing Debt (Billions of yen) (Days) (Billions of yen) 800 Inventories 80 200 Debt 8% Turnover (Days) Debt/Total Assets 600 51 50 60 150 6% 49 49 47 5.0% 3.1% 400 40 100 4% 148 533 510 489 444 432 200 20 50 98 1.1% 2% 0.8% 0.7% 39 32 31 0 0 0 0% FY02 FY03 FY04 FY05 2Q06 FY02 FY
Slide 28: Free Cash Flow Capital Expenditure
Capital Free Cash Flow Expenditure (Billions of yen) (Billions of yen) 800 Capex 800 Operating C/F Net income Free C/F Depreciation Investing C/F 600 250 600 205 440 384 309 400 400 343 700 266 276 606 562 466 450 425 401 384 200 200 319 253 245 226 210 200 193 184 0 0 FY03 FY04 FY05 FY06 FY03 FY04
Slide 29: Financial Ratios
Financial Ratios * Common stock held by stockholders as of June 30, 2006, were split on a 3-for-2 basis. EPS (Basic) and dividend per share have been adjusted to retroactively reflect the forward stock split. (Yen) EPS (Basic) 800 20% Dividend per share 16.8% ROE 15.9% 16.0% 15.9% ROA 600 15% 12.5%