FY2018 1Q Results

April 25, 2018
Yoshiyuki Matsusaka
Director, Senior Vice President* The figures are rounded off to the nearest 100 million yen in this material.
* Forward-looking statements and results forecasts presented in this material are based on the management’s assumptions using currently available
information and therefore contain inherent risks and uncertainties.
As a consequence, due to a range of possible factors, actual results may materially differ from the forecasts.

Summary of 2018 1Q Results
Net sales¥150.8 B （Y/Y -2.0B, -1％）

 The Enterprise and Professional segments achieved sales growth, while
the Consumers and Area segments suffered a sales decline. Net salesdeclined.

Operating Income¥3.7 B （Y/Y -1.9B, -34％）

 Operating income fell mainly due to the shrinkage of the gross profit in theConsumers segment.

Profit attributable toowners of parent¥2.5 B （Y/Y -1.5B, -37％）
1

Summary of Results

1Q 2018 Actual(from January 1 to March 31)(Billions of yen)

 Summary of Results

1Q 2017

Net sales

1Q 2018

ChangesAmount%152.8

150.8-2.0(35.1%)(34.5%)(-0.7%)

53.7

52.0-1.7(3.7%)(2.5%)(-1.2%)

5.7

3.7-1.9(3.8%)(2.7%)(-1.0%)

Ordinary income

5.8

4.1-1.7

Profit attributable toowners of parent(2.6%)(1.7%)(-0.9%)

4.0

2.5-1.5

Gross profit
Operating income-1%-3%-34%-29%-37%

 Op. Income Variance Analysis

11.8

10.9

1Q 2017

Decrease in
net sales

Decrease ingross profit

Increase in
SG&A expenses

1Q 20182

Overview of New Segments
Consumers

Professional

Selling Canon products such as digital camera
and ink jet printers and products from externalsuppliers to general individual customers

Providing solution businesses targeting customers inspecialized fields of each area

Enterprise
Providing IT solutions and services catering to the needsof each business category in addition to sales of I/O
devices to large enterprises<Principal group companies>
Canon IT Solutions Inc.
Canon Biz Attenda Inc.

Production Printing
Providing continuous feed printings and high-speed cut
sheet printings primarily to the printing industry<Principal group company>
Canon Production Printing Systems Inc.

Industrial Equipment
Providing semiconductor manufacturing equipment andinspection and measurement equipment primarily tomanufacturers of semiconductors and other electronicdevices

Healthcare

Area
Providing IT solutions including management solutions inaddition to sales of I/O devices primarily to medium- andsmall-sized enterprises across the country<Principal group company>
Canon System & Support Inc.

Providing pharmaceutical equipment, IT systems andothers to healthcare and health checkup providers<Principal group companies>
Canon Lifecare Solutions Inc.
Canon ITS Medical Inc.

Imaging Solutions
Providing network camera solutions for surveillance andcommercial video equipment to broadcasters3

1Q 2018 ActualSegment Outline(from January 1 to March 31)(Billions of yen)

1Q 2017
Net sales

1Q 2018

Op.
IncomeNet sales

ChangesOp.
IncomeNet sales

Op.
IncomeConsumer

32.7

0.3

26.8

-2.1

-5.8

-2.4

Enterprise

44.2

2.0

47.1

2.5

+2.9+0.5

Area

68.1

3.5

66.4

2.9

-1.7

-0.5

Professional

13.5

-0.2

16.5

0.3

+2.9+0.5

Other-5.7

0.2

-6.0

0.1

-0.3

-0.1

Total

152.8

5.7

150.8

3.7

-2.0

-1.9

Notes
* “Other” includes the intersegment sales, the shared service businesses and the corporate expenses that are notallocated to each segment.
4

Segment Information Consumer Segment
Net sales : 26.8 B （ Y/Y -5.8B, -18%）
 While sales of mirrorless cameras surged after the introduction of new products, digital interchangeable lens cameras as awhole declined. Sales and sales volume of inkjet printers and ink cartridges fell due to the impact of an increase in store
stock.

Operating income -2.1 B （ Y/Y -2.4B, -%） Operating income fell following a decrease in the gross profit due to the sales decline and the additional fee to promote thesales of store stock.

