Canon Q3 Operating Profit Nearly Halves on Post-Brexit Yen Strength

[Canon Rumors Guy]

Canon has released their Q3 2016 financials and they’re still making money, just not as much as they’d like to be.</p>
<p><a href="http://www.reuters.com/article/canon-results-idUSL4N1CU215?type=companyNews">From Reuters</a>:</p>
<blockquote><p>Oct 26 Japan’s Canon Inc said on Tuesday its third quarter operating <span class="vm-hook-outer vm-hook-default"><span class="vm-hook">profit</span></span> fell 48 percent, hurt by a strengthened yen following Britain’s vote to leave the European Union.</p>
<p>Operating profit for the three months ended Sept. 30 declined to 40 billion yen ($383.62 million) from 77.3 billion yen a year earlier. Five analysts surveyed by Thomson Reuters estimated an average third quarter operating profit of 58.3 billion yen.</p>
<p>The world’s biggest maker of cameras and printers also lowered its operating profit forecast for the year through December to 235 billion yen from a 265 billion yen estimate in July. ($1 = 104.2700 yen) (Reporting by Tim Kelly; Editing by Muralikumar Anantharaman)</p></blockquote>
<p><strong>Financial Reports by Canon Inc</strong> (<a href="http://www.the-digital-picture.com/News/News-Post.aspx?News=19136">found at TDP</a>)</p>
<ul>
<li><a href="http://www.canon.com/ir/conference/pdf/conf2016q3e.pdf" target="_blank" rel="nofollow">Conference on results for 3Q 2016 Presentation material (PDF)</a></li>
<li><a href="http://www.canon.com/ir/conference/pdf/conf2016q3e-sum.pdf" target="_blank" rel="nofollow">Speech Summary (PDF)</a></li>
<li><a href="http://www.canon.com/ir/results/2016/rslt2016q3e.pdf" target="_blank" rel="nofollow">Results for 3Q 2016 (PDF)</a></li>
</ul>
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[Mt Spokane Photography]

Its amazing how one event can trigger currency changes that do not seem related on the surface. Was Canon hedging huge amounts that were suddenly devalued? They announced almost immediately after the vote that it would reduce profit.

 

[Woody]

So, from Jan to Sep 2016, Canon has sold 3.89 million (Q1=1.02M, Q2=1.5M, Q3=1.37M) ILCs.

Waiting for CIPA numbers for the same period... so that we can estimate Canon's market share so far... (the first half of 2016 has seen Canon dominating the ILC market with nearly 50% market share).

 

[tesign]

"Oct 26 Japan’s Canon Inc said on Tuesday its third quarter operating profit fell 48 percent, hurt by a strengthened yen following Britain’s vote to leave the European Union."

Or could it be Canon new product getting more expensive that sales slowed down.

Hmmm...?

 

[ritholtz]

"Oct 26 Japan’s Canon Inc said on Tuesday its third quarter operating profit fell 48 percent, hurt by a strengthened yen following Britain’s vote to leave the European Union."

Or could it be Canon new product getting more expensive that sales slowed down.

Hmmm...?

Lot of data in the attached report. ILC sales growth rate is +8% yoy and compacts are down by 50%. They are doing fine in ILC's. Based on value, 89% of cameras are ILC's. Hopefully we will see $400 Rebate with every DSLR soon. ;D

 

[Mt Spokane Photography]

"Oct 26 Japan’s Canon Inc said on Tuesday its third quarter operating profit fell 48 percent, hurt by a strengthened yen following Britain’s vote to leave the European Union."

Or could it be Canon new product getting more expensive that sales slowed down.

Hmmm...?

Due to the increased value of the Yen, Canon gets less for each exported item sold. In order to get the same value in Yen, prices would need to rise even more. Sales did not drop much in the third quarter, its just that Canon received less in Yen for each sale.

While Canon could drop prices and increase sales, they do not have much margin left to drop prices. I'm sure we will see sales for the Holiday Season, but they may not be as good as in past years where there was a larger margin of profit.

 

[davidmurray]

I've long thought it ridiculous that the Japanese yen is so worthless against most other currencies.
Given the value of the Japanese economy in the context of the world economy and the Western World's desire for electronic goods, why don't they arbitrarily shift the decimal point 5 places to the left for the Japanese yen both internally and externally.

I have to wonder what difficulties the Japanese people would be having when it comes to assessing the worth of something when so much of everything has 5 to 10 figure quantities of yen. Even a hamburger at McDonald's would have a 5 figure number. :-(

 

[sanj]

It seems like some people on this forum are right.

 

[duckduckbin]

I have to wonder what difficulties the Japanese people would be having when it comes to assessing the worth of something when so much of everything has 5 to 10 figure quantities of yen. Even a hamburger at McDonald's would have a 5 figure number. :-(

If you struggle with yen, then it'll be a torture for korean wan, a nightmare with vietnamese dong....
Now you know why Asians are good at math ;p

 

[eguzowski]

Karma biting them in the A$$ for putting out a 5D Mark III with video specs from three years ago. A crop factor of 1.7 on 4k, no tilt screen, no 4k HDMI out, to many mega pixels to process for event photographers, dynamic range of old...I'm guessing they are dragging in other products as well.

 

[zim]

Its amazing how one event can trigger currency changes that do not seem related on the surface. Was Canon hedging huge amounts that were suddenly devalued? They announced almost immediately after the vote that it would reduce profit.

Absolutely correct, except for the word 'amazing' I'd have used slightly stronger. In this case avtvm's catch phrase is probably quite accurate!

 

[zim]

http://www.digitalrev.com/article/apple-experiences-its-first-annual-revenue-slump-in-15-years

Bloody britexit at it again :

 

[time123]

While Canon could drop prices and increase sales, they do not have much margin left to drop prices. I'm sure we will see sales for the Holiday Season, but they may not be as good as in past years where there was a larger margin of profit.

