Ib Turnover
Ib Turnover
Ib Turnover
Since Canon reinvests in growth within the scope of the cash it generates, its
management is generally debt-free. However, this has not always been the case as in
2016, Canon borrowed money from financial institutions to finance the acquisition of
the medical business, which is now a pillar of Canon's new businesses. Canon is
repaying these borrowings while maintaining sufficient corporate liquidity, and this
borrowing is expected to be fully repaid in 2023.
At a time when almost every industry-oriented business group is making every effort
to expand profits under the principle of putting profit as their top priority, Canon is
also pursuing balance sheet management rigorously. In other words, the company is
working to manage inventories and trade receivables more efficiently by finding ways
to reduce these accounts. Regarding the management of business operations, they
have set three easy-to-follow key indicators as guidelines: net sales, profit, and cash
flow. Additionally, Canon has implemented a framework in which the Finance &
Accounting Headquarters centrally manages indicators such as return on equity (ROE)
to improve capital profitability and turnover.
Summary of Operations
Millions of Yen
2022 Change 2021 Change 2020
Net sales 4,031,414 +14.7% 3,513,357 +11.2% 3,160,243
Operating profit 353,399 +25.4% 281,918 +155.0% 110,547
Income before income taxes 352,440 +16.4% 302,706 +132.4% 130,280
Net income attributable to 243,961 +13.6% 214,718 +157.7% 83,318
Canon Inc.
Source: Canon Annual Report 2022
As observed on the table, Canon is having an overall noticeable increase in the net
sales criterion. This means that the sales turnover of Canon Inc. has been getting
bigger over the years, with its growth rate changing from 11,2% to 14,7% in 2021
and 2022, respectively.
Other areas like operating profit, income before income taxes, and net income
attributable to Canon Inc. also witnessed a considerable increasing trend as all figures
grew larger than in previous years. In general, judging from this summary, we can say
that Canon is operating at a profit, as these profitability indexes have all increased
over the years.
The main operating expenses are employee salaries, research and development,
advertising, and other marketing costs. In 2022, operating expenses rose by 9.5%
year-over-year to ¥1,474,403 million. This was due to a weakening yen, which made
operating expenses in foreign currencies more expensive, and to an increase in selling
expenses as sales grew. However, operating expenses as a percentage of net sales
decreased by 1.8 points to 36.5% due to ongoing efforts to control costs and improve
management structure.
III. How does Canon manage its corporate finance?
Regarding this document, we will analyze how Canon Inc. manages its finances
as followed, namely the Investment Decision, The Financing Decision, and the
Global Money Management using financial summaries and consolidated
statements of cash flows as our sources of analysis.
Regarding the investment decision, Canon considers equity price risk as an indicator
to make an investment decision. Canon prefers to hold marketable securities as part of
the company’s current assets. These securities are oftentimes very liquid and have a
low risk of default. Canon also owns investments that are part of its noncurrent assets
and they are held in the long term to make available for any future use. In this sense,
Canon is not interested in the short-term profitability when purchasing or selling
marketable securities or investments. The following table shows the maturities and
fair values of marketable securities and investments with original maturities of more
than three months as of December 31, 2022.
1. Canon strives to generate more cash flow and enhance a highly profitable structure
by further improving the profitability of existing businesses and accelerating the
growth of new businesses.
However, Canon plans to actively engage in large-scale M&A for growth strategies
and is also willing to raise external funds as needed. According to Canon’s Annual
Report 2022, the company made the movements of raising funds and using funds
wisely to achieve the highest profitability. The activities are described below:
• Return to shareholders:
Canon pays back profits to shareholders mainly in the form of dividends while taking
into consideration medium to long-term business prospects, planned future
investments, cash flows, and other factors.
• Repayment of borrowings:
Canon has been repaying borrowings steadily to have sufficient financial strength,
following investment for growth and return to shareholders.
The operating profit on foreign operation sales is usually lower than that from
domestic operations because foreign operations consist mainly of marketing activities.
Marketing activities are generally less profitable than production activities, which are
mainly conducted by the Company and its domestic subsidiaries.
The following table provides information about Canon’s major derivative financial
instruments related to foreign currency exchange transactions existing as of December
31, 2022. All of the foreign exchange contracts described in the following table have a
contractual maturity date in 2023.
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