Canon Marketing Japan (CMJ) serves as the domestic sales company for Canon Inc. (TSE1: 7751), which has a 57.76% stake in CMJ (as of end-December 2021). In addition to selling Canon products, CMJ has its own IT solutions business.
The company’s consolidated segments are Consumer (22.2% of FY12/21 sales before adjustments), Enterprise (32.7%), Area (37.8%), Professional (5.4%), and Other (1.9%). In the Consumer segment, CMJ’s main customers are large domestic retailers, which it supplies with interchangeable lens digital cameras (single-lens reflex cameras, mirrorless cameras), interchangeable lenses, compact cameras, inkjet printers, and other products targeting general consumers. In the Enterprise segment, it supplies large and medium-sized Japanese companies with multifunctional peripherals (MFPs) and other office equipment, maintenance services for those devices, data center operation, and IT solutions. In the Area segment, it provides SMEs in Japan with MFPs and maintenance services, along with installation services and peripheral software for PCs and other non-Canon business equipment. In the Professional segment, the company provides industrial equipment including continuous feed printers and other devices for production printing, semiconductor manufacturing equipment, and device manufacturing equipment. Through this segment, the company also builds electronic medical record systems for hospitals in the healthcare sector.
CMJ intends to continue expanding from domestic sales of Canon products into the IT solutions field, with a focus on originality. It plans to improve profitability by leveraging its involvement with Canon business equipment to expand its services in IT and other fields. The Enterprise and Area segments will drive growth in these areas.
In FY12/21, CMJ reported consolidated sales of JPY552.1bn (+1.3% YoY), operating profit of JPY39.7bn (+26.8% YoY), recurring profit of JPY41.1bn (+16.6% YoY), and net income attributable to owners of the parent of JPY29.4bn (+33.7% YoY). Sales rose in all key segments except Area, despite the widespread adoption of telework and restrictions placed on sales activities due to the COVID-19 pandemic. Operating profit increased YoY, due to enhanced reductions in SG&A expenses and improved margins on the back of growth in high-value-added products.
The company revised its FY12/22 earnings forecast upward on April 25, 2022. The revised forecast calls for sales of JPY583.0bn (+5.6% YoY), operating profit of JPY41.5bn (+4.5% YoY), recurring profit of JPY43.0bn (+4.6% YoY), and net income attributable to owners of the parent of JPY29.5bn (+0.3% YoY). Based on Q1 results, the company upwardly revised full-year sales forecasts for the Consumer and Enterprise segments by a total of JPY3.0bn and adjusted operating profit for each segment accordingly. While the company expects the impact of the pandemic to gradually subside, it budgets higher SG&A expenses, including for sales activities, due in part to the resumption of such activities. By segment, the company projects a profit decline in the Consumer segment attributed to an increase in sales activities-related expenses. However, the downturn here is expected to be offset by profit growth in the Area segment, driven in part by recovery in office equipment sales which have suffered a supply shortage. The company anticipates growth in the IT solutions business in the Enterprise segment, and a recovery in production printing and ongoing demand for industrial equipment for the semiconductor industry in the Professional segment.
The medium-term business plan, published on a rolling basis, provides concrete strategies for achieving the goals in the company’s long-term management objectives. Under the leadership of the new representative director (appointed March 26, 2021), CMJ announced its 2021–2025 long-term management objectives and 2021–2023 three-year management plan at the time of its Q1 FY12/21 results announcement on April 23, 2021. At the time of FY12/21 results announcement, in light of FY12/21 results, the company unveiled a new three-year management plan spanning 2022–2025. Management targets for 2025, both in the new three-year plan and existing long-term objectives, call for sales of JPY650.0bn, operating profit of JPY50.0bn, and ROE of 8.0%. To achieve these targets, the company has outlined a growth strategy centered on the IT solutions business while incorporating sales of Canon products.