Genuinely curious here; how did you determine what Canon's profit margins are on it's products? I didn't think that product profit margins were something Canon posts about and I'm pretty sure most companies keep that type of information secret.

 

[jeffa4444]

"Oct 26 Japan’s Canon Inc said on Tuesday its third quarter operating profit fell 48 percent, hurt by a strengthened yen following Britain’s vote to leave the European Union."

Or could it be Canon new product getting more expensive that sales slowed down.

Hmmm...?

Due to the increased value of the Yen, Canon gets less for each exported item sold. In order to get the same value in Yen, prices would need to rise even more. Sales did not drop much in the third quarter, its just that Canon received less in Yen for each sale.

While Canon could drop prices and increase sales, they do not have much margin left to drop prices. I'm sure we will see sales for the Holiday Season, but they may not be as good as in past years where there was a larger margin of profit.

The yen has appreciated against the £ sterling by 24% since January it was already rising before the Brexit vote. Canon UK prices have gone up inline with that drop except for the 80D which has remained at launch price. Some lenses notably new ones have unchanged but everything else has increased. How much Canon is obsorbing is very unclear, however I'm sure sales in the UK at least must be down consumers face rises in fuel, food & imported manufactured goods so disposable income is lower.

 

[rrcphoto]

really CR?

you don't post the actually astonishing ILC news in that brief?

"As for interchangeable-lens cameras, in the third quarter, sales increased 8% to 1.37 million units
thanks to mirrorless models and new DSLRs

Canon, through the launch of new products, has been working to stimulate latent demand for
interchangeable-lens cameras. For the new DSLRs that were launched in the first half of this year,
like the EOS 80D, which offers improved capacity to track fast-moving subjects, and the EOS Kiss
X80 (EOS Rebel T6 in the Americas, EOS 1300D in Europe) with its enhanced ability to connect to
networks, have been enjoying strong sales. In addition, the EOS 5D Mark IV, the core model
incorporating a full-size sensor that was launched in September has been contributing to sales since
its launch thanks to the well-balanced basic performance it offers in terms of still and video shooting.

Furthermore, for mirrorless cameras, following the EOS M3, we launched an affordably priced
model, the EOS M10 last year. We continued to post strong results through carrying out focused
marketing activities by strengthening online advertising and our sales network. We were successful
in generating new demand among groups that have had little familiarity with inter-changeable lens
cameras in the past, such as women and young generations. Enhancing our lineup in this way, we are
growing our mirrorless camera market share in Europe and Americas, but especially in Asia, and this
is now beginning to serve as an underpinning factor that supports our presence within the entire
interchangeable-lens camera market."


Canon is -1% YoY for Unit sales on ILC's. In a declining market.

 

[rrcphoto]

So, from Jan to Sep 2016, Canon has sold 3.89 million (Q1=1.02M, Q2=1.5M, Q3=1.37M) ILCs.

Waiting for CIPA numbers for the same period... so that we can estimate Canon's market share so far... (the first half of 2016 has seen Canon dominating the ILC market with nearly 50% market share).

CIPA will probably roll in at around 7.6-7.8 million units (as my guess) (a year ago there was 1 million shipped in Sept)

so somewhere in between a 49.8 to 51% marketshare.

 

[AvTvM]

it is not (only) Brexit and currency swings.
It is Canon's failure to bring fully competitive mirrorless camera + lens systems - both APS-C and FF - to market in a timely fashion. I really love seeing stupid Canon being presented the bill for it. Conservative, greedy b*stards, that's what you deserve. With love from one of you customers who is holding back spending more money on mirrorslapper cameras and mirrorslapper lenses.

 

[unfocused]

It seems like some people on this forum are right.

But which people. Certainly not the "Canon is Doomed" crowd?

Unfortunately, too few people will actually read the materials before commenting.

...It is Canon's failure to bring fully competitive mirrorless camera + lens systems - both APS-C and FF - to market in a timely fashion. I really love seeing stupid Canon being presented the bill for it. Conservative, greedy b*stards, that's what you deserve. With love from one of you customers who is holding back spending more money on mirrorslapper cameras and mirrorslapper lenses.

Ha. Ha. As I said. It's too bad so few people will actually read the materials. Clearly you didn't.

...While Canon could drop prices and increase sales, they do not have much margin left to drop prices. I'm sure we will see sales for the Holiday Season, but they may not be as good as in past years where there was a larger margin of profit.

A couple of problems here.

First, holiday price reductions are driven by the retailers, not by Canon.

Second, your statement seems to be contradicted by Canon.

[quote author=Canon]
As we head towards the year-end selling season, we expect competition to become increasingly fierce as we believe competitors will have adjusted their production systems and will work aggressively to recover lost ground. [/quote]

I don't believe Canon is going to sit idly by while other manufacturers attempt to steal sales.

 

[rrcphoto]

it is not (only) Brexit and currency swings.
It is Canon's failure to bring fully competitive mirrorless camera + lens systems - both APS-C and FF - to market in a timely fashion. I really love seeing stupid Canon being presented the bill for it. Conservative, greedy b*stards, that's what you deserve. With love from one of you customers who is holding back spending more money on mirrorslapper cameras and mirrorslapper lenses.

yes, the greedy bastards.. ILC sales up 8% in unit volume.

 

[IglooEater]

Okay maybe Brexit has hurt the world economy. (We'll only know that in 20 years) But blaming it entirely for a nearly 50% loss of profit is simply ludicrous. Another poster referred to Apple's slump in profits, too. Sounds to me like the electronics industry is hurting across the board, and some folks are trying to use Britain as a scapegoat to comfort investors.