Canon Q416 and FY16 Had Sales and Profit Decline

2017 Projection Shows Healthy Increase is Sales and Operating Profit

Canon, Inc. announced its fourth quarter and full-year 2016 results on January 31, 2017 (see Figure 1, Figure 2, and Figure 3).

  • Canon consolidated Q4 sales of ¥ 965.2 billion (B) ($8.8B), down 7% year-to-year (YTY)
  • Office Business Unit Q4 sales of ¥ 485.9B ($4.4B), a decline of 9% YTY
  • Consolidated Operating Profit of ¥ 80.2B ($732M), a decline of 25.1 % YTY
  • Office Business Unit Q416 copier unit growth rate of (3)%, for printers a major turnaround of a 25% increase
  • Imaging System Business Unit Q416 inkjet unit growth rate of (3)% YTY
  • FY16 sales of ¥ 3,401B and operating profit of ¥ 229B, a decrease of 11% and 36% respectively



Our View

Based on a review of Canon, Inc. financial results, the company would prefer if 2016 really didn’t occur. Most results were unfavorable with declines pretty much across the board. This means that any improvement in 2017 will be seen as a much-needed boost to employee morale, Canon, Inc. and Japan. Part of Canon’s strategy is to slowly acquire other units and diversify as demand for its cameras, printers, and MFPs diminish amidst the spread of smartphones and paperless media. A case in point was its acquisition Toshiba Medical Systems Corporation, a medical equipment company. Another positive about having such a difficult year is the company is now focused more than ever on cost savings and watching expenses.

Canon recounted the economy for 2016. In the U.S. there were signs of economic recovery, Europe and Japan – weak due to consumer spending, emerging markets – limited growth. As such, Canon had a major drop in laser printer sales and consumables until Q4. Canon’s color A3 imageRUNNER ADVANCE C5500 series and its SOHO color A3 imageRUNNER C3300 series provided growth in an otherwise dismal Office Business Unit in 2016. Inkjet printers in Canon’s Imaging System Business Unit also saw a decline of 9% in sales and 3% in units for 2016, again mainly due to the shrinking market for consumer products. One area the company touted were the sales of models equipped with large-cap ink tanks which had healthy demand in emerging countries.

Since Canon has projected the yen will weaken against the dollar, the company has shown some resilience in its sales and operating profit for 2017 (see Figure 4).

Figure 4: Canon Summary of Projected Results (Billions of Yen)

 FY17 ProjectionsFY16 ActualDelta
Net Sales4,000.03,401.517.6%
Gross Profit1,903.01,673.813.7%
Operating Profit255.0228.911.4%
Yen - 1 USD110.0108.58

Canon’s outlook is surprisingly positive. The U.S. economy is expected to grow, the European economy shows concerns with Brexit, emerging economies indicates signs of recovery for Russia and Brazil, and a continued slowdown is expected for China. Bottom line, it is expected the U.S. to be the driving force of the global economy in 2017.

This can be translated into the expectations that color MFD models will make up for the contraction of monochrome models, demand for laser printers should remain at the same level as 2016, but demand for color models and laser MFPs models is expected to increase. Inkjet printer demand is expected to decline – mainly for consumer models and not business models.

Canon foresees an increase for commercial printers with demand expected for short-run and in-house printing jobs to continue. Canon expects to expand light production and high-speed printing equipment sales in 2017.

Canon will concentrate on cost savings of approximately ¥ 30B and “will keep tight control over expenses,” something that Canon has needed to do for the past few years. Times are changing for Canon and the expectation is that the company will react faster so it can avoid another difficult year like 2016.

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