Shared Research believes the company’s strengths are 1) its recurring revenue streams (recurring revenue businesses), 2) the powerful Canon brand, and 3) its strong balance sheet. Weaknesses include 1) limited domestic growth opportunities, 2) difficulty expanding its core business overseas, and 3) high volatility in the IT services market.
|Gross profit margin||33.5%||33.5%||35.4%||36.1%||35.9%||35.4%||35.1%||32.4%||33.8%||34.5%|
|Operating profit margin||2.5%||2.6%||3.8%||4.1%||4.4%||4.8%||4.7%||5.2%||5.7%||7.2%||7.1%|
|Recurring profit margin||2.7%||2.8%||4.0%||4.3%||4.6%||5.0%||4.9%||5.5%||6.5%||7.4%||7.4%|
|Per-share data (JPY)|
|Shares issued(year-end; '000 shares)||151,080||151,080||151,080||151,080||151,080||151,080||151,080||151,080||131,080||131,080||-|
|EPS (fully diluted)||-||-||-||-||-||-||-||171.6||169.6||226.8||-|
|Dividend per share||24.0||24.0||40.0||45.0||50.0||60.0||60.0||60.0||60.0||75.0||75.0|
|Book value per share||1,907.5||1,980.2||2,082.6||2,136.2||2,163.0||2,290.7||2,337.0||2,502.4||2,664.2||2,883.7||-|
|Balance sheet (JPYmn)|
|Cash and cash equivalents||108,435||102,282||120,607||99,573||107,285||136,979||135,571||53,993||59,631||67,528|
|Total current assets||316,608||324,938||339,596||347,542||362,141||397,506||387,244||377,403||380,349||396,082|
|Tangible fixed assets||99,564||99,684||100,059||99,310||96,701||75,090||71,987||82,813||83,729||85,154|
|Investments and other assets||30,415||29,559||29,184||30,150||32,064||32,750||34,292||39,011||36,855||38,651|
|Total current liabilities||163,397||164,914||164,770||159,678||156,966||157,398||129,903||120,023||108,440||107,109|
|Total fixed liabilities||45,088||45,086||44,623||49,385||59,841||55,911||65,317||58,582||52,049||44,632|
|Total net assets||254,088||257,075||270,352||277,438||280,919||297,522||303,570||325,092||346,114||374,676|
|Total liabilities and net assets||462,574||467,075||479,746||486,502||497,727||510,832||498,790||503,698||506,604||526,418|
|Total interest-bearing debt||0||73||0||0||0||435||216||175||128||133|
|Cash flow statement(JPYmn)|
|Cash flows from operating activities||33,767||28,780||38,190||29,730||33,306||28,885||16,990||22,052||38,490||32,756|
|Cash flows from investing activities||-16,066||-25,757||-15,221||-44,536||-19,460||7,963||-10,526||-94,584||-26,174||-15,894|
|Cash flows from financing activities||-11,813||-9,105||-4,544||-6,224||-6,086||-7,145||-7,838||-8,557||-6,587||-9,160|
On March 29, 2022, Canon Marketing Japan Inc. announced details of the issuance of stock compensation-type stock options.
At a meeting of the Board of Directors held on the same day, the company resolved to issue stock acquisition rights as stock compensation-type stock options to executive officers who are vice presidents or higher (including persons serving concurrently as directors; hereinafter "eligible officers"). The name of the acquisition rights is Stock Acquisition Rights Issued in April 2022 of Cannon Marketing Japan Inc.
The purpose of the issuance of stock acquisition rights is to share the benefits and risks of share price fluctuations with shareholders and to motivate eligible officers further to improve business performance and enhance enterprise value in the medium to long term. The total number of stock acquisition rights to be allotted is 200, breaking down into 43 to the President & Representative Director and Executive President, 22 to the Director & Senior Vice President, 30 in total to the two Director & Vice Presidents, and 105 in total to the seven Vice Presidents. The class and number of shares subject to one stock acquisition right are 100 shares of common stock in the company. The date of allotment of the stock acquisition rights and due date of monetary payment in exchange for the stock acquisition rights is April 28, 2022. See company news release for details.
On February 16, 2022, Canon Marketing Japan Inc. made an announcement regarding the introduction of a stock compensation-type stock options plan.
Canon Marketing Japan announced that the Board of Directors meeting held on the same day passed a resolution on a plan for allotting stock acquisition rights as stock compensation-type stock options for executive officers who are vice presidents or higher (including persons serving concurrently as directors; excluding outside directors) (hereinafter referred to collectively as “eligible officers”).
