Canon Q4 and Fiscal Year Results

Canon has released its fourth quarter and Fiscal Year results as of 31 December 2022.

2022 in Review

Looking back at 2022, while the global economy resumed its economic activities in earnest, the pace of economic recovery slowed due to global inflation and tight monetary policies in order to control inflation in each country. In the United States, although affected by inflation and tightening monetary policy, the economic recovery continued due to robust increases in personal consumption and expansion of exports. In Europe, the economy slowed down due to a surge in energy prices resulting from the Ukraine crisis and continuous price hikes caused by inflation. In China, the recovery of personal consumption declined, and capital investment slowed due to restrictions implemented under its Zero-COVID strategy. In other emerging countries, the economy recovered moderately, mainly in India and Southeast Asia. In Japan, affected by the surge in the price of energy and inflation caused by the depreciation of the yen, the economy continued to recover moderately, mainly in terms of personal consumption.

Amid the unstable economic environment, in the markets in which Canon operates, despite a shortage of semiconductor chips and supply chain disruptions, demand improved moderately. Looking at performance by products, demand for office multifunction devices (MFDs) remained firm due to a recovery of in-office work. Meanwhile, demand for laser printers and inkjet printers slowed due to decreased demand from customers working from home. For cameras, demand remained solid, mainly for mirrorless cameras and lenses for professionals and enthusiasts. For medical equipment, demand in Japan declined this year due to a drop-off following the conclusion of government spending in 2021, although investments in the medical field recovered slowly, mainly for diagnostic imaging unit products outside Japan. For semiconductor lithography equipment, while the memory devices market declined, overall demand remained firm due to strong demand for power devices and sensors. For FPD (Flat Panel Display) lithography equipment, demand tended to decline due to decreased demand from customers working from home amid the COVID-19 pandemic, and demand for laptop computers decreased in response to the current economic slowdown.

The average value of the yen for the year was ¥131.66 against the U.S. dollar, a year-on-year depreciation of approximately ¥22, and ¥138.42 against the euro, a year-on-year depreciation of approximately ¥8.

In 2022, Canon ensured adequate supplies of products through sustained efforts such as switching to alternative components and seeking new vendors and taking swift action to secure transportation capacity while utilizing alternative transportation routes to deal with a shortage of components and logistics disruption. Net sales for the year increased by 14.7% year-on-year to ¥4,031.4 billion due to adjustment of product prices and depreciation of the yen. New business sales exceeded ¥1,000 billion, and net sales exceeded ¥4,000 billion for the first time in five years since 2017 as a result of the business portfolio transformation. Gross profit as a percentage of net sales decreased by 1.0 points to 45.3% due to the increase in the ratio of hardware caused by stabilisation of production supply, including printers, in addition to the increased costs of parts and logistics. However, gross profit increased by 12.3% year-on-year to ¥1,827.8 billion, mainly due to price adjustments of products and the depreciation of the yen. Although operating expenses increased by 9.5% year-on-year to

¥1,474.4 billion as a result of increased operating expenses denominated in foreign currencies due to the depreciation of the yen, as well as an increase in selling expenses accompanying growth in sales, the operating expense to sales ratio decreased by 1.8 points to 36.5% due to continued efficiency-focused cost control and improvements to management structure. As a result, operating profit increased by 25.4% year-on-year to ¥353.4 billion. Other income (deductions) decreased by ¥21.8 billion year-on-year to a loss of ¥1.0 billion, mainly due to the deterioration of valuation gains and losses on securities and currency exchange losses from liabilities incurred by group finance, denominated in foreign currencies caused by the depreciation of the yen. As a result, income before income taxes increased by 16.4% year-on-year to ¥352.4 billion, and net income attributable to Canon Inc. increased by 13.6% year-on-year to ¥244.0 billion.

Basic net income attributable to Canon Inc. shareholders per share was ¥236.71 for the year, a year-on-year increase of ¥31.36.

Results by Segment

Looking at Canon’s full year performance by business unit, in the Printing Business Unit, unit sales increased compared with the previous year due to the recovery of office MFDs production, thanks to supplies of semiconductor chips improving in the second half of the year. Sales of services and consumables increased moderately compared with the previous year due to a recovery of increase of in-office work. As for laser printers and inkjet printers, unit sales increased significantly compared with the previous year due to the recovery from stagnating production activities resulting from COVID-19 infections. However, consumables decreased compared with the previous year due to decreased demand from customers working from home. For equipment in the production printing market, sales increased compared with the previous year due to strong sales of the varioPRINT iX series of high-speed cut-sheet color inkjet presses, while revenue from services also increased. These factors resulted in total sales for the business unit of ¥2,261.9 billion, a year-on-year increase of 16.7%, while income before income taxes decreased by 3.1% year-on-year to ¥225.8 billion, due to the increase in costs of parts and logistics, despite price adjustment of products.

As for the Imaging Business Unit, unit sales of interchangeable-lens digital cameras were above those of the same period of the previous year due to continued robust demand for full-frame mirrorless cameras including the EOS R5 and EOS R6 as well as favorable reviews of the new EOS R7 and EOS R10 APS-C-size mirror- less cameras, despite stagnant production activities caused by a shortage of components. Unit sales of lenses increased owing to strong sales of RF-series interchangeable-lenses that expanded the product lineup. As for network cameras, sales increased significantly, mainly as a result of strengthening sales activities in response to diversifying market needs in addition to the recovery of product supply. As for professional video production equipment, sales of Cinema EOS-series cameras, including the new EOS R5 C, as well as professional video cameras and broadcast lenses, were strong. These factors resulted in total sales for the business unit of ¥803.5 billion, a year-on-year increase of 22.9%, while income before income taxes increased by 63.2% year-on-year to ¥128.0 billion mainly as a result of improved profitability due to an enhanced product mix