Consequently, the U.S. economic climate indicated a significant decline. Likewise, the Japanese economy also remained stagnant, reflecting flat consumer spending and decreased capital spending in the business sector, the latter owing to declining profits stemming from sluggish export sales and production. As for the economies of Europe and Asia, the pace of economic growth was hampered by the weakened U.S. and Japanese economies. In addition, the terrorist attacks in the United States have increased uncertainty surrounding the future recovery of the global economy.
As for the markets in which the Canon Group operates, within the IT-related equipment segment, unfavorable consumer spending in Japan and the United States resulted in reduced demand for personal-use printers while corporate-use digital copying machines and printers generally posted favorable results. The digital camera market continued to show strong growth, fueled by the launch of several new products by digital camera makers targeting autumn sales campaigns. In the field of semiconductor-production equipment, inventory adjustments by memory device manufacturers stalled due to a sustained lack of demand for memory devices. Accordingly, memory device manufacturers continued to exercise restraint with regard to capital expenditures. The average value of the yen in the third quarter of 2001 was ¥121.69 to the U.S. dollar, and ¥108.27 to the euro; a depreciation of 12% and 10%, respectively, compared withthe corresponding period for the previous year.
Amid these conditions, Canon achieved consolidated net sales of ¥680.3 billion (US$ 5,717 million) in the third quarter, an increase of 7.6% compared with the same period for the previous year. The lower value of the yen and significant growth in sales for digital cameras and semiconductor production equipment contributed greatly to the favorable results along with steady growth recorded in copying machines. Despite severe price competition in the market, Canon’s gross profit ratio during the third quarter of the year improved by 3.4% to 45.2%, reflecting the positive effects of cost reductions, realized through continued production reformation activities, combined with the lower value of the yen. Selling, general and administrative expenses rose 12.3% from the same period for the previous year as R&D expenditure increased 14.8% to ¥51.3 billion (US$ 431 million). Consequently, operating profit in the third quarter totaled ¥78.2 billion (US$ 658 million), a substantial increase of 30.3%. In the area of other income (deductions), the promotion of cash flow management has resulted in improved financial strength, making possible a ¥0.5 billion (US$ 4 million) improvement in interest income and expense. Currency exchange loss, however, increased by ¥2.3 billion (US$ 19 million) and equity affiliates earnings also worsened by ¥5.0 billion (US$ 42 million) due to the deteriorating profit margins of affiliated companies that manufacture memory devices. As a result, other income (deductions) overall worsened by ¥10.2 billion (US$ 86 million) compared with the same period for the previous year. Consequently, income before income taxes totaled ¥70.1 billion (US$ 589 million), an increase of 12.8%. Net income grew by 4.6% to ¥37.5 billion (US$ 315 million) although the effective tax rate rose 5.6% due to decreased equity in income of affiliates.
Basic net income per share for the period was ¥42.77 (US$ 0.36), a ¥1.69 increase compared with the corresponding period for the previous year, owing to the growth in net income.
In the business machine segment, sales of copying machines grew 15.1% in the third quarter of the year, boosted by strong global demand for monochrome digital copying machines, especially the iR3300 series, launched in July of this year, and the iR5000/6000 series, along with newly introduced color copying machines. In the field of computer peripherals, while sales of laser beam printers and Bubble Jet printers showed a major decline on a local currency basis due to flagging demand in the PC market, the low value of the yen helped to offset the drop, resulting in a slight decrease of 1.7%. Sales of business systems, including facsimile machines, computers, micrographics and calculators increased 2.8%, despite the negative influence of severe price competition in the facsimile market. As a result, overall sales of business machines reached ¥513.4 billion (US$ 4,315 million), achieving 5.2% sales growth compared with the same period for the previous year. Operating profit in the business machine segment for the quarter increased 15.5%, to ¥83.7 billion (US$ 704 million), as cost-cutting measures and the positive effect of the weak yen minimized the negative impact of increased price competition.
While sales of 35mm and Advanced Photo System cameras slipped under the effects of the increasing popularity of digital models and price competition, sales of digital cameras nearly doubled during the third quarter of 2001 compared with the same period for the previous year. This can be attributed to the launch of five new Canon products in the first halfincluding the IXY DIGITAL 300 and 200 (PowerShot S300 and S110 in North America, DIGITAL IXUS 300 and v in Europe)aimed at strengthening Canon’s digital camera lineup to achieve greater market share. Sales of video camcorders in this quarter also continued to show substantial growth. Overall, camera sales achieved 9.5% growth, to ¥87.2 billion (US$ 733 million). Operating profit for the camera segment, however, decreased 9.8%, to ¥10.7 billion (US$ 90 million), mainly due to a drop in profits for 35mm and Advanced Photo System cameras, even despite the marked improvement in profitability for digital camera products.
Although orders from semiconductor manufacturers have declined, sales of optical and other products continued to grow substantially, increasing by 23.1% to ¥79.6 billion (US$ 669 million), supported by active capital investment by semiconductor device manufacturers through the end of last year. Also, the improved profitability of semiconductor production equipment and other products made possible an operating profit of ¥13.1 billion (US$ 110 million), an increase of 178.8% compared with the same period for the previous year.
Despite the large increase in net income, cash flow from operating activities between January 1 and September 30 2001 recorded an increase of ¥224.6 billion (US$ 1,887 million), ¥13.7 billion (US$ 115 million) less than the corresponding period for the previous year, mainly due to payment of trade payables.
SOURCE: COMPANY PRESS RELEASE