The company will discontinue the current performance-based stock compensation plan and newly introduce a stock compensation-type stock options plan (hereinafter referred to as the “Plan”). The purpose of the Plan is to further motivate the eligible officers to improve business performance and enhance enterprise value in the medium to long term by sharing both the benefits and risks of fluctuating stock prices with the shareholders. The introduction of the Plan will be subject to the approval of a proposal concerning the revision of the compensation plan at the 54th Ordinary General Meeting of Shareholders scheduled to be held on March 29, 2022.
On January 26, 2022, Canon Marketing Japan Inc. announced the difference in parent earnings between FY12/21 and the previous fiscal year.
The company made the disclosure along with its FY12/21 results announcement on the same day. See the report for details.
On the same day, the company announced its decision regarding dividends of surplus.
The company made the disclosure along with its FY12/21 results announcement on the same day. On October 25, 2021, the company announced its plan to pay a year-end dividend per share of JPY30 for FY12/21. However, at the time of FY12/21 results announcement, upon comprehensive consideration of its dividend policy and other related matters, it decided to raise the year-end dividend forecast per share to JPY45. Combined with the interim dividend, the annual dividend per share for FY12/21 is expected to be JPY75, up YoY.
|(JPYmn)||Q1||Q1–Q2||Q1–Q3||Q1–Q4||Q1||Q1–Q2||Q1–Q3||Q1–Q4||Q1||% of Est.||FY Est.|
|Gross profit margin||33.1%||33.1%||33.5%||33.8%||33.7%||34.6%||34.7%||34.5%||34.3%|
|Operating profit margin||5.5%||5.0%||5.2%||5.7%||7.5%||7.5%||6.7%||7.2%||10.0%||7.1%|
|Recurring profit margin||5.5%||6.3%||6.1%||6.5%||7.8%||7.8%||7.0%||7.4%||10.0%||7.4%|
|Gross profit margin||33.1%||33.0%||34.3%||34.4%||33.7%||35.5%||35.1%||33.8%||34.3%|
|Operating profit margin||5.5%||4.4%||5.6%||7.2%||7.5%||7.4%||4.9%||8.5%||10.0%|
|Recurring profit margin||5.5%||7.3%||5.7%||7.3%||7.8%||7.9%||5.1%||8.6%||10.0%|
The Japanese economy continued to pick up, despite weakness in some areas due to the continuing impact of COVID-19. Personal consumption remained weak, particularly in travel and eating out, due to the impact of COVID-19 variants. In terms of capital spending, there were signs of recovery due in part to improvements in overseas economies. IT investment in particular was robust due to continued strong interest in investment in the financial and manufacturing industries. Note, however, that production in some companies lagged due to supply constraints resulting from semiconductor shortages and supply chain disruptions, and higher raw material prices due to the situation in Ukraine and other factors.
Against this backdrop, sales rose 5.0% YoY, primarily due to sales growth for cybersecurity-related products and services and SI services as a result of aggressive IT investment by client companies, and higher sales of semiconductor manufacturing equipment helped by proactive investment by domestic semiconductor manufacturers. Operating profit increased 39.8% YoY as the Enterprise segment in particular saw the share of high-value-added products and services in the sales mix increase mainly in the IT solutions business.
|Segment profit margin||0.1%||4.0%||7.2%||9.9%||9.8%||10.9%||9.6%||10.5%||10.0%|
|Segment profit margin||0.1%||7.8%||12.2%||14.9%||9.8%||12.0%||6.5%||12.4%||10.0%|
Sales of digital cameras with interchangeable lenses expanded sharply YoY. Sales of EOS R series mirrorless cameras among other products increased. The growing number of EOS R series users also drove strong sales of RF mount interchangeable lenses.
Sales of inkjet printers increased significantly YoY due to strong sales of high-priced products and the launch of new products. Sales of ink cartridges increased YoY mainly due to accelerated demand ahead of the April 2022 price revision.
Sales decreased YoY due to supply shortages in PC peripherals and other products purchased from external suppliers.
|Segment profit margin||7.6%||6.2%||5.5%||5.4%||8.0%||7.2%||7.1%||7.7%||11.1%|
|Segment profit margin||7.6%||4.4%||4.2%||5.0%||8.0%||6.4%||6.9%||9.2%||11.1%|
In terms of major business equipment, sales of office-use MFPs and laser printers declined YoY due to product supply shortages. Sales of maintenance services for office-use MFPs and laser printer cartridges were down YoY due to lower print volume at the offices of major companies as teleworking became more commonplace.
