(Millions of yen, thousands of U.S. dollars, except per share amounts)
December 31, 2021
December 31, 2020
December 31, 2021
December 31, 2022
Income before income taxes
Net income attributable
to Canon Inc.
Net income attributable to Canon Inc. shareholders per share:
December 31, 2021
December 31, 2020
December 31, 2021
Canon Inc. shareholders' equity
Notes: 1. Canon's consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles.
2. U.S. dollar amounts are translated from yen at the rate of JPY115=U.S.$1, the approximate exchange rate on the Tokyo Foreign Exchange Market as of December 30, 2021, solely for the convenience of the reader.
30-2, Shimomaruko 3-chome,Ohta-ku,
Tokyo 146-8501, Japan
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I. Operating Results and Financial Conditions
2021 in Review
Looking back at 2021, the global economy continued to recover as movement restrictions were gradually eased and the rollout of vaccines worldwide encouraged resumption of economic activities. However, production activity stagnated due to a resurgence of coronavirus disease ("COVID-19") infections. In addition, the global shortage of semiconductor chips and the disruption in logistic and distribution channels due to high demand became a serious issue in the second half of the year. In the United States, economic recovery advanced as a result of the increased personal consumption and expansion of capital investment through economic measures. In Europe, restrictions on economic activities were eased in each country, with increasing personal consumption and expansion of capital investment leading to a steady economic recovery. In China, personal consumption and exports continued to grow steadily despite sluggish infrastructure investment. In other emerging countries, economic recovery was modest due to stagnant economic activity caused by the spread of COVID-19 infections, mainly in India and Southeast Asia. In Japan, economic recovery remained moderate due to the prolonged State of Emergency.
Amid these conditions, in the markets in which Canon operates, demand for products remained solid, despite the impact of the shortage of semiconductor chips in the second half of the year. Demand for office multifunction devices (MFDs) continued to recover. For laser printers, demand remained at the same level as the previous year. For Inkjet printers, demand in home use remained solid. For cameras, demand remained solid, mainly in mirrorless cameras. For medical equipment, despite delays in the installation of medical devices in some areas due to the resurgence of COVID-19 infections, recovery continued thanks to the return of routine examinations at medical institutions compared with the previous year, in which COVID-19 testing was prioritized. For lithography equipment, demand for semiconductor lithography equipment continued amid favorable market conditions and FPD (Flat Panel Display) lithography equipment remained solid.
The average value of the yen for the year was ¥109.93 against the U.S. dollar, a year-on-year depreciation of approximately ¥3, and ¥129.94 against the euro, a year-on-year depreciation of approximately ¥8.
In 2021, unit sales of office MFDs were above those of the previous year, despite the shortage of semiconductor chips in the second half of the year. Sales of services and consumables moderately recovered due to the gradual increase in employees returning to the office and resulting demand for related services and consumables. As for the Prosumer consisting of laser printers and inkjet printers, unit sales were below those of the previous year due to the stagnation of production activity resulting from a resurgence of COVID-19 infections in Southeast Asia. However, unit of sales of laser printer consumables increased significantly compared with the previous year, during which demand had decreased. For interchangeable-lens digital cameras, unit sales remained at around the same level as the previous year due to the shortage of semiconductor chips, despite continued strong sales of full-frame mirrorless cameras. As for network cameras, which are being used in a growing range of applications, sales increased due to the strengthening of sales activities. For medical equipment, sales increased mainly in Japan and North America due to strong sales of computed tomography (CT) systems and diagnostic ultrasound systems as a result of recovering demand in key markets and government's support for medical institutions. While unit sales for semiconductor lithography equipment remained solid, unit sales for FPD lithography equipment were significantly above those of the previous year, when equipment installation stagnated due to circumstances related to COVID-19. Under these conditions, net sales for the year increased by 11.2% year-on-year to ¥3,513.4 billion. Gross profit as a percentage of net sales increased by 2.8 points to 46.3%, due to recovery of services and consumables, expansion of highly profitable products and currency exchange rate fluctuations. Gross profit for the year increased by 18.3% year-on-year to ¥1,627.8 billion. Operating expenses increased by 6.4% year-on-year to ¥1,345.9 billion, mainly due to currency exchange rate fluctuations. However, operating expense percentage improved significantly from 40.0% to 38.3% thanks to the results of structural reform and group-wide improvements in productivity. As a result, operating profit increased by 155.0% year-on-year to ¥281.9 billion. Other income (deductions) increased by ¥1.1 billion year-on-year to ¥20.8 billion, due to such factors as valuation gain on securities, while income before income taxes increased by 132.4% year-on-year to ¥302.7 billion and net income attributable to Canon Inc. increased by 157.7% year- on-year to ¥214.7 billion.