Net sales

2018 Actual v. 2017 Actual

1Q 2017

1Q 2018 Changes

Net sales

32.7

26.8-5.8

Op. income

0.3-2.1-2.4

Net sales - Growth rate (Y/Y)

1Q
FY20182Q(Billions of Yen)

Op. income

3Q

4Q

FY-18%

5

Segment Information Enterprise Segment
Net sales : 47.1 B （ Y/Y +2.9B, +7%）
 Net sales increased after a growth in sales of industry-specific solutions for large companies and SI
services of Canon IT Solutions.

Operating income 2.5 B （ Y/Y +0.5B, +28%）
 Operating income surged mainly due to an increase in the profitability of SI services.
Net sales

2018 Actual v. 2017 Actual

1Q 2017

1Q 2018 Changes

Net sales

44.2

47.1+2.9Op. income

2.02.5+0.5

Net sales - Growth rate (Y/Y)

1Q
FY20182Q(Billions of Yen)

Op. income

3Q

4Q

FY

+7%
6

Segment Information Area Segment
Net sales : 66.4B （ Y/Y -1.7B, -3%）
 Net sales declined after a fall in sales of main hardware and maintenance services.

Operating income 2.9B （ Y/Y -0.5B, -15%）
 Operating income fell following a decrease in the gross profit due to the sales decline.
Net sales

2018 Actual v. 2017 Actual

1Q 2017

1Q 2018 Changes

Net sales

68.1

66.4

-1.7

Op. income

3.5

2.9-0.5

Net sales - Growth rate (Y/Y)

1Q
FY2018(Billions of Yen)

2Q

Op. income

3Q

4Q

FY-3%
7

Segment Information Professional Segment
Net sales : 16.5 B （ Y/Y +2.9B, +22%）
 Net sales grew after brisk sales of semiconductor manufacturing equipment and inspection andmeasurement equipment among industrial equipment.

Operating income 0.3 B （ Y/Y +0.5B, -%） Operating income increased due to sales growth of industrial equipment.
Net sales

2018 Actual v. 2017 Actual

1Q 2017

1Q 2018 Changes

Net sales

13.5

16.5+2.9

Op. income-0.2

0.3+0.5

Net sales - Growth rate (Y/Y)

1Q
FY20182Q(Billions of Yen)

Op. income

3Q

4Q

FY

+22%

8

Segment Information Professional Segment
Net sales - Growth rate (Y/Y)

FY2018
1Q Results

Production Printing-7%

Industrial Equipment+125%

Healthcare Business-5%

Imaging Solutions-9%

Production Printing
Sales dropped as a result of sluggish sales of continuous feed printers.

Industrial Equipment
Sales jumped after brisk sales of semiconductor manufacturing equipment, inspection andmeasurement equipment, industrial components and others.

Healthcare Business
Sales slid due mainly to the weakness of modality projects for hospitals.

Imaging Solutions
Sales fell due to the postponement of network camera deals despite healthy sales of products forbroadcasters.

9Overall Sales of IT Solutions(Billions of Yen)

Sales of IT Solutions by Segment
ChangesAmount%1Q 2017

1Q 2018

Enterprise segment

26.6

29.9

+3.3+12%

Area segment
Other15.2
4.6

15.15.2-0.1+0.6-1%+13%

Total

46.4

50.2+3.7+8%

Reference: Overall IT Security
Y/Y
2017 vs2018
1Q

Overall IT Security Amount

+0%

10

Summary of Projections(Billions of Yen) There is no revision of projection for FY2018.
FY2018
Projection

Net Sales

FY2017
ActualChanges
Amount

645.0

632.2

+12.8(5.0%)(4.8%)(+0.2%)

32.0

30.4

+1.6(5.1%)(5.0%)(+0.1%)

Ordinary Income

33.0

31.5+1.5

Profit attributable toowners of parent(3.4%)(3.3%)(+0.1%)

21.7

20.7+1.0

Operating Income%+2%+5%+5%+5%11Summary of Projections by Segment(Billions of Yen)FY2018 Current Projection v. Previous Projection
FY2018FY2018PreviousProjection