In IT solutions, SI projects for financial companies and embedded system development projects increased, with a steady performance in the second data center operations. In addition, the company benefited from a number of new BPO and business-use PC projects, among others. According to the company, sales were significantly higher YoY.
|Segment profit margin||6.0%||4.4%||4.2%||4.2%||7.0%||6.6%||5.6%||5.8%||8.3%|
|Segment profit margin||6.0%||2.4%||3.7%||4.2%||7.0%||6.2%||3.3%||6.1%||8.3%|
Sales of major business equipment, including office-use MFPs and laser printers, fell due to product supply shortages. Sales of maintenance services for office-use MFPs also declined due to continued teleworking and declining print volume, especially in metropolitan areas. On the other hand, sales of laser beam printer cartridges increased YoY due to accelerated demand ahead of the April 2022 price revision.
In IT solutions, sales of HOME, a cloud-based IT support service, and security-related products such as ESET anti-virus software increased against the backdrop of growing cybersecurity threats, including targeted attacks and phishing. In addition, the company continued to focus on acquiring IT equipment maintenance and operating services contracts, and increased the number of orders received. As a result, overall IT solutions sales were up YoY.
|Segment profit margin||7.9%||8.5%||7.9%||6.5%||8.7%||10.0%||9.0%||8.3%||17.6%|
|Segment profit margin||7.9%||9.0%||6.5%||1.8%||8.7%||11.3%||6.6%||6.4%||17.6%|
Sales grew YoY as sales of continuous feed printers to printing industry customers were strong.
Against the backdrop of continued proactive investment by domestic semiconductor manufacturers, sales of semiconductor manufacturing equipment and maintenance services were strong. Sales increased significantly YoY due in part to large-scale projects for inspection and measuring equipment.
Sales expanded sharply YoY. In addition to several large projects for the installation of electronic medical record systems and medical IT infrastructure for hospitals, there were also projects for the introduction of online eligibility checks for clinics and dispensing pharmacies.
|(JPYmn)||1H Act.||2H Act.||FY Act.||1H Act.||2H Act.||FY Act.||1H Act.||2H Act.||FY Act.||FY Est.|
|Cost of sales||206,070||214,038||420,108||175,746||185,332||361,078||180,080||181,729||361,809|
|Gross profit margin||32.0%||32.8%||32.4%||33.1%||34.4%||33.8%||34.6%||34.4%||34.5%|
|Operating profit margin||4.4%||6.0%||5.2%||5.0%||6.4%||5.7%||7.5%||6.9%||7.2%||7.1%|
|Recurring profit margin||4.7%||6.2%||5.5%||6.3%||6.6%||6.5%||7.8%||7.1%||7.4%||7.4%|
While the Japanese economy is expected to get on a recovery track, CMJ expects its business environment to be clouded by uncertainties caused by the spread of COVID-19, semiconductor shortages, supply constraints arising from supply chain disruptions, and changes in raw material prices.
The company intends to further enhance profitability in its mainstay business of canon product sales. In IT solutions, which it has positioned as a growth business, the company plans sales growth accompanied by increased profitability, and aims to expand the business.
On April 25, 2022, the company upgraded its forecasts for sales, operating profit, and recurring profit. The reasons include: (1) strong sales of high-priced products such as lenses for interchangeable lens digital cameras and inkjet printers in the Consumer segment; (2) strong performance of SI projects for the manufacturing industry in the Enterprise segment; (3) higher share of high-value-added IT solutions products and services in the sales mix in the Enterprise and Area segments. The details will be updated after interviews with the company.
The segment forecasts below are as of January 26, 2022. The company made upward revisions to the Consumer and Enterprise segment forecasts on April 25, 2022. The details will be updated after interviews with the company.
The company forecasts segment sales of JPY130.3bn (+JPY800mn YoY) and operating profit of JPY12.0bn (-JPY1.6bn YoY).
