Canon 2015 Annual Report Download - page 40

CANON ANNUAL REPORT 2015
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management’s expected long-term rate of return on plan
assets by the value of its plan assets to arrive at the expected
return on plan assets that is included in pension expense.
Canon defers recognition of the difference between this
expected return on plan assets and the actual return on plan
assets. The net deferral affects future pension expense.
Canon recognizes the funded status (i.e., the difference
between the fair value of plan assets and the projected ben-
efit obligations) of its pension plans in its consolidated bal-
ance sheets, with a corresponding adjustment to accumulated
other comprehensive income (loss), net of tax.
Sales
The shrinking market for digital compact cameras and the
slowing growth of China’s economy led to a major decline in
net sales in Imaging System Business Unit. However, due to
steady demand for color-model office MFDs and color-model
light-production printing systems, benefitting from the boost
provided by the acquisition of Axis and the positive effect of
favorable currency exchange rates, Canon’s consolidated net
sales in 2015 totaled ¥3,800,271 million, an increase of 2.0%
from the previous year.
Overseas operations are significant to Canon’s operating
results and generated 81.2% of total net sales in 2015. Such
sales are denominated in the applicable local currency and are
subject to fluctuations in the value of the yen relative to those
currencies. Despite efforts to reduce the impact of currency
fluctuations on operating results, including localization of
manufacturing in some regions along with procuring parts and
materials from overseas suppliers, Canon believes such fluctu-
ations have had and will continue to have a significant effect
on its results of operations.
The average value of the yen during the year was ¥121.13
against the U.S. dollar, a year-on-year depreciation of approx-
imately ¥15, and ¥134.20 against the euro, a year-on-year
appreciation of approximately ¥6. The effects of foreign
exchange rate fluctuations positively affected net sales by
approximately ¥146,800 million in 2015. This favorable impact
consisted of approximately ¥44,800 million of unfavorable
impact for the euro denominated sales and favorable impact
of ¥170,500 million for the U.S. dollar denominated sales, and
¥21,100 million for other foreign currency denominated sales.
Return on Sales (%)
9
6
3
0
2014 2015201320122011
Cost of sales
Cost of sales principally reflects 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 fluctuations in world market prices accompanied by
fluctuations in foreign exchange rates that may affect Canon’s
cost of sales. Other components of cost of sales include
depreciation expenses, maintenance expenses, light and fuel
expenses, and rent expenses. The ratio of cost of sales to net
sales for 2015 and 2014 was 49.1% and 50.1%, respectively.
Gross profit
Canon’s gross profit in 2015 increased by 3.9% to ¥1,934,384
million from 2014. The gross profit ratio also increased by 1.0
points year on year to 50.9%. The increase in the gross profit
ratio reflects ongoing cost-cutting activities and highly profit-
able new products.
FINANCIAL OVERVIEW
SUMMARY OF OPERATIONS
Millions of yen
2015 change 2014 change 2013
Net sales ¥3,800,271 +2.0% ¥3,727,252 -0.1% ¥3,731,380
Operating profit 355,210 -2.3% 363,489 +7.8% 337,277
Income before income taxes 347,438 -9.3% 383,239 +10.3% 347,604
Net income attributable to Canon Inc. 220,209 -13.6% 254,797 +10.5% 230,483
CONSOLIDATED RESULTS OF OPERATIONS