Canon Inc (CAJ) 2012 Q4 法說會逐字稿

Good morning or good afternoon, ladies and gentlemen, and welcome to Canon's conference call. Please refer to today's slide, and note that our financial comparison made during my presentation will be on a year-on-year basis unless otherwise stated.

Please refer to slide 2. This is today's agenda.

Please turn to slide 3. At the beginning of 2012 the global economy was on a partial gradual recovery; growth in emerging market. From early spring however, signs of a global economic slowdown started to spread. The growing debt crisis in Europe was negatively impacting the economies of developed countries, such as the United States and Japan, which in turn impacted emerging markets.

For the year, the yen remained at the historically high appreciated levels, and in September anti-Japanese sentiment arose in China. The external environment became increasingly challenging and, as a result, we posted declines in both net sales and profit.

In this challenging market environment, we worked to build a solid base for growth. We launched more new product this year than we have in the past, further raising our competitiveness and enabling us to maintain or improve our market shares in all core product categories. In addition to this, we firmly maintain a strong financial constitution and a healthy level of cash in hand.

Please refer to slide 4. In the fourth quarter net sales and operating profit decreased, reflecting lower unit sales of laser printers and lithography equipment. For the full year, net sales and operating profit also decreased. This reflects euro depreciation and lower sales of laser printers.

Please turn to slide 5. I will now compare our full-year's result with our projections. The weaker than expected yen was a positive factor. All business units were short of projection, in terms of sales variance. In Office, and mainly for copiers, we were below plan in all regions except for Japan. In Imaging Systems we were below plan for cameras.

As for China, the economic slowdown and lingering effect of restrained buying were greater than expected. In the other categories the negative figures and the net sales represent lower than expected price decline. The positive yield and the operating profit reflect reduced expenses.

Please refer to slide 6. I will now discuss our projections for 2013, this year. This slide shows our assumption for exchange rate and the exchange rate sensitivity.

Please turn to slide 7. This slide highlights key points regarding our projections. Although we expect the global economy to remain challenging over the foreseeable future, we also expect a gradual recovery of the global economies to gain strength from the second half of the year.

As we expect the markets in which we operate to also follow this trend, we will keep an eye on market movement while working to implement the measures that will help us return to path of growth.

Leveraging our product competitiveness to promote sales expansion is one core measure. Many of the competitive products we launched last year will fully contribute to our performance this year. On top of this, we work to expand sales of strategic new products that we plan for this year.

Taking a flexible and strategic approach we'll also expand sales by investing in such activities as advertising and sales promotion, while also investing in new product development. Through volume expansions and the continuing effort to enhance cost reduction we'll promote profitability improvements, and our aim to raise net sales and profit.

Please refer to slide 8. This slide summarizes our full-year projections.

Please turn to slide 9. I will now compare our 2013 projections with our results of last year. Expected yen depreciation is a positive factor. Changes in sales volumes are projected to have a positive impact on all business units.

In the other categories, the negative figures on the net sales represent price declines. The negative figures on the operating profit reflects price declines, increase in expenses related to sales expansion and development, and JPY80 billion in cost savings.

Please refer to slide 10. I will now discuss each business unit, starting with Office. Generally speaking, Europe had a negative impact on both the copiers and the laser printer market, while the copier market grew gradually, supported by sales of color models, the laser printer market shrank despite double-digit growth in color MFP units.

As for copiers, backed by the competitive line-up, we work toward building a solid base for generating stable profit by expanding our Service and Solution business.

In the past half of the last year we rounded out our line-up with the launch of new monochrome models and in the second half of the year we introduced new second generation imageRUNNER ADVANCE models, which realized further improvement in printing capabilities and compatibilities with systems.

At the same time, we strengthened our Solutions business and enhancing our abilities to support diversifying the need of customers. Through these measures, we expanded sales and the business opportunities.

In order to promote sales expansion in the commercial printing area, we cooperated with Oce to strengthen our product line-ups, while working to improve our sales structures and expand our sales channels. Through these measures, we are able to recover market shares, growing hardware unit sales by 5% for the full year.