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Basic net income attributable to Canon Inc. shareholders per share was ¥205.35 for the year, a year-on-year increase of ¥125.98.
Results by Segment
Looking at Canon's full year performance by business unit, in the Printing Business Unit, unit sales of office MFDs increased compared with the previous year as the imageRUNNER ADVANCE DX series saw solid demand and demand for MFDs continued to recover despite the shortage of semiconductor chips. Sales of services and consumables increased due to a recovery in office occupancy rates. For equipment in the production printing market, the varioPRINT iX series of high-speedsheet-fed color inkjet presses earned favorable reviews, and sales of services and consumables increased due to the recovery. As for laser printers, unit sales decreased compared with the previous year due to stagnation of production activity resulting from the resurgence of COVID-19 infections in Southeast Asia. However, sales of consumables increased significantly compared with the previous year, during which time demand had decreased. For inkjet printers, unit sales were below those of the previous year due to stagnation of production activity in Southeast Asia. However, unit sales of refillable ink tank printers were above those of the previous year due to solid global demand. Total sales were above those of the previous year due to a focus on higher-priced models. These factors resulted in total sales for the business unit of ¥1,938.8 billion, a year-on-year increase of 7.4%, while income before income taxes increased by 53.1% year-on-year to ¥233.0 billion.
As for the Imaging Business Unit, unit sales of interchangeable-lens digital cameras were the same level as the previous year due to the shortage of semiconductor chips, despite strong sales of the EOS R5 and EOS R6 full- frame mirrorless cameras. In addition, sales of RF-series interchangeable lenses increased significantly due to the expansion of the lens product lineup. As for network cameras, despite the continued impact of COVID-19, sales increased mainly as a result of strengthening sales activities for such diversified applications as monitoring of congested and confined spaces as well as conventional market needs including crime prevention and disaster monitoring tools. These factors resulted in total sales for the business unit of ¥653.5 billion, a year-on-year increase of 20.7%, while income before income taxes increased by 1,484.5% year-on-year to ¥78.5 billion.
As for the Medical Business Unit, although the resurgence of COVID-19 infections and the shortage of semiconductor chips and shipping containers had an impact on production and installation, sales remained solid due to returning routine examinations at medical institutions. Sales of CT systems and diagnostic ultrasound systems increased mainly due to capitalizing on opportunities with medical institutions in Japan supported by the government and recovering demand in the North America. These factors resulted in total sales for the business unit of ¥480.4 billion, a year-on-year increase of 10.2%, while income before income taxes increased by 34.3% year-on-year to ¥34.3 billion, recording highs for both sales and income before income taxes for the Medical Business Unit.
As for the Industrial & Others Business Unit, regarding semiconductor lithography equipment, unit sales increased compared with the previous year due to strong demand in a wide range of products such as sensors and memory. For FPD lithography equipment, demand for panels used in devices including laptops, tablets and high-resolution display panels remained strong. As a result, unit sales increased significantly compared with the previous year, when equipment installation stagnated due to circumstances related to COVID-19. These factors resulted in total sales for the business unit of ¥545.7 billion, a year-on-year increase of 18.2%, while income before income taxes totaled ¥44.7 billion, a year-on-year increase of 105.9%.
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During 2021, cash flow from operating activities increased by ¥117.2 billion year-on-year to ¥451.0 billion due to a significant increase in profit and working capital improvement. Cash flow used in investing activities increased by ¥51.8 billion year-on-year to ¥207.3 billion mainly due to the acquisition of Redlen Technologies Inc. intended for key parts creation of CT systems and capital investment towards enhancing production capacity. Accordingly, free cash flow increased by ¥65.4 billion compared with the previous year to ¥243.8 billion.
