Canon 2010 Annual Report Download - page 52
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Please find page 52 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 201050
Sales
Canon’s consolidated net sales in fi scal 2010 totaled ¥3,706,901
million (U.S.$45,764 million), representing a 15.5% increase from
the previous fi scal year. This increase of sales was due to a sub-
stantial recovery in sales of laser printers among offi ce prod-
ucts, continued robust sales of such consumer products as
digital SLR cameras, the increase in sales within the Industry
and Other Business Unit, and the effects of consolidation aris-
ing from corporate acquisitions, such as Océ N.V. (“Océ”).
Canon made Océ into a consolidated subsidiary in March 2010
to strengthen the printing business. Océ is engaged in research
and development, manufacture and sale of document manage-
ment systems, printing systems for professionals and high-
speed, wide-format digital printing systems. The amounts of net
sales of Océ included in the Canon’s consolidated statement of
income from the acquisition date to the year ended December
31, 2010 was ¥ 246,518 million (U.S.$3,043 million).
Overseas operations are signifi cant to Canon’s operating
results and generated approximately 81% of total net sales in
fi scal 2010. Such sales are denominated in the applicable local
currency and are subject to fl uctuations in the value of the yen
to those currencies. Despite efforts to reduce the impact of cur-
rency fl uctuations on operating results, including localization of
manufacturing in some regions along with procuring parts and
materials from overseas suppliers, Canon believes such fl uctu-
ations have had and will continue to have a signifi cant effect on
its results of operations.
The average value of the yen in fi scal 2010 was ¥87.40 to the
U.S. dollar, and ¥114.97 to the euro, representing an apprecia-
tion of about ¥6 or 6% to the U.S. dollar, and a signifi cant appre-
ciation of approximately ¥15 or 12% against the euro, compared
with the previous year. The effects of foreign exchange rate fl uc-
tuations negatively affected net sales by approximately
¥193,900 million in 2010. This unfavorable impact consisted of
approximately ¥86,700 million for U.S. dollar denominated sales,
¥101,100 million for euro denominated sales and ¥6,100 million
for other foreign currency denominated sales.
Cost of sales
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 of the raw materials used by Canon is imported or includes
imported materials. Many of these raw materials are subject to
fl uctuations in world market prices accompanied by fl uctuations in
exchange rates that may affect Canon’s cost of sales. Other com-
ponents of cost of sales include depreciation expenses from plants,
maintenance expenses, light and fuel expenses along with rent
expenses. The ratio of cost of sales to net sales for fi scal 2010 and
2009 was 51.9% and 55.5%, respectively.
Gross profi t
Canon’s gross profi t in fi scal 2010 increased by 24.9% to
¥1,783,088 million (U.S.$22,013 million) from fi scal 2009. The
gross profi t ratio rose by 3.6 points year on year to 48.1%.
Despite the signifi cant impact of the strong yen, this improve-
ment was achieved due to the launch of new products and
ongoing cost-reduction efforts, along with heightened produc-
tion turnover accompanying ramped-up production.
Operating expenses
The major components of operating expenses are payroll, R&D,
advertising expenses and other marketing expenses. Despite
the negative impact of consolidation of ¥172,800 million
(U.S.$2,133 million), continued Group-wide efforts to signifi cant-
ly reduce spending contributed to a decline in total operating
expenses to sales ratio of 37.6% for fi scal 2010, a 0.1 point
improvement compared with fi scal 2009.
Operating profi t
Operating profi t in fi scal 2010 increased 78.6% to a total of
¥387,552 million (U.S.$4,785 million) from fi scal 2009, constitut-
ing 10.5% of net sales.
Other income (deductions)
Other income (deductions) for fi scal 2010 improved by ¥3,011
million (U.S.$37 million), mainly due to earnings and losses on
investments in affi liated companies.
Income before income taxes
Income before income taxes in fi scal 2010 was ¥392,863 million
(U.S.$4,850 million), an increase of 79.1% from fi scal 2009, and
constituted 10.6% of net sales.
Income taxes
Provision for income taxes in fi scal 2010 increased by ¥56,038
million (U.S.$692 million) from fi scal 2009, primarily as a result
of the increase in income before income taxes. The effective
tax rate during fi scal 2010 dropped by 2.6% compared with fi s-
cal 2009. This was due mainly to an increase in tax deduction
for R&D expenses in fi scal 2010.
12
0
9
6
3
06 07 08 09 10
Return on Sales
(%)
7.6
4.1
6.7
11.0 10.9