As for non-hardware, sales were basically flat, due to a decline in unit price and users limiting their printers' usage due to the weak economy. As a result, full-year net sales of copiers increased 1.8% on the local currency basis, but decreased 0.6% in yen terms.

As for laser printers, we promoted the shift to colors and MFPs, launching a strategic product in a focused manner into the MFP market, which is expected to show strong growth in the future. Due to reduced demand for SFPs, particularly monochrome models, however, full-year unit sales decreased 15%.

As for consumables, full-year net sales decreased 11.3%, reflecting the economic slowdown and our effort to adjust channel inventory levels up to and through the third quarter of last year. As a result, full-year net sales of printers decreased 15.2%.

For the business unit full-year net sales and operating profit decreased 8.4% and 21.5%, respectively.

Please turn to slide 11. I will now discuss our projections for this business unit. In 2013 we expect the copier market to remain on the path of gradual growth, mainly supported by continued demand for current models. This year, we expect to fully benefit from models that were launched last year. In order to expand sales, we will connect this result with other measures, such as continuing to enhance our product line-up; strengthen our Solution business; and globally deploying our managed document service, utilizing our own cloud infrastructure.

We also aim to expand sales in the commercial printing area by completing the integration of Oce's sales operations. Through these measures, we expect to exceed market growth in terms of hardware unit. Targeting 10% unit growth, we'll expand our installed base for copiers to build a solid foundation for generating future profit, such as through consumable sales. As a result, net sales of copiers are projected to increase 9%.

As for laser printers, we expect the market to return to the path of growth supported by color and MFP models. Within this market, we'll work to increase our installed base of printers, focusing on expanding sales of the new color MFPs we launched last autumn, and linking this to future growth in print volumes.

This year, we'll also work to stimulate the market, continuing the effort to launch new product in a timely manner that meet the customers' need in each region. Through these measures, we expect full-year's unit sales to increase 10%.

As for consumables, from the fourth quarter of last year, our segment has been in line with market demand. Based on this and the expectation that the demand will improve as the global economy recovers, we expect the full-year's net sales of consumables to exceed that of last year. As a result, full-year net sales of printers are projected to increase 4.4%.

For the business unit full-year's net sales and operating profit are projected to increase 7.7% and 11.6%, respectively.

Please refer to slide 12. I will now discuss the Image System business unit, starting with cameras. In 2012 economic slowdown impacted the camera market. Despite this, the interchangeable lens camera market grew [13%] to [18 million] units. The compact camera market, however, shrank [11%] to [93 million] units as it was also impacted by the growing popularity of smartphones. Within the interchangeable lens camera market, the launch of new product in each category contributed to sales growth.

In addition to updating existing models, we further enhanced our usual line-up, adding new cameras such as EOS M, our first mirrorless cameras, and EOS 6D, a small and lightweight model incorporating full-size sensors. Thanks to this effort, our unit sales grew 14% to [8.2 million] units. And we expect to have secured the number 1 market share position in every major region.

Lenses continued to enjoy strong demand alongside the cameras. As for compact cameras, in autumn we introduced high-end models that offered further enhanced network capabilities and imaging performance. The addition of these new products, and the other factors, allowed us to achieve slightly decreased sales of [18.3 million] units and improve our market shares.

As a result in 2012, we continued to hold the number 1 market share position globally for the overall camera market. We, therefore, have posted a net sales increase of 6.8% for the full year.

And for inkjet printers in 2012 the market shrank around 10%, in unit terms, due to the economic slowdowns and the competitors exiting the market. Within this market our full-year's unit sales grew 2%. We achieved this by expanding sales of models that respond to the unique characteristics of each region, particularly in Asia where we hold the top market share position. In addition, expanded sales in Japan also contributed to this result.

And for consumables full-year's net sales decreased, due to the impact that the Thai flood had on our installed base, which lingered up to and through the third quarters of last year. As a result, full-year's net sales of inkjet printers decreased 1%.

For the business unit full-year's net sales increased 7.2% and operating profit decreased 0.5%.

Please turn to slide 13. I will now discuss our 2013 projections for this business unit, starting with cameras. In 2013 we expect a continued strong demand in the interchangeable lenses camera market, which is expected to grow 11% (sic - see slide 13 "12%") to 20 million units. As for compact cameras, we expect some market to shrink 11% (sic - see slide 13 "7%") to 83 million units, reflecting lower demand in all regions.

