Canon 2008 Annual Report Download - page 50

48
Sales
Canon’s consolidated net sales in
fi
scal 2008 totaled ¥4
,
094
,
161
million (U.S.
$
44,991 million). This represents an 8.6% decrease
from the previous fi scal year, refl ecting the effects of the signifi
-
cant appreciation of the yen coupled with declining prices of
products such as digital cameras and inkjet printers, and reduced
sales volumes stemmin
g
f
rom decreased demand
f
or network
MFDs, laser beam
p
rinters, and other offi ce e
q
ui
p
ment
.
Overseas operations are signifi cant to Canon’s operating
results and generated approximately 76% of total net sales in
fi
scal 2008. Such sales are denominated in the applicable local
currenc
y
and are sub
j
ect to
fl
uctuations in the value o
f
the
y
en
to those currencies. Des
p
ite efforts to reduce the im
p
act of
currency fl uctuations on operating results, including localization
o
f
manu
f
acturing in some regions along with procuring parts
and materials
f
rom overseas suppliers, Canon believes such
fl uctuations have had and will continue to have a si
g
nifi cant
effect on its results of o
p
erations.
The average value of the yen in fi scal 2008 was ¥103.23 to
the U.S. dollar, and ¥151.46 to the euro, representin
g
a si
g
ni
fi
-
cant appreciation o
f
about 14% to the U.S. dollar, and approxi-
mate
l
y 7% appreciation against t
h
e euro, compare
d
wit
h
t
h
e
previous year. The effects of foreign exchange rate fl uctuations
negatively impacted net sales by approximately ¥299,500 million
in 2008. This un
f
avorable impact was comprised o
f
approximatel
y
¥218
,
700 million for U.S. dollar denominated sales
,
¥66
,
400
million for euro denominated sales and ¥14,400 million for
other foreign currency denominated sales.
Cost o
f
sale
s
Cost of sales principally refl ects the cost of raw materials, parts
and labor used by Canon in the manufacture of its products. A
portion o
f
the raw materials used by Canon is imported or
includes imported materials. Man
y
o
f
these raw materials are
sub
j
ect to fl uctuations in world market prices accompanied b
y
fl uctuations in exchange rates that may affect Canon’s cost of
sales. Other components of cost of sales include depreciation
expenses
f
rom plants, maintenance expenses, li
g
ht and
f
uel
expenses alon
g
with rent expenses. The ratio o
f
cost o
f
sales to
net sales for fi scal 2008, 2007 and 2006 was 52.7%, 49.9%
and 50.4%, respectively.
Gross pro
fi
t
Canon’s
g
ross profi t in fi scal 2008 decreased b
y
13.8% to
¥1,938,008 million
(
U.S.$21,297 million
)
from fi scal 2007. The
gross pro
fi
t ratio deteriorated by 2.8 points year on year to 47.3%.
Despite the continued launch o
f
new products and on
g
oin
g
cost-reduction e
ff
orts, the deteriorated
g
ross pro
fi
t ratio was
mainly the result of such factors as the sharp appreciation of
the yen, falling product prices accompanied by the rise in prices
o
f
materials
.
Operat
i
n
g
expenses
The ma
j
or components o
f
operatin
g
expenses are pa
y
roll, R&D,
a
d
vertisin
g
expenses an
d
ot
h
er mar
k
etin
g
expenses. W
h
i
l
e R&D
expenses increase
d
s
l
ig
h
t
l
y compare
d
wit
h
t
h
e previous year,
Grou
p
-wide cost reduction efforts contributed to a decline in
total operating expenses o
f
3.2%
.
Operating profi
t
Operating profi t in fi scal 2008 dropped 34.4% to a total of
¥496,074 million (U.S.$5,451 million) from fi scal 2007, recording
12.1% to net sales
.
Other income (deductions
)
Other income (deductions) for fi scal 2008 decreased by ¥26,642
million
(
U.S.
$
293 million
)
due to such factors as a reduction in
interest income stemmin
g
f
rom a decrease in cash surplus and a
l
ower
y
ie
ld
on investments, a
d
ec
l
ine in earnin
g
s on investments
in affi liates accounted for by the equity method, and write-downs
of non-current marketable securities
.
I
ncome be
f
ore income taxes and minority interests
Income before income taxes and minority interests in fi scal 2008
was ¥481,147 million
(
U.S.$5,287 million
)
, a decline of 37.4%
f
rom
fi
scal 2007
,
and constituted 11.8% o
f
net sales
.
I
n
co
m
e
ta
x
es
Provision for income taxes in fi scal 2008 decreased by ¥103,470
million (U.S.$1,137 million) from fi scal 2007, primarily as a result
o
f
the decline in income be
f
ore income taxes and minorit
y
interests. The e
ff
ective tax rate durin
g
fi
scal 2008 declined b
y
1.0% com
p
ared with fi scal 2007
.
Net
i
ncome
As a result, net income in
fi
scal 2008 decreased b
y
36.7% to
¥309,148 million (U.S.$3,397 million), which re
p
resents a 7.6%
r
etu
rn
o
n n
et
sales.