Canon Inc. Third Quarter 217 Results October 24, 217 Toshizo Tanaka Executive Vice President & CFO This presentation 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 presentation. A detailed description of these and other risk factors is included in Canon s annual report on Form 2-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.
Agenda 3Q 217 Results P3 6 FY 217 Projections P7 1 Details by Business P11 17 Financial Situation P18 21 Supplementary Information P22 27 2
Key Messages Recovery of existing businesses accelerating, New businesses expanding Further progress in business structure transformation" Third quarter 3rd consecutive quarter of significant YoY sales and profit growth Full-year projection Previous projection raised again Net sales +3 billion yen, operating profit +2 billion yen 3
3Q 217 in Summary 3rd consecutive quarter of YoY sales and profit growth starting from Q1, first time in 7 years Continued recovery of laser printer business Firm sales of cameras, particularly new models Continued expansion of FPD lithography equipment and OLED vacuum deposition equipment sales Benefits from new consolidation (Toshiba Medical) 4
Summary of Results 3Q 217 Actual 3Q 217 3Q 216 Actual Actual Pct. Change Net Sales 994.5 778.8 +27.7% Gross Profit 482.2 376.6 +28.% (% Sales) 48.5% 48.4% Op. Profit 8.5 4. +11.1% (% Sales) 8.1% 5.1% Net Income Attributable to Canon Inc. 63.1 24.4 +158.6% (% Sales) 6.3% 3.1% Foreign Exchange Rate Yen 1USD 11.93 12.33 Yen 1EURO 13.42 114.25 5
Transition in Sales and Op. Profit 3Q 217 Actual v. 3Q 216 Actual Sales Op. Profit 3Q 216 Actual 778.8 4. Foreign Exchange Impact +57.3 +19.1 (Net Sales, Cost of Sales, Expenses) Sales Volume Impact Office +6.7 Imaging System +.4 Medical System +111.6 Industry and Others +43.6 Total +162.3 +6.5 Others -3.9-39.1 Total Change +215.7 +4.5 3Q 217 Actual 994.5 8.5 1USD: 1EURO: Change in Exchange Rate 12.33 to 11.93 yen 114.25 to 13.42 yen 6
Exchange Rate Assumptions 217 Current Projection Average Exchange Rate 4Q17 FY17 FY16 Yen-1USD 112. yen 111.88 yen 18.58 yen Yen-1EURO 132. yen 126.49 yen 12.25 yen Impact of Exchange Rate Movement (4Q Impact Given a One Yen Change) Net Sales Operating Profit USD 3.8 billion yen 1.3 billion yen EURO 1.9 billion yen 1. billion yen 7
Overview of Current Projection Full-year projection Further progress in business structure transformation Versus last year Sales and profit growth First time in 4 years Existing businesses - Recovery of Laser printer and camera businesses, Lithography equipment New businesses - 2% growth in network cameras, 5% growth in OLED vacuum deposition equipment, as well as contribution from Toshiba Medical Versus previous projection Raised projection for net sales by 3 billion yen and operating profit by 2 billion yen Better-than-expected improvement compared to our previous projection Revised exchange rate assumptions 8
Summary of Projected Results FY 217 Current Projection FY 217 FY 216 Pct. Change Current Projection Actual Net Sales 4,8. 3,41.5 +19.9% Gross Profit 1,984. 1,673.8 +18.5% (% Sales) 48.6% 49.2% Op. Profit 35. 228.9 +52.9% (% Sales) 8.6% 6.7% Net Income Attributable to Canon Inc. 245. 15.7 +62.6% (% Sales) 6.% 4.4% Foreign Exchange Rate Yen 1USD 111.88 18.58 Yen 1EURO 126.49 12.25 9
Transition in Sales and Op. Profit FY 217 Current Projection v. FY 217 Previous Projection Sales Op. Profit Previous Projection (Jul. 27, 217) 4,5. 33. Foreign Exchange Impact (Net Sales, Cost of Sales, Expenses) +21. +9.3 1USD: 1EURO: Change in Exchange Rate 112.14 to 111.88 yen 123.39 to 126.49 yen Sales Volume Impact Office -12.3 Imaging System +4.8 Medical System -2.4 Industry and Others +17.9 Total +8. +8.4 Others +1. +2.3 Total Change +3. +2. Current Projection (Oct. 24, 217) 4,8. 35. 1