CurrentProjection
NetOp.
Sales
IncomeNet Sales

Changes
Net Sales
Amount%Consumer

163.4

163.0

11.6

-0.4

-0%

Enterprise

182.7

183.0

8.5

+0.3

+0%

Area

263.3

261.0

13.2

-2.3

-1%

Professional

61.5

61.0

-1.3

-0.5

-1%

Other

-25.9

-23.0

0.0

+2.9

-

Total

645.0

645.0

32.0

--Notes* “Other” includes the intersegment sales, the shared service businesses and the corporate expenses that are notallocated to each segment.
12Summary of Projections by Segment(Billions of Yen)FY2018 Projection v. FY2017 Actual
FY2017FY2018ActualCurrent ProjectionOp.
Net Sales
IncomeChanges

Net Sales

Op.
IncomeConsumer

166.3

12.7

163.0

11.6

-3.3

-2%

-1.1

Enterprise

177.1

7.9

183.0

8.5

+5.9

+3%+0.6

Area

257.3

11.2

261.0

13.2

+3.7

+1%+2.0

Professional

54.5

-1.9

61.0

-1.3

+6.5

+12%+0.6

Other-23.0

0.5

-23.0

0.0

-0.0

+0%

-0.5

Total

632.2

30.4

645.0

32.0

+12.8

+2%+1.6

Net Sales
Amount%Op.
IncomeNotes* “Other” includes the intersegment sales, the shared service businesses and the corporate expenses that are notallocated to each segment.
13

Earnings Forecast: Segment Information (1)Consumers■Sales of digital SLR cameras is expected to be weak and to shrink despite a rally in the shipment of somemodels as a result of the rectification of store stock. As for mirrorless cameras, positive promotional
activities will be conducted with a focus on new models and a massive sales rise is anticipated. The segment
aims to achieve growth in all models for beginners.
■The compact digital camera market is forecasted to remain weak. However, the segment will make intensive
efforts to expand sales of high magnification models with high unit prices.
■For inkjet printers, sales volume is expected to fall, but efforts will be made to promote high capacity
cartridge models and high unit price models. The segment will aim to achieve sales growth of all printers,
including printers for SOHO and laser printers.

Enterprise■ Net sales is expected to rise year-on-year, because the manufacturing sector will make a strong investment
in boosting operational efficiency. The segment will strive to win new SI development projects and topropose and offer strong financial solutions to the financial industry with a view toward sales growth. For
cultural and educational institutions, it will increase Canon’s unique solutions, such as the in Campus series,
to speed up the shift from hardware to solutions and to attain a rise in sales.
■ The segment anticipates that data center services in the category of IT infrastructure services will expand,
and will continue with the shift of the embedded business to external sales, with a focus on the industrial
field, including automotive control systems, to external sales.
■ With respect to business equipment, the segment foresees a slight decline in sales of MFPs and sales
growth in laser printers as a result of large deals.

14

Earnings Forecast: Segment Information (2)Area■ The Area segment should see an increase in office MFP shipments, reflecting proposals that will broaden
the range of situations in which customers use them in business by linking it with cloud computing. For
production MFPs, the segment will endeavor to gain new customers in a bid to expand Machine in Field(MIF). For laser printers, while foreseeing a decline in quantity due to integration into MFPs and a decreasein deals, the segment will continue its promotion of applications for specific purposes in a bid to achieve
growth of cartridge sales.
■ For IT solutions, the segment will make proposals aimed at increasing customers’ security in the area ofsecurity solutions to achieve sales growth. In addition, a sales of “HOME”and IT Maintenance Services willcontinue to increase .

Professional■Production Printing: Growth in sales volume and sales after the release of new models of color light
printers for cut sheets and replacing monochrome continuous feed printers to color ones is forecast.
■Industrial Equipment: An increase in sales based on the continued briskness of the semiconductor market
is anticipated.
■Healthcare: A sales hike arising from the sales expansion of digital radiography systems and medical ITsystems is expected.
■Imaging Solutions: Deals with broadcasters relating to replacements with 4K-ready equipment areexpected to increase. The segment will promote network cameras for customers operating multiple storesin a bid to attain sales growth.

15

SupplementaryInformation

916

Capital Relationship Diagram

17

Results of main consolidated companies(Billions of Yen)

1Q FY2017

1Q FY2018

Net sales
Op. income

20.4
1.3

(6.3%)

21.9
1.8

Net sales
Op. income

32.1
1.2

(3.8%)

30.6
0.8

Net sales
Op. income
Net sales
Op. income

3.2
-0.2
3.9
0.1

ChangesAmount%+7%(8.2%)+1.5+0.5(2.6%)-1.6-0.4

Enterprise
Canon IT Solutions Inc.