Last year, we strengthened our enhanced our EOS systems product line-up, launching more new models than we have in the past. The mirrorless cameras and small and lightweight cameras that incorporate the precise image sensors are good examples of how we are responding to the new need of users.

Our abilities to deliver this type of innovative product is based on our continuing focus on internal product development and the manufacturing, as well as key component, such as sensors.

In addition to these products, we launched new product this year to gain access to a broader range of users and also actively responded to demand coming from existing customers concerning their step-up.

As for compact cameras, which are also produced internally, we have exercised our strength and worked to enhance our high-end models line-ups. Additionally, we will continue to grasp users' need in order to maintain our lead in this market. Through these measures we aim to grow interchangeable ranges camera unit 12% to 9.2 million and hold the decline in compact cameras to 7%, or 17 million units.

As for our CINEMA EOS SYSTEMS, we'll work to enhance our line-ups, launching new bodies and lenses capable of taking high-quality pictures in (inaudible). As a result, full-year's net sales of cameras are projected to increase 14.4%.

And for inkjet printers, in addition to our strength in the major qualities and the basic features, we also work to expand sales through appealing designs, such as offering color variations, as well as ease of use. Additionally, by focusing on models designed for imaging market, we expect to increase full-year unit sales by 2%.

And for consumables, we expect to exceed our sales of last year; this reflects the recoveries and growth in our installed base. As a result, we expect our full-year's net sales of inkjet printers to increase 10%.

For the business unit, full-year's net sales and operating profit are projected to increase 12.3% and 35.3% respectively.

Please refer to slide 14. I will now discuss the Industry and other business units, starting with IC Steppers.

In 2012 we sold 46 IC Steppers. This reflects the impact of [repaying] the investment in the fourth quarters. 2012 unit sales of flat panel display i-liners decreased, due to the weak market. Full-year sales of Others grew, thanks to increased orders for Tokki's OLED manufacturing equipment and new consolidations.

For the business unit full-year's net sales and operating profit decreased 3.1% and 75.7% respectively.

Please turn to slide 15. I will now discuss our projections for this business units, starting with IC Steppers. In 2013 we expect IC Steppers' market to be around 240 units, which is basically the same as last year.

Despite this outlook, and due to the expectation that recovery in restricted investment for i-line liners, will begin from the second half of last year and this year, we expect our full-year's unit sales to decrease.

The flat panel display liners market is expected to be around 80 units in 2013. Under this outlook, we expect our full-year's unit sales to be higher than last year's, due to increasing sales equipment used in manufacturing large size panels.

As for others, we project full-year sales to increase. This reflects the expectation for continued growth of our medical-related business and the recovery in the [strained] semi-conductor-related investment in the second half of the year.

For the business units, we are projecting full-year's net sales to increase 8.1% and our operating profit to be JPY7.6 billion in the red.

Please refer to slide 16. Now I will discuss our financial situation. At the end of December, inventory turnover was 57 days. Within this [field], sales companies accounted for 37 days and compared with end of last year, camera inventory was up slightly. Our approach to inventory management is based on identifying the demand trend and preventing lost sales opportunities; from this perspective, inventory of sales companies within appropriate ranges.

As for work in progress, which accounted for 17 days, or JPY160 billion of the total, we'll continue our efforts to achieve appropriate levels of inventories, promoting production line efficiencies through automations and other measures.

Please turn to slide 17. This slide highlights capital expenditures and the cash flow. Through comprehensive cash flow management, we work to maintain our financial health.

Please refer to slide 18. I will now discuss cash in hand. Through comprehensive cash flow management, cash on hand, at end of December, was JPY667.7 billion, an amount equal to 2.3 months of net sales.

As for our 2012 dividend, we plan to pay a total of JPY130 per share, an increase of JPY10 from last year.

Despite the challenging business environment, we make a concerted effort to achieve our goals of increasing sales and profit, aiming to make 2013 the year we return to a path of growth.

This concluded my presentation. Thank you very much for your kind attention.