While uncertainty prevails concerning the impact of COVID-19, unit sales of interchangeable lens digital cameras are expected to increase 26% YoY, assuming a market recovery and a shift by Canon SLR camera users to the EOS R series mirrorless cameras with the company's RF mount. Unit sales of compact digital cameras are expected to decline 53%. Inkjet printer unit sales are seen increasing 4% YoY due to a recovery in product supply. Inkjet printer cartridge sales value is projected to fall 3% YoY as a decline in color printing has caused the market to contract. A decrease in gross profit resulting from the decline in ink cartridge sales, along with higher SG&A expenses, is expected to cause a decrease in operating profit.
The company projects segment sales of JPY196.0bn (+JPY5.4bn YoY) and operating profit of JPY13.9bn (+JPY0mn YoY).
Business equipment sales are expected to increase in reaction to the product supply shortage in FY12/21. For maintenance services for office MFPs and laser printer cartridges, sales are expected to decline as customers continue teleworking and transition to a paperless office environment. For IT solutions, sales are projected to grow due to an increase in manufacturing industry systems integration projects at Canon IT Solutions, CMJ's main subsidiary; the expansion of digital business driven by digital transformation (DX) efforts at client companies, and solid performance in data center services. Despite higher gross profit due to IT solutions growth, the company expects operating profit to remain flat YoY due to a rise in SG&A expenses.
The company forecasts segment sales of JPY232.5bn (+JPY11.7bn YoY) and operating profit of JPY13.5bn (+JPY1.5bn YoY).
As in the Enterprise segment, a reactionary increase in business equipment sales is forecast following the product supply shortages of the preceding year. For maintenance services for office MFPs and laser printer cartridges, sales are expected to decline as SMEs—particularly in large metropolitan areas—continue teleworking and reducing their use of paper. For IT solutions, the security business, including the cloud-based IT support service HOME and the antivirus software ESET, is expected to grow. Meanwhile, IT maintenance services and operational support are forecast to be strong. Operating profit is projected to increase due to growth in IT solutions.
Provided that supply conditions recover, the company plans a 29% increase in office equipment sales, in terms of the number of units sold. The company expects growth in IT solutions driven by an expansion of SI services (+17% YoY in value terms).
The company anticipates segemnt sales of JPY39.8bn (+JPY8.3bn YoY) and operating profit of JPY3.4bn (+JPY900mn YoY).
For production printing, digital printing demand should push sales of continuous feed printers upward. For industrial equipment, capital investment in the domestic semiconductor industry is expected to remain robust, leading to increased sales of semiconductor manufacturing equipment. For healthcare, the company expects sales to rise in line with several large projects related to the construction of electronic medical record systems and medical IT infrastructure for hospitals, as well as the introduction of IT systems for clinics and dispensing pharmacies. And higher sales in all three of these fields are forecast to result in increased operating profit.
The company’s medium- to long-term strategy includes two layers. The medium-term plan is updated annually on a rolling basis and is informed by business strategies formulated from a long-term perspective.
Under the framework of the previously announced long-term management objectives (2021–2025), the company has implemented the measures outlined
in the medium-term plan (2021–2023). Based on the results, at the time of its FY12/21 results announcement (January 26, 2022), the company
announced a new medium-term plan spanning the four-year period from 2022 through 2025.
The company has placed “Kyosei”, which it adopted as its corporate philosophy in 1999, at the core of its long-term management plan (FY12/21 to FY12/25). The company believes that the philosophy is still relevant even with the focus on SDGs today, and has placed it at the core of its long-term management plan to show its commitment to promoting sustainability management.
In the past, the company has reviewed its business portfolio in response to changes in the market environment. Under this long-term management plan, however, the company will work to “solve social issues through business” by combining its Canon product business and IT solutions business to expand the range of issues it can solve. The company aims to become a "professional corporate group that solves social and customer issues using ICT and the power of humans." In line with this, the company has adopted the following three basic strategies.
1. Sustainably increasing corporate value by solving social issues through business
2. Becoming a high-profit corporate group
Business reform placing IT solution business at the center of growth
Improving the sales system for each customer segment using the customer base
Increasing the added value and enhancing profitability with respect to the Canon product business
3. Creating a virtuous circle by improving management capital
Accelerating business growth by developing skilled human resources and increasing engagement
Accelerating business growth through strategic investment
The management targets for FY12/25, the final year of the long-term management plan, call for sales of JPY650.0bn (including sales of JPY300.0bn from IT solutions), operating profit of JPY50.0bn, and ROE of 8.0%. The company has highlighted the IT solutions business as a growth driver. Of its JPY300.0bn target for FY12/25, the company plans to raise the share of sales from maintenance and operation services/outsourcing to 25% (versus 17.8% in FY12/20 and 21.3% in FY12/21), focusing not only on growing the IT solutions business, but also on improving profitability.