(+1.9%)

Area
Canon System & Support Inc.

-5%(-1.2%)

Professional
Canon Production PrintingSystems Inc.
Canon Lifecare Solutions Inc.

(-)

(3.8%)

2.9-0.2
3.40.1(-)(4.3%)

-0.2
+0.0
-0.5
-0.0-7%(-)-13%(+0.5%)

18

SG&A expenses(Billions of Yen)

FY 2017
1Q

FY 2018 Changes
1Q
1Q

Advertising expenses

1.8

1.9

+0.1

Promotion expenses

1.2

1.1

-0.0

Warranty expenses

1.4

1.3

-0.1

Other direct selling expenses

5.1

4.8

-0.3

Personnel expenses

30.9

31.5

+0.7

Depreciation and amortization

0.5

0.3

-0.2

Other selling expenses

7.2

7.3

+0.1

48.048.3+0.2

Total

19

Non-operating income and expenses(Billions of Yen)

 Non-operating income

Interest income
Dividend income
Gain on investments in partnership
OtherTotal

FY 20171Q
0.00.00.1
0.2

FY 2018
1Q
0.0
0.0
0.2
0.2
0.5

Changes1Q-0.0+0.0+0.2+0.0+0.3

FY 20171Q
0.00.00.1
0.1

FY 2018
1Q
0.00.1
0.1

Changes1Q-0.0-0.0-0.0-0.0

 Non-operating expenses

Interest expenses
Foreign exchange losses
OtherTotal

20

Extraordinary income and expenses(Billions of Yen) Extraordinary income

Gain on sales of fixed assets
Gain on sales of investment in securities
OtherTotal
 Extraordinary expenses

Loss on sales and disposal of fixed assets
Loss on impairment of fixed assets
Loss on valuation of investment securities
Expenses for restructuring of business bases
OtherTotal

FY 2017
1Q
0.0
0.5
0.5

FY 20181Q
0.1
0.1

Changes
1Q
+0.1
-0.5
-0.4

FY 2017
1Q
0.0
0.0
0.0
0.0

FY 20181Q
0.1
0.00.10.0
0.00.2

Changes
1Q
+0.0
+0.0
+0.1+0.0
-0.0
+0.2
21

Balance Sheets
Dec. 31
2017

AssetsMar. 31
Changes
2018

510.8

493.2

-17.6

397.5

380.3

-17.3

Cash and deposits

137.0

99.1

-37.8

Notes and accounts
receivable

125.6

111.6

-14.1

Inventories

33.9

38.5

4.6

Other (current assets)

101.0

131.1

30.1

113.3

112.9

-0.4

Property, plant andequipment

75.1

74.3

-0.8

Intangible assets

5.5

5.3

-0.1

Investments andother assets

32.8

33.3

0.6

213.3

197.4

-15.9

Current liabilities
Notes and accounts
payableOther (current liabilities)

157.4141.8

-15.6

100.9

88.2

-12.7

56.5

53.6

-2.9

Long-term liabilities

55.9
297.5

55.6
295.8

-0.3
-1.7

Stakeholders' equity

301.1

299.1

-2.0

(Treasury stock)Total accumulated othercomprehensive income(loss)
Non-controlling interests

-31.9

-31.9

-0.0

-4.1

-3.8

0.3

0.5

0.5

-0.0

58%

60%

+2%

Current assets

Non-current assets

Liabilities

Net assets

Equity ratio(Billions of Yen)

Notes and accounts receivable trade

Inventories

22

Financial Indicator(Billions of Yen)Operating income ratio / ROA / ROE

Profit attributableto owners ofparent23

Financial IndicatorPayout Ratio / EPS / Dividend per share
Payout Ratio

Dividend per share：
Yen
EPS：Yen24

Financial Indicator(Billions of Yen)Investment

Depreciation and amortization
1Q
Actual

1Q
Actual

2Q-4Q
FY
Projection Projection

2Q-4Q
FY
Projection Projection

FY2017

2.0

11.7

13.7

FY2017

3.5

10.8

14.3

FY2018

2.6

21.5

24.1

FY2018

3.3

10.4

13.7

Cash Flow25

926