Canon Inc. Q2 FY2017- Financial Results - Profits Continue to Rise

Canon Q2 FY2017 Headlines

  • Overall company Net Sales up y-on-y +15.4%
  • Overall company Operating Profit y-on-y +40.4%
  • Imaging System segment Net Sales down y-on-y -1.7%
  • Imaging System segment Operating Profit up y-on-y +12.2%
  • Sales of Mirrorless cameras grew by more than +70% in H1 2017

Canon Inc. continue to post improved results for the second quarter of 2017. Overall Sales are up and better still profits rise by +40.4%. Office products continue to perform strongly and the Industry sector returned a profit. The newly classified Medical sector is still 'finding its feet' and made a nominal profit. So the ongoing structural reforms are making good progress in a challenging market. What about the imaging sector?


Consolidated net sales have improved +15.4% to 992.5¥B and operating profit has improved y-on-y to 96.3¥B a +40.4% improvement. This improvement reflects the fact that the new businesses of AXIS and Toshiba Medical Services Corporation (TMSC) have been added to the fold. Operating profit to Net Sales ratio has also improved to 9.7% another good indicator.

Imaging Segment Results


The imaging segment that includes Digital Cameras, Lenses and Ink Jet Printers has been under pressure due to falling markets and strong competition suffered a -1.7% fall in Net Sales to 282.7¥B. This reduction came from a -2.2% fall in unit price of Ink Jet Printers and a -6% fall in the number of Digital Cameras sold. Operating profits were up +12.2% on the previous year to 48.5¥B.

Digital Camera Net Sales as a proportion of Whole Business


So how important are Digital Cameras and Lenses to the overall business results? The answer is less and less. As the market for Digital Cameras matures and growth is hard to come by, diversification to other more profitable areas where growth is strong will continue in the coming months and years. Using core strengths, such as Lens production, will aid in the development of some new business areas, i.e. Network Cameras.

Digital Camera Unit Sales by Type


Taking a closer look at the Digital Cameras sold we can see that Interchangeable Lens (IL) models have declined in numbers by -4.9% from 1.5M units to 1.43M units y-on-y. These include both ‘true’ DSLR and Mirrorless models. Compact Cameras continue to decline by -8.4% from 1.16M to 1.07M units y-on-y for this quarter.

The ratio of type by units sold is 57% in favor of IL cameras. Whereas, by value including lenses, this increases to 86%. Hence, the low priority put on producing low-cost fixed lens cameras.

Canon Market Share of the Digital Camera Market


The chart above is taken from Canons own figures of market size and predictions for the rest of 2017. These figures correlate reasonably well with CIPA figures. Canon's market share of IL cameras in 2016 was ‘just’ 49.3% of the total market by units. Very considerate of them to leave the other half for Nikon, Sony, Olympus, Fujifilm and Panasonic to fight over. In 2017, that is predicted to slip a little over 1% to 48.2%.

Not so with the Compact cameras. Here Canon only had 26.7% of the total market in 2016. This is predicted to rise as more advanced cameras take over this segment. Canon G-series cameras are gaining ground from the competition, especially with the G7x mkii and G9x mkii selling strongly. Full year predictions are for the market share of compact cameras to rise to 28.5%.


After a disrupted year in 2016 and continued market shrinkage, Canons Digital Camera business continues to outperform the market and minimize any downturn. Overall, business diversification is working well and now the Camera business is only worth 18% of sales.

Once the Digital Camera market reaches the bottom we will be able to get a better picture of who will be predominant and who will be sidelined. I still suspect that there will be casualties among the major manufacturers. That may play into Canons hands and they are well placed to benefit from such.

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