Canon 2014 Annual Report Download - page 43

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41
C
ORPORATE
S
TRUCTUREBU
S
INE
SS
S
EGMEN
T
F
INANCIAL
S
ECTIO
N
CORPORATE DAT
A
STRATEGY
SALES BY REGION
Millions of yen
2014 change 2013 change 2012
Japan ¥ 724,317 +1.2% ¥ 715,863 -0.6% ¥ 720,286
Americas 1,036,500 -2.2% 1,059,501 +12.7% 939,873
Europe 1,090,484 -3.1% 1,124,929 +10.9% 1,014,038
Asia and Oceania 875,951 +5.4% 831,087 +3.2% 805,591
Total ¥3,727,252 -0.1% ¥3,731,380 +7.2% ¥3,479,788
Note: This summary of net sales by geographic area is determined by the location where the product is shipped to the customers.
yen against euros and solid demand for office MFDs in
sluggish economic condition, net sales decreased by 3.1%
from the previous year due to the price reduction of inter-
changeable-lens digital cameras and shrinking of digital
compact camera market in Europe.
Operating profit by segment
Please refer to the table of segment information in Note 21 of
the Notes to Consolidated Financial Statements.
Operating profit for the Office Business Unit in 2014
increased by 9.4% to ¥292,057 million, resulting from the
sales increase including the positive effects of favorable cur-
rency exchange rates.
Despite operating profit for the Imaging System Business Unit in
2014 decreased by 4.5% to ¥194,601 million, in response to
the sales decline, operating profit ratio increased from previ-
ous year, owing to the improvement in profitability from the
sales shift to high-added-value models in camera, along with
the positive effects of favorable currency exchange rates.
Operating profit for the Industry and Others Business Unit in
2014, despite an improvement from the previous year result-
ed from sales increase, recorded a loss of ¥21,801 million
owing to investment, including R&D expenses, into next-
generation technologies.
FOREIGN OPERATIONS AND FOREIGN
CURRENCY TRANSACTIONS
Canon’s marketing activities are performed by subsidiaries in
various regions in local currencies, while the cost of sales is
generally in yen. Given Canon’s current operating structure,
appreciation of the yen has a negative impact on net sales
and the gross profit ratio. To reduce the financial risks from
changes in foreign exchange rates, Canon utilizes derivative
financial instruments, which consist principally of forward
currency exchange contracts.
The operating profit on foreign operation sales is usual-
ly lower than that from domestic operations because for-
eign operations consist mainly of marketing activities.
Marketing activities are generally less profitable than pro-
duction activities, which are mainly conducted by the
Company and its domestic subsidiaries. Please refer to the
table of geographic information in Note 21 of the Notes to
Consolidated Financial Statements.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents increased by ¥55,671 million to
¥844,580 million in fiscal 2014 compared to the previous
year. Canon’s cash and cash equivalents are typically denomi-
nated in Japanese yen and in U.S. dollars, with the remainder
denominated in other currencies.
Net cash provided by operating activities increased by
¥76,285 million to ¥583,927 million in fiscal 2014 compared
to the previous year. The major component of Canon’s cash
inflow is cash received from customers, and the major com-
ponents of Canon’s cash outflow are payments for parts and
materials, selling, general and administrative expenses, R&D
expenses and income taxes.
For fiscal 2014, cash inflow from operating activities
increased, due to the increasing profit as well as an improve-
ment in working capital. There were no significant chang-
es in Canon’s collection rates. Cash outflow for payments for
parts and materials decreased, as a result of decreased inven-
tory level. Cash outflow for income taxes increased due to an
increase in taxable income.
Net cash used in investing activities increased by ¥19,086
million to ¥269,298 million in fiscal 2014. This reflects
the acquisition of Milestone Systems, to enhance Canon’s
network camera business, and several other companies.
Purchases of fixed assets were focused on items relevant to
new products.
Canon defines “free cash flow” as cash flows from
operating activities less cash flows from investing activi-
ties. For fiscal 2014, free cash flow totaled ¥314,629 mil-
lion as compared with ¥257,430 million for fiscal 2013.
Canon’s management recognizes that constant and inten-
sive investment in facilities and R&D is required to main-
tain and strengthen the competitiveness of its products.
In Asia and Oceania, although sales volume of
interchangeable-lens digital cameras and digital compact
cameras declined, net sales increased by 5.4% from the previ-
ous year due to solid demand for office MFDs coupled with
the positive effects of depreciation of the yen.
A summary of net sales by geographic area is provided below.