The medium-term plan (FY12/21 to FY12/23), which was announced together with the long-term plan (FY12/21 to FY12/25), outlines specific business strategies for the company to achieve the long-term plan.
Under the medium-term plan (FY12/21 to FY12/23), the company divided its business portfolio into three major business areas: IT solutions, Canon products, and specialized areas and new businesses, and worked to focus on selective areas within each business.
The company positioned the IT solutions business as the core of its growth, and indicated that it would expand its service-oriented business model in particular. In addition, document solutions, which the company differentiated by combining with Canon products, were positioned as part of the IT solutions business, and the company aimed to expand the scope of its solutions offering. By promoting this business, the company believed it would be able to grow its Canon product business. In the Canon product business, the company planned to operate in close collaboration with its other businesses with an eye on profitability. As for specialized areas and new businesses, the company aimed to expand its industrial equipment business.
With respect to the connection between the company’s businesses and segments, the IT solutions business is included in the Enterprise, Area, and Professional segments, and the Canon product business is centered on the Consumer segment, but also related to the Enterprise, Area, and Professional segments.
FY12/21 sales fell short of the targets set in the medium-term plan (2021–2023) in every segment but the Consumer segment, but operating profit exceeded the targets in all segments. In the Consumer segment, sales of Canon products including high-margin digital cameras with interchangeable lenses grew. IT solutions sales increased in both the Enterprise and Area segments. In the Professional segment, industrial equipment performed well for the semiconductor industry, where capital investment remained robust.
The company worked to strengthen IT solutions. In the Enterprise segment, the company intended to enhance Edge solutions (video and digital document solutions) and recorded related sales of JPY23.0bn (+27.8% YoY) in FY12/21. In the Area segment, the number of contracts for HOME and other IT maintenance and operation services rose 22.7% YoY to 135,000. This showed the company's ongoing relationships with its customers.
In addition, key KPIs were strong. The company worked to expand security and ITO/BPO related sales both for the Enterprise and Area segments. As a result, security sales were JPY32.5bn (+16.1% YoY) and ITO/BPO related sales were JPY21.5bn (+59.3% YoY).
Investments for business growth totaled JPY24.0bn, with approximately JPY3.0bn invested in human resources, JPY5.0bn in systems, and JPY16.0bn in businesses.
FY12/21 sales fell slightly short of the target set forth in the medium-term plan (2021–2023) but profit surpassed the target. On January 26, 2022, the company announced a new medium-term plan (2022–2025) based on the FY12/21 results. The final year of the new medium-term plan is 2025, the same year as the long-term management objectives, and the targets are also the same: sales of JPY650.0bn (of which JPY300.0bn is for IT solutions), operating profit of JPY50.0bn, an operating profit margin of 7.7%, and ROE of 8.0%.
The four basic policies of the medium-term plan (2022–2025) are (1) to expand the IT solutions business with profit, (2) to further expand the earnings capacity of existing businesses, (3) to strengthen specialized areas and create new businesses, and (4) to manage the group with the objective of continuous growth.
Continuing from the previous medium-term plan, the company aims to establish a service-oriented business model and expand its IT solutions business with earnings. The company set goals by customer type and focus area. In the Enterprise segment, which serves major companies and semi-major and medium-sized companies, the company will focus on Edge solutions such as video solutions, digital document solutions, mathematical and demand forecasting, and low-code development. The company plans to increase sales associated with Edge solutions from JPY23.0bn in FY12/21 to JPY45.0bn in FY12/25. In the Area segment, which serves SMEs, the company will focus on expanding the number of contracts for HOME (an IT support service for SME offices) and other IT maintenance and operation services. The company plans to increase the number from 135,000 in FY12/21 to approximately 220,000 in FY12/25.
