Canon 2010 Annual Report Download - page 48
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Please find page 48 of the 2010 Canon annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.CANON ANNUAL REPORT 201046
FINANCIAL OVERVIEW
GENERAL
The following discussion and analysis provides information that
management believes to be relevant to understanding Canon’s
consolidated fi nancial condition and results of operations.
References in this discussion to the “Company” are to Canon
Inc. and, unless otherwise indicated, references to the fi nancial
condition or operating results of “Canon” refer to Canon Inc.
and its consolidated subsidiaries.
OVERVIEW
Canon is one of the world’s leading manufacturers of plain
paper copying machines, digital multifunction devices (“MFDs”),
laser printers, cameras, inkjet printers, semiconductor lithogra-
phy equipment and liquid crystal display (“LCD”) lithography
equipment. Canon earns revenues primarily from the manufac-
ture and sale of these products domestically and international-
ly. Canon’s basic management policy is to contribute to the
prosperity and well-being of the world while endeavoring to
become a truly excellent global corporate group targeting con-
tinued growth and development.
Canon divides its businesses into three segments: the Offi ce
Business Unit, the Consumer Business Unit, and the Industry
and Others Business Unit.
Economic environment
Looking back at the global economy in 2010, economic condi-
tions continued to improve broadly throughout the world, led
by the economic growth of such emerging markets as China
and India. In the United States, despite the unemployment rate
remaining at a relatively high level and other concerns, eco-
nomic conditions continued to recover gradually thanks in part
to economic measures by the government. As for Europe, in
spite of lingering fi nancial and employment concerns along
with the emergence of fi nancial crises in some countries, the
region overall managed to realize a recovery. China, which
quickly recovered its growth pace through major economic
stimulus measures, and the rest of Asia, along with other
emerging nations, continued to achieve economic expansion.
And in Japan, although signs began to appear indicating a turn-
around, the recovery came to a standstill at the end of 2010
due to prolonged defl ation and other factors.
Market environment
As for the markets in which Canon operates amid these condi-
tions, within the offi ce equipment market, demand for network
digital MFDs recovered, mainly for color models, while laser
printers also realized a steady rebound compared with the pre-
vious year. As for the consumer products market, demand for
digital single-lens refl ex (“SLR”) cameras maintained healthy
growth across global markets. As for compact digital cameras,
although sales were sluggish in developed countries, demand
in emerging markets grew favorably resulting in a slight
increase overall. With regard to inkjet printers, demand contin-
ued on a track to recovery. In the industry and others market,
demand for semiconductor lithography equipment and LCD
lithography equipment grew steadily, owing to improved invest-
ment by semiconductor device and LCD panel manufacturers.
The average value of the yen during the year was ¥87.40 to the
U.S. dollar, a year-on-year appreciation of approximately ¥6 or
6%, and ¥114.97 to the euro, a year-on-year appreciation of
approximately ¥15 or 12%.
Summary of operations
Amid the impact of the sharp appreciation of the yen, net sales
for the year totaled ¥3,706.9 billion (U.S.$45,764 million), an
increase of 15.5% from the previous year, owing to a substan-
tial recovery in sales of laser printers among offi ce products,
continued robust sales of such consumer products as digital
SLR cameras, the increase in sales within the Industry and
Others Business Unit, and the effects of consolidation arising
from corporate acquisitions, such as Océ N.V. Income before
income taxes totaled ¥392.9 billion (U.S.$4,850 million), a year-
on-year increase of 79.1%, while net income attributable to
Canon Inc. also increased by 87.3% to ¥246.6 billion
(U.S.$3,044 million).
Key performance indicators
The following are the key performance indicators (“KPIs”) that
Canon uses in managing its business. The changes from year to
year in these KPIs are set forth in the table shown on page 47.
Revenues
As Canon pursues the goal to become a truly excellent global com-
pany, one indicator upon which Canon’s management places
strong emphasis is revenue. The following are some of the KPIs
related to revenue that management considers to be important.
Net sales is one such KPI. Canon derives net sales primarily
from the sale of products and, to a much lesser extent, provi-
sion of services associated with its products. Sales vary
depending on such factors as product demand, the number
and size of transactions within the reporting period, market
acceptance for new products, and changes in sales prices.
Other factors involved are market share and market environ-
ment. In addition, management considers the evaluation of net
sales by segment to be important for the purpose of assessing
Canon’s sales performance in various segments, taking into
account recent market trends.
Gross profi t ratio (ratio of gross profi t to net sales) is another
KPI for Canon. Through its reforms of product development,
Canon has been striving to shorten product development lead
times in order to launch new, competitively priced products at
a faster pace. Furthermore, Canon has further achieved cost
reductions through enhancement of effi ciency in its production.
Canon believes that these achievements have contributed to
improving Canon’s gross profi t ratio, and will continue pursuing
the curtailment of product development lead times and reduc-
tions in production 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 by Canon. Canon is focusing on
two areas for improvement. Canon is striving 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 certain level of spending in core technology to sus-
tain Canon’s leading position in its current business areas and
to seek possibilities in other markets. Canon believes such
investments will create the basis for future success in its busi-
ness and operations.