Canon’s 2020 financial results show drop in net sales, increase in profits for Imaging Systems business: Digital Photography Review

Sales of Canon’s new R5 and R6 mirrorless cameras helped to mitigate further losses in a tumultuous 2020.

Today, canon issued its financial report for its entire 2020 fiscal year (FY2020), which ran from January 1, 2020 to December 31, 2020. In it, Canon’s numbers and notes point towards a more positive path for its imaging division than it’s seen in a number of years.

Since roughly 2012, the digital photography market has practically been in freefall, declining double-digit percentages year after year. 2020 isn’t any different, but even amidst the global COVID-19 pandemic, there is light at the end of the tunnel. Or, at the very least, the darkness is beginning to fade.

For reference, Canon’s Imaging System business includes its cameras, lenses, inkjet printers and other photo-related products. In this analysis, we’ll break down both the overall Imaging System business, as well as the camera-specific numbers, when available. All numbers are shown in Japanese Yen and American Dollars in parenthesis, with ‘B’ and ‘M’ representing billion and million, respectively.

A full breakdown of net sales and operating profit for Canon’s Imaging Systems business. The ‘Cameras’ division is specifically highlighted by Canon for this slide in its presentation. Click to enlarge.

For its FY2020, Canon’s Imaging System business reported net sales of ¥712.2B ($6.8B) and an operating profit of ¥71.8B ($690M), down 11.8% and up 49.1% year-over-year (YoY), respectively. Despite net sales being down 11.8%, both of these numbers are better than Canon’s FY2020 Q3 projections, which expected full-year net sales to be down 14.7% and operating profit to be up 5.9% YoY.

Looking at only camera sales for the Imaging Systems business, Canon reported net sales of ¥347.7B ($3.4B). This is higher than the ¥330.1B ($3.2B) Canon last projected but is still down 25.5% YoY. On a unit level, Canon sold 2.76 million digital interchangeable lens cameras. This is higher than the 2.7 million unit sales it last projected but is still 34% decrease YoY. Canon is already projecting next year will see a 1% increase in digital interchangeable lens camera sales. If the 1% increase holds true, it will be just the second time Canon has reported an increase in unit sales since 2013, with the other instance being a 2% increase back in 2016.

The 1% increase in unit sales might not be large, but it’s the first time since 2016 Canon’s projections have been positive.

The dramatic increase in operating profit YoY (especially when taking into account the decrease in net sales) shows Canon managed to dramatically reduce expenses for its Imaging Systems business in 2020. Based on the supplementary data provided by Canon, it managed to reduce expenses for its Imaging Systems business by roughly ¥30B ($290M) in FY2020 compared to FY2019. Most of that decrease is attributed to a massive ¥21B ($200M) decrease in research and development costs in FY2020.

As it did in its FY2020 Q3 documents, Canon attributes this to a ‘faster-than-expected’ recovery in camera demand following the initial plummet in sales due to the COVID-19 pandemic. Evidence of this can be seen in the following chart, which shows (highlighted) that Canon’s camera net sales were down just 6.1% in Q4, compared to being down 16% in Q3 and down a whopping 54.5% in Q2, which the initial surge of the COVID-19 pandemic hit. Canon specifically notes its EOS R5 and EOS R6 mirrorless cameras are ‘resonating very well’ and attributing to the recovery of its Imaging Systems business.

Click to enlarge.

While the COVID-19 pandemic continues to ravage much of the world, Canon notes the recent resurgence in cases — including the new strains of the novel coronavirus — doesn’t appear to have much of an impact on sales. Furthermore, Canon echoes the sentiments of Sigma CEO Kazuto Yamaki, who said in a recent interview he expects the photography market to stabilize in 2021. Canon says it expects the market contraction to be limited to just 3% YoY, which is a dramatic improvement compared to ~20% decreases seen over the past four years or so.

Looking forward to its 2021 fiscal year (FY2021), Canon is already projecting an increase in net camera sales of 4.8% and an increased operating profit (3.9%) for its entire Imaging Systems business.

Below are a few other tidbits from Canon’s full-year FY2020 presentation:

  • 35% of Canon’s camera unit sales are still digital compact cameras (1.48 million units)
  • Despite being 35% of unit sales, digital compact cameras account for only 13% of net sales by value (Canon includes lens sales in with the value of its interchangeable lens camera sales)
  • Canon is turning its Imaging Systems inventory around at a faster rate YoY (an average of 59 days in 2020 compared to an average of 66 days in 2019). This could be due to increased demand for printers since more people are working from home and Canon includes inkjet printers in its Imaging Systems business)
A breakdown of sales value and units between digital interchangeable lens cameras (DILC) and digital compact cameras (DCC). Click to enlarge.

Overall, it appears as though Canon has weathered the storm and is keeping its head held high going into a year where many think the camera market will begin to stabilize after nearly a decade of decline. Canon says it plans to strengthen its EOS R system and improve its product mix for 2021. What that entails remains to be seen, but we’ll be here and ready to cover the news as new products and services are announced.

You can read through all of Canon’s FY2020 investor relations materials on the Canon Global website.

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