Canon 2015 Annual Report Download - page 48

CANON ANNUAL REPORT 2015
46
income (loss). These amounts are subsequently reclassified
into earnings through other income (deductions) in the same
period as the hedged items affect earnings. Substantially all
such amounts recorded in accumulated other comprehen-
sive income (loss) at year-end are expected to be recognized
in earnings over the next twelve months. Canon excludes
the time value component from the assessment of hedge
effectiveness. Changes in the fair value of a foreign cur-
rency exchange contract for the period between the date
that the forecasted intercompany sales occur and its matu-
rity date are recognized in earnings and not considered hedge
ineffectiveness.
The amount of the hedging ineffectiveness was not material
for the years ended December 31, 2015, 2014 and 2013. The
amounts of net losses excluded from the assessment of hedge
effectiveness (time value component) which was recorded in
other income (deductions) was ¥131 million, ¥145 million and
¥111 million for the years ended December 31, 2015, 2014
and 2013, respectively.
Canon has entered into certain foreign currency exchange
contracts to manage its foreign currency exposures. These for-
eign currency exchange contracts have not been designated as
hedges. Accordingly, the changes in fair values of these con-
tracts are recorded in earnings immediately.
LOOKING FORWARD
As for the future of the global economy, although it is
expected to be somewhat better than what it had been over
the past five years, the situation remains unstable due to
issues such as increased geopolitical risk in the Middle East
and the economic slowdown in China. As such, global eco-
nomic growth is expected to remain modest. From an indus-
trial perspective, however, remarkable developments are
being made in technologies in such areas as the IoT and artifi-
cial intelligence, which are leading to major changes in indus-
try structure. Advancements in digital technology have made
it easier for startup companies to enter markets, thus fueling
increased market competition.
In the businesses in which Canon is involved, although
demand for color office MFDs and production printers is
expected to continue growing, a recovery in sales of products
that are largely sold in emerging markets, such as entry-class
cameras and single-function laser printers, is expected to take
time. Within the market for semiconductor lithography equip-
ment, capital investment is expected to remain strong while
forecasts for the FPD lithography equipment market also point
to further future expansion. Also expected to grow is the net-
work camera market, a market in which Axis, which became a
consolidated subsidiary in 2015, is a major player.
Under these circumstances, the Canon Group embarked
on a new five-year plan, Phase V of the “Excellent Global
Corporation Plan.” During Phase V, under the basic policy of
“Embracing the challenge of new growth through a grand
strategic transformation,” reforms that were promoted in
Phase IV will be further expanded upon. In 2020, the final year
of Phase V, Canon aims to achieve net sales of 5 trillion yen,
an operating profit ratio of 15% or more, a net income ratio
of 10% or more, and a shareholders’ equity ratio of 70% or
more. Toward this objective, Canon will undertake the follow-
ing various measures.
Establish a new production system to achieve a cost-
of-sales ratio of 45%
Strengthen domestic mother factories by further promot-
ing the return of production to Japan and the integration
of design, procurement, production engineering, and man-
ufacturing technology operations. At the same time, pur-
sue total cost reductions through the promotion of such
advanced production engineering technologies as robotics
and automation.
Reinforce and expand new businesses while creating
future businesses
Create and expand new businesses by accelerating the hor-
izontal expansion of existing business. Additionally, con-
centrate management resources and make effective use
of M&A to accelerate the expansion of promising business
areas such as commercial printing, network cameras and
life sciences.
FINANCIAL OVERVIEW