The company also plans to expand its security and ITO/BPO related businesses in both the Enterprise and Area segments. The company expects to increase sales from the security business from JPY32.5bn in FY12/21 to JPY48.5bn in FY12/25, and sales from the ITO/BPO related business from JPY21.5bn in FY12/21 to JPY32.0bn in FY12/25.
Through these measures, the company plans to expand IT solutions sales from JPY221.1bn in FY12/21 to JPY300.0bn in FY12/25. Maintenance and operation services/outsourcing has higher margins compared to other areas in the IT solutions business, and the company expects sales in this area to grow from JPY47.0bn in FY12/21 to JPY75.0bn in FY12/25 (18.6% CAGR over the term of the plan).
|IT solutions||FY12/21||FY12/22 Est.||CAGR||FY12/25|
|Maintenance/operations services and outsourcing||47,000||45,000||75,000|
|IT products/system sales||101,000||105,400||n.a.|
The company has adopted a consumer driven
organizational structure. The Enterprise segment targets major companies and
semi-major and medium-sized companies, while the Area segment SMEs. Accordingly, the company develops different strategies for each customer segment. For large companies, it will utilize its existing customer base to cultivate industry-specific projects and business collaboration projects. In addition, the company will
work to capture new demand for documents amid the diversification of office activities
triggered by the spread of COVID-19. For semi-major and
medium-sized companies, CMJ will work to develop new customers by fortifying its sales structure. For SMEs, it will enhance productivity by conducting sales activities tailored to the local community and reviewing internal business processes.
In the Canon product business, the company aims to achieve higher profitability. It offers a full range of printing products, including production printing for professional use, office MFPs and laser printers for large and small businesses, and inkjet printers for home use. By combining these products with IT solutions, the company will establish a system to provide high value-added printing services that meet industry and business needs. In the Consumer segment, it will broaden its interchangeable lens digital camera customer base from professional to "middle" layer customers, focusing on mirrorless cameras with new lens mounts, and expand its service lineup.
The company has been discovering industrial equipment made by European and North American manufacturers and aims to find and commercialize new products during the new medium-term plan. The company will grow the business scale by discovering and commercializing overseas products and developing new services as market and customer demand dictate. Looking at industrial equipment, the company will leverage its trading company function to introduce products for semiconductor-related companies. It intends to serve as a platform for matching diversified customer needs with various products from around the world, while also incorporating maintenance and other services that are part and parcel of supplying products.
CMJ plans to create new businesses, while taking initiatives to develop and deploy innovative human resources across the group. The company has introduced the Canon i Program, an in-house entrepreneurship program designed to encourage employees to launch their own businesses.
The aim is to establish a professional corporate group that resolves societal and customer issues by leveraging the power of ICT and people. To this end, the company is hurrying to build a loop for engagement enhancement that links the sophistication of its human resources, customer satisfaction, and employee job satisfaction. The company will invest in businesses while being conscious of capital efficiency and profitability, and construct a system to reinvest the profits generated from these investments into growth businesses.
The company's policy is to use cash flow from operating activities and cash on hand generated from 2022 to 2025 to return profits to shareholders based on a consolidated dividend payout ratio of 30% while maintaining an appropriate level of cash and deposits. The company will allocate more than JPY200.0bn to growth investments for IT solutions and new businesses. This includes not only M&A and equity investments, but also investments into systems and human resources.
|Medium-term targets (2022–2025)||FY12/21||FY12/22 Est.||CAGR||FY12/25|
|Operating profit margin||7.2%||7.0%||7.7%|
As part of its sustainability efforts, the company has set forth its Environmental Vision 2050, which calls for (1) achieving carbon neutrality, (2) working to build a resource-recycling society, and (3) endeavoring to preserve biodiversity and prevent pollution.
Regarding the realization of carbon neutrality, the company has set a specific goal of reducing its own carbon dioxide emissions by 38% by 2030 compared to 2021, and contributing to the reduction of its customers' CO2 emissions through its business activities. In terms of contributing to the realization of a resource-recycling society, the company has set targets for zero emissions of product waste, reduction of plastic waste, and effective use of water. In terms of contributing to biodiversity conservation and pollution prevention, the company aims to eliminate hazardous materials through green procurement. The company has expressed its support for the Task Force on Climate-related Financial Disclosure (TCFD) to make its efforts to achieve its environmental vision and medium-term environmental goals more effective. Future TCFD disclosures will