Office 3Q 217 Actual Sales Growth rate y/y ( ) Local currency base 6 Monochrome copiers Color copiers 4 Printers 411 486 458 Others 471 444 Office +8.1%(+.5%) Others +4.3%(-3.4%) 3Q17 Growth Rate y/y (Unit Base) Copiers Printers Color +11% -6% Monochrome -2% -8% Total +4% -8% Op. Profit Op. Profit Ratio 3Q17 Color Ratio Copiers Printers Value Base* 58% 54% Unit Base 54% 18% Op. Profit *Includes Consumables Growth rate y/y +47.3% 2 Printers +11.2%(+4.1%) 1.% 12.1% 11.9% 9.5% +9.4%(+1.3%) 6.9% 29 49 55 56 42 +5.3%(-2.3%) 3Q16 4Q16 1Q17 2Q17 3Q17 Copier total +7.6%(-.3%) 3Q16 4Q16 1Q17 2Q17 3Q17 11
2, 1,5 Office FY 217 Projection Monochrome copiers Printers Sales Growth rate y/y ( ) Local currency base 2,5 Color copiers Others Office +3.3%(+.6%) 1,88 1,869 1,867 Others +1.5%(-1.5%) FY17 Growth Rate y/y (Unit Base) Copiers Printers Color +8% +3% Monochrome -3% -2% Total +3% -1% Op. Profit Op. Profit Ratio FY17 Color Ratio Op. Profit Copiers Growth rate y/y +24.2% Printers Value Base* 59% 52% Unit Base 54% 18% *Includes Consumables 1, Printers +3.4%(+1.2%) 9.4% 11.1% 11.3% 28 211 5 +7.2%(+4.1%) 169 +.7%(-2.%) FY16 FY17 FY17 Previous Current Projection Projection Copier total +4.4%(+1.4%) FY16 FY17 FY17 Previous Current Projection Projection 12
3 2 Imaging System 3Q 217 Actual Growth rate y/y ( ) Local currency base 4 248 Cameras IJP Others 325 Sales 242 283 Imaging System +9.%(+.4%) 271 IJP +6.6%(-1.3%) Growth Rate y/y (Unit Base) 3Q17 Interchangeable Lens Digital Cameras -5% Compact Digital Cameras +13% Total Digital Cameras +2% IJP +1% Op. Profit Op. Profit Ratio Op. Profit Interchangeable Lens Digital Camera Ratio * 3Q17 Value Base 86% Unit Base 61% * Proportion of Total Digital Cameras * Value Base Includes Interchangeable Lenses Growth rate y/y +31.1% 1 Cameras +11.2%(+2.2%) 12.% 3 15.9% 52 12.1% 29 17.2% 48 14.5% 39 3Q16 4Q16 1Q17 2Q17 3Q17 3Q16 4Q16 1Q17 2Q17 3Q17 13
1,2 8 Imaging System FY 217 Projection Growth rate y/y ( ) Local currency base 1,6 Cameras IJP Others 1,95 Sales 1,119 Imaging System +3.4%(+.4%) 1,133 IJP +1.5%(-1.2%) Growth Rate y/y (Unit Base) FY17 Interchangeable Lens Digital Cameras -3% Compact Digital Cameras -1% Total Digital Cameras -2% IJP +2% Op. Profit Op. Profit Ratio 13.2% Op. Profit 14.3% Interchangeable Lens Digital Camera Ratio * FY17 Value Base 85% Unit Base 58% * Proportion of Total Digital Cameras * Value Base Includes Interchangeable Lenses Growth rate y/y +19.1% 15.2% 4 Cameras +4.8%(+1.6%) 144 16 172 FY16 FY17 Previous FY17 Current Projection Projection FY16 FY17 FY17 Previous Current Projection Projection 14
Medical System 3Q 217 Actual & FY 217 Projection Sales Op. Profit 5 44 439 Op.Profit Op.Profit Ratio 15.% 4 1.% 3 7.5% 6.7% 2 1 132 89 112 4.7% 4.9% 21 22 5.% 1Q17 2Q17 3Q17 FY17 Previous Projection FY17 Current Projection 1.2% 1Q17 2Q17 3Q17 FY17 Previous Projection 7 FY17 Current Projection.% Note : The figures for 1Q17, pertaining to Medical System Business Unit, which was included in "Industry and Others" Business Unit, were reclassified. 15
13.5% 6.% -1.5% Industry and Others 3Q 217 Actual Net Sales Gross Sales (Includes sales among Group businesses) Sales Eliminations (Sales among Group businesses) 25 15 5-5 12 115 26 Growth rate y/y ( ) Local currency base Sales Eliminations Lithography Equipment Others Gross 141 156 141 Sales 142 122 151 129 35 4 44 169 137 55-21 -2-2 -21-22 3Q16 4Q16 1Q17 2Q17 3Q17 Note : The figures for 1Q17, pertaining to Medical System Business Unit, which was included in "Industry and Others" Business Unit, were reclassified. Industry and Others Net Sales +4.6% (+36.8%) Gross Sales +35.9% (+32.7%) Gross 191 (Litho.Equip.) +112.4% (+11.3%) Lithography Equipment (Unit Sales) 3Q16 3Q17 IC 14 15 FPD 7 29 3 2 1 3.1% 4 Op. Profit Op. Profit Op. Profit Ratio *Calculation of operating profit ratio includes intersegment sales 1.8% 3 5.4% IC Lithography Unit Breakdown by Light Source 3Q16 3Q17 ArF KrF 5 4 i-line 9 11 9 7.6% 13 Growth rate y/y +327.1% 9.8% 19 3Q16 4Q16 1Q17 2Q17 3Q17 16
