Canon 2008 Annual Report Download - page 46

44
FINANCIAL OVERVIEW
GENERAL
The
f
ollowin
g
discussion and anal
y
sis provides in
f
ormation that
mana
g
ement
b
e
l
ieves to
b
e re
l
evant to un
d
erstan
d
in
g
Canon’s
consolidated fi nancial condition and results of o
p
erations.
References in this discussion to the “Company” are to Canon
Inc. and
,
unless otherwise indicated
,
re
f
erences to the
fi
nancial
condition or operatin
g
results o
f
“Canon” re
f
er to Canon Inc.
a
n
d
i
ts
co
n
sol
i
dated
subs
i
d
i
a
ri
es.
OVERVIEW
Canon is one o
f
the world’s leadin
g
manu
f
acturers o
f
cop
y
in
g
mac
h
ines,
l
aser
b
eam printers, in
kj
et printers, cameras, steppers
and aligners. Canon earns revenues primarily from the manufac
-
ture and sale of these products domestically and internationally.
Canon’s basic management policy is to contribute to the prosperity
and well-bein
g
o
f
the world while endeavorin
g
to become a trul
y
exce
ll
ent
gl
o
b
a
l
corporate
g
roup tar
g
etin
g
continue
d
g
rowt
h
an
d
d
eve
l
o
p
ment
.
Canon divides its businesses into three product groups:
business machines, cameras, and optical and other products.
T
h
e
b
usiness mac
h
ines pro
d
uct
g
roup
h
as t
h
ree su
b
-
g
roups:
offi ce imaging products, computer peripherals and business
information
p
roducts
.
E
conom
i
c env
i
ronment
Lookin
g
back at the
g
lobal econom
y
in 2008, while the effects
of the sub
p
rime loan crisis led to a slowdown that was felt in
major countries from the beginning of the year, stock markets
plun
g
ed and the real econom
y
in these countries rapidl
y
deterio
-
rated, especiall
y
toward the end o
f
the
y
ear, as a result o
f
increasing fi nancial uncertainty triggered by the failures of major
fi nancial institutions in the United States. Furthermore, growth
in Asia and other emerging economies slowed down sharply due
to a decline in exports, and the sense o
f
a severe recession o
f
g
lobal proportions has
g
raduall
y
spread. As for forei
g
n exchan
g
e
mar
k
ets, t
h
e uni
l
atera
l
yen
b
uying t
h
at
b
egan in ear
l
y autumn
drove up the value of the yen against all other foreign currencies.
M
ar
k
et environmen
t
As for the markets in which Canon o
p
erates amid these conditions,
within the digital camera segment, demand for digital single-lens
re
fl
ex (“SLR”) cameras continued to expand. While demand
f
or
compact di
g
ital cameras declined sharpl
y
toward the end o
f
the
y
ear and prices continued to fall, the market sta
g
ed health
y
growth for the year. As for the offi ce imaging products market,
sales o
f
color network digital multi
f
unction devices (“MFDs”)
showed robust
g
rowth amid the shi
f
t toward color models in each
re
g
ion, althou
g
h demand
f
or monochrome models remained low.
As for com
p
uter
p
eri
p
herals, in addition to a dro
p
in demand for
monochrome laser beam
p
rinters, sales of color-model
p
rinters,
which had enjoyed sustained healthy expansion, remained rela
-
tivel
y
unchan
g
ed
f
rom the previous
y
ear. With re
g
ard to ink
j
et
printers, althou
g
h demand continued to shift from sin
g
le-function
to multifunction models, demand overall for the segment declined.
Within the optical equipment segment, while the market for
ali
g
ners, used to produce liquid cr
y
stal displa
y
(“LCD”) panels,
rea
l
ize
d
a rapi
d
recover
y
t
h
an
k
s to an increase in capita
l
spen
d
in
g
by LCD panel manufacturers, demand for steppers, utilized in
the production of semiconductors, fell si
g
nifi cantl
y
. The avera
g
e
value of the yen during the year was ¥103.23 to the U.S. dollar,
a year-on-year appreciation of about 14%, and ¥151.46 to the
euro, a
y
ear-on-
y
ear appreciation o
f
approximatel
y
7%.
S
ummary of operations
Amid these conditions, Canon’s consolidated net sales for the
period was ¥4,094.2 billion (U.S.
$
44,991 million), a year-on-year
decline o
f
8.6%
,
due to the e
ff
ects o
f
the substantial rise in value
of the
y
en alon
g
with fallin
g
prices of such consumer products
as
d
igita
l
cameras an
d
in
k
jet printers, an
d
re
d
uce
d
sa
l
es vo
l
umes
due to decreased demand for network MFDs, laser beam printers,
and other o
ffi
ce equipment. Income be
f
ore income taxes and
minorit
y
interests totaled ¥481.1 billion (U.S.
$
5,287 million), a
decline of 37.4% from the year-ago period, while net income
decreased 36.7% to ¥309.1 billion
(
U.S.$3,397 million
).
Ke
y
per
f
ormance indicator
s
The followin
g
are the ke
y
performance indicators (“KPIs”) that
Canon uses in managing its
b
usiness. T
h
e year-on-year c
h
anges
in these KPIs are set
f
orth in the table shown on page 45
.
R
evenue
s
As Canon pursues to
b
ecome a tru
l
y exce
ll
ent g
l
o
b
a
l
company,
one indicator upon which Canon’s management places strong
emphasis is revenue. The
f
ollowing are some o
f
the KPIs related
to revenue that mana
g
ement considers to be important
.
Net sa
l
es is one suc
h
KPI. Canon
d
erives net sa
l
es primari
ly
from the sale of
p
roducts and, to a much less extent,
p
rovision
o
f
services associated with its products. Sales vary depending
on such
f
actors as product demand, the number and size o
f
transactions within the reportin
g
period, product reputation
f
or
new products, and changes in sales prices. Other factors involved
are market share and market environment. In addition, manage-
ment considers the evaluation o
f
net sales by product group to
be important
f
or the purpose o
f
assessin
g
Canon’s sales per
f
or
-
mance in various pro
d
uct
g
roups ta
k
in
g
into account recent
m
a
r
ket
t
r
e
n
ds.
Gross profi t ratio (ratio of gross profi t to net sales) is another
KPI
f
or Canon. Throu
g
h its re
f
orms in product development, Canon
h
as
b
een strivin
g
to s
h
orten pro
d
uct
d
eve
l
opment
l
ea
d
times in
order to launch new, competitively priced products at a faster
pace. Furthermore, Canon has achieved cost reductions through
enhancement o
f
e
ffi
ciency in its production. Canon believes that
these achievements have contributed to improvin
g
Canon’s
g
ross
profi t ratio, and will continue pursuin
g
the curtailment of product
d
eve
l
o
p
ment
l
ea
d
times an
d
re
d
uctions in
p
ro
d
uction costs
.
Operating profi t ratio (ratio of operating profi t to net sales)
and research and development (“R&D”) expense to net sales
ratio are considered to be KPIs b
y
Canon. Canon is
f
ocusin
g
on
two areas for im
p
rovement. Canon strives to control and reduce
its selling, general and administrative expenses as its fi rst key
point. Secondly, Canon’s R&D policy is designed to maintain a high
level o
f
spendin
g
in core technolo
gy
to sustain Canon’s leadin
g
p
osition in its current fi elds of business and to seek
p
ossibilities
in
othe
r m
a
r
kets
.
Ca
n
o
n
bel
i
e
v
es
such
inv
est
m
e
n
ts
wi
ll
c
r
eate
the basis for future success in its business and operations
.