Cash flow from financing activities is mainly comprised of the refinancing and the repayment of loans which was provided for the acquisition of Toshiba Medical Systems Corporation (Canon Medical Systems Corporation) resulting in the decrease of long-term loans by ¥170.0 billion. In addition, total outlay recorded ¥267.4 billion due to the dividend payout.
Owing to these factors, as well as the impact from foreign currency exchange adjustments, cash and cash equivalents decreased by ¥6.3 billion to ¥401.4 billion from the end of the previous year.
As for the outlook for 2022, despite the resurgence of COVID-19 infections due to new variants, the impact on economic activity is expected to be more limited due to the progress of vaccination programs. However, the outlook for the global economy remains uncertain, with risks such as delays in the supply of semiconductor chips and high demand for international freight transport. Under these conditions, the global economy is expected to maintain a recovery trend over the long term, supported by various economic measures and fiscal policies in each country and region.
In the markets in which Canon operates, for office MFDs, despite the impact of the shortage in the supply of semiconductor chips in the first half of the year, demand is expected to increase due to the recovery of office occupancy rates. For laser printers, demand is expected to increase due to recovery of demand from offices in addition to home use, which has become more widespread. For inkjet printers, demand is expected to remain solid due to remote work and education, which have become more commonplace due to the impact of the COVID-19 pandemic. As for interchangeable-lens digital cameras, demand is expected to remain solid due to the need for high-quality visual expression. In addition, unit sales of interchangeable-lens digital cameras is expected to exceed that of the current fiscal year due to the effects of backorders caused by the shortage of semiconductor chips in the current fiscal year. Canon will strengthen the competitiveness of product lineup mainly in EOS R system cameras and interchangeable lenses while reinforcing sales promotion efforts amid a shift to mirrorless cameras. For network cameras, the market is expected to continue growing due to the stable expansion of sales markets and increasing demand for video analysis solutions. As for the medical equipment market, demand is expected to remain solid, although a downturn in demand is expected as a result of government's support for medical institutions during the fiscal year. For semiconductor lithography equipment, demand from a wide range of fields is expected to continue.
With regard to currency exchange rates on which Canon bases its performance outlook, Canon anticipates exchange rates of ¥112 to the U.S. dollar and ¥130 to the euro, representing depreciation of approximately ¥2 against both the U.S. dollar and the same level against the euro as the previous year.
Upon taking into consideration the current economic forecast, the aforementioned currency exchange rates, fulfillment of backorders in the current fiscal year, recovery of office printing and enhancing the production processes of semiconductor lithography equipment, Canon projects full-year consolidated net sales of ¥3,870.0 billion, a year-on-year increase of 10.2%; operating profit of ¥332.0 billion, a year-on-year increase of 17.8%; income before income taxes of ¥360.0 billion, a year-on-year increase of 18.9%; and net income attributable to Canon Inc. of ¥245.0 billion, a year-on-year increase of 14.1%.
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This document contains forward-looking statements with respect to future results, performance and achievements that are subject to risk and uncertainties and reflect management's views and assumptions formed by available information. All statements other than statements of historical fact are statements that could be considered forward-looking statements. When used in this document, words such as "anticipate," "believe," "estimate," "expect," "intend," "may," "plan," "project" or "should" and similar expressions, as they relate to Canon, are intended to identify forward-looking statements. Many factors could cause the actual results, performance or achievements of Canon to be materially different from any future results, performance or achievements that may be expressed or implied by such forward-looking statements, including, among others, changes in general economic and business conditions, changes in currency exchange rates and interest rates, introduction of competing products by other companies, lack of acceptance of new products or services by Canon's targeted customers, inability to meet efficiency and cost reduction objectives, changes in business strategy and various other factors, both referenced and not referenced in this document. A detailed description of these and other risk factors is included in Canon's annual report on Form 20-F, which is on file with the United States Securities and Exchange Commission. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those described herein. Canon does not intend or assume any obligation to update these forward-looking statements.
II. Basic Concept Regarding the Selection of Accounting Standards
Canon is listed on the New York Stock Exchange and, since registering its American Depositary Receipts on the OTC (over-the-counter) market in 1969, has prepared its consolidated financial statements in accordance with U.S. generally accepted accounting principles ("GAAP") over the long term.
Canon has continued to adopt U.S. GAAP in order to maintain the continuity of financial statements from the past and to maintain international comparability.