1.% 9.% 8.% 7.% 6.% 5.% 4.% 3.% 2.% 1.%.% Industry and Others Net Sales Gross Sales (Includes sales among Group businesses) Sales Eliminations (Sales among Group businesses) FY 217 Projection 1, 6 2-2 Growth rate y/y ( ) Local currency base Sales Eliminations Lithography Equipment Others 52 464 121 Sales Gross 585 625 645 512 532 198 198-82 -85-85 FY16 FY17 FY17 Previous Current Projection Projection Lithography Equipment (Unit Sales) Industry and Others Net Sales Gross 73 FY16 +28.4% (+26.9%) Gross Sales +24.9% (+23.6%) (Litho. Equip.) FY17 FY17 Previous Current Projection Projection IC 64 74 73 FPD 37 86 86 +63.2% (+62.1%) 8 6 4 2 Op. Profit Op. Profit Ratio *Calculation of operating profit ratio includes intersegment sales 1.3% 7 IC Lithography Unit Breakdown by Light Source Op. Profit 6.5% 46 FY16 FY17 FY17 Previous Current Projection Projection ArF KrF 19 24 24 i-line 45 5 49 Growth rate y/y +625.% 7.4% 54 FY16 FY17 FY17 Previous Current Projection Projection 17
Inventories 8 Amount Turnover (Days) 9 7 6 57 595 47 52 53 55 59 54 55 57 597 621 561 569 7 5 3 5 52 521 479 494 1-1 4-3 3 3QE15 4QE15 1QE16 2QE16 3QE16 4QE16 1QE17 2QE17 3QE17-5 18
Capital Free Cash Flow Expenditure 1, Increase in PP&E Net Income Attributable to Canon Inc. Depreciation 1, Operating C/F Free C/F Investing C/F 75 5 315 21 837 295 33 5 584 475454 5 55 55 255 22 151 22 245 269 255 22 25 264 273 25 26 255 182 195 172 19 175-337 FY14 FY15 FY16 FY17 FY17 Previous Current Projection Projection (5) FY14 FY15 FY16 FY17 FY17 Previous Current Projection Projection 19
Cash on Hand Cash on Hand (Year-end) 1,5 Cash-on-hand Cash-on-hand (In months of 2nd-half net sales.) 4 3.5 3 1, 2.4 2.6 2.2 2.5 789 845 1.9 1.7 1.8 2 5 634 63 6 64 1.5 1.5 FYE13 FYE14 FYE15 FYE16 FYE17 Previous Note : Approx. 5, 15 and 5 billion yen was used to acquire Projection own shares in 213, 214 and 217, respectively. The cumulative amount since 27 is approx. 1.1 trillion yen. FYE17 Current Projection 2
Dividend (Yen) 2 18 16 14 12 1 8 6 4 2 Regular Dividend Commemorative Dividend Dividend Payout Ratio 13 13 1 67.2% 64.6% 64.6% 15 15 15 74.4% 18.7% 16 1 7.5% FY12 FY13 FY14 FY15 FY16 FY17 Plan 12% 1% 8% 6% 4% 2% % 21
Supplementary Information 22
Transition in Sales and Operating Profit FY 217 Current Projection v. FY 216 Actual Sales Op. Profit FY 216 Actual 3,41.5 228.9 Foreign Exchange Impact (Net Sales, Cost of Sales, Expenses) +89.8 +31.6 Sales Volume Impact Office Imaging System Medical System Industry and Others +31.1 +6.3 +438.2 +135.1 Total +61.7 +238.5 Others -22. -149. Total Change +678.5 +121.1 FY 217 Current Projection 4,8. 35. 1USD: 1EURO: Change in Exchange Rate 18.58 to 111.88 yen 12.25 to 126.49 yen Supplementary Information 23
Gross Profit Variance Analysis 3Q 217 Actual v. 3Q 216 Actual 3Q17 3Q16 Change 12 Gross Profit 482.2 376.6 +15.6 % Sales 48.5% 48.4% +.1pt. 15.6 8 57.3 6.5 4 1.3-3.9-18.6-4 Forex Impact on Sales Sales Volume Impact Price Change Forex Impact on Costs Cost Reduction Total Change in Gross Profit Supplementary Information 24
Operating Profit Variance Analysis 3Q 217 Actual v. 3Q 216 Actual 3Q17 3Q16 Change Op. Profit 8.5 4. +4.5 % Sales 8.1% 5.1% +3.pt. 12 15.6 6 4.5-19.6-6 Total Change in Gross Profit -45.5 Change in SG & A (Excluding Forex Impact) Change in SG & A (Forex Impact) Total Change in Operating Profit Supplementary Information 25
Interest Bearing Debt 45 3.% Debt Debt/Total Assets 613 63 25.% 2.% 11.9% 11.6% 15.% 1.% 5.% 3 2 2.1%.%.% FYE13 FYE14 FYE15 FYE16 3QE17.% Supplementary Information 26
Financial Ratios (Yen) 9 15% 6 8.4% 8.7% 7.4% 8.8% 1% 3 5.6% 2.78 5.9% 229.3 5.% 21.65 5.2% 3.1% 137.95 4.8% 225.71 5% FY13 FY14 FY15 FY16 FY17 Current Projection EPS(Basic) (Attributable to Canon Inc.) ROE ROA % Supplementary Information 27