This is a summary of the second quarter fiscal 2008 earnings call conducted by Canon, Inc. (CAJ) on July 24, 2008.
Management:
Group Executive Finance & Accounting: Masahiro Osawa
Key Investor Issues:
- Canon posted a 107.84 billion yen ($1 billion) profit for the second quarter, down from 123.93 billion yen a year ago.
- For the first six months of the year, Canon''s net profit lost 15.9% to 214.49 billion yen ($2 billion).
- Quarterly sales totaled 1.106 trillion yen ($10.26 billion), down 1.9% from a year ago.
- Canon raised its full-year sales outlook to 4.59 trillion yen ($42.6 billion), up from an earlier forecast of 4.57 trillion yen.
Second Quarter Highlights:
In the second quarter, net sales and profits were lower than for the same period of last year. This was due to such external factors as lower than expected business confidence, particularly in developed countries, a greater impact from the Yen''s appreciation compared with the first quarter, and the steep increases in raw material and oil prices.
Despite these factors, however, Canon maintains a high overall profitability, as the company actively expands sales of new products and took aggressive measures to control costs. Despite the severe economic environment in local currency terms the company achieved higher overall net sales and profit growth than in the first quarter.
Second quarter net sales decreased 1.29%, but increased approximately 5% on a local currency basis.
The results sales of monochrome copying machines and IC steppers decreased due to the economic slowdown in developed countries and the weak semiconductor market respectively.
Second quarter operating profit and income decreased 11.7% and 13%, respectively.
This reflects such negative factors as price declined due to intensified competition amidst weak market conditions, escalating raw material and oil prices as well as Yen''s appreciation.
From a profitability perspective, Canon maintains a high gross profit ratio of just below 50%. This was accomplished through after measures to expand sales of high value added new products and printer consumables.
Changes in exchange rates had a positive impact on both net sales and operating profit.
There are four changes in sales volumes. Results for Office Imaging Products were below the company’s projection as weaker than expected worldwide business confidence led to a decline in office equipment, investment, by major customers in Japan, the U.S. and Europe.
Computer Peripherals results were basically in line with the company’s projections.
For Cameras, results were rightly below projections, due to a stronger than expected shift in demand towards low price products. For Optical and Other Products, result was rightly below projections for semiconductor production equipment due to a weak semiconductor market.
Others category net sales represent lower than projected price decline as the company attached greater importance on profitability of mainly business machines.
As for operating profit within the Others category, this represents significantly lower cost reduction due to steep rises in raw material and oil prices and lower production volumes offset by lower than projected price decline, and a continuation of higher than projected SG&A savings.
Second quarter net sales of Business Machines decreased 4.6% but increased approximately 2% on a local currency basis.
- The decrease in sales of monochrome copying machines, namely in Europe and North America were offset by increased sales of printers.
- Second quarter operating profit decreased 3%, reflecting the reduction in sales of monochrome copying machines, the Yen''s appreciation and escalating raw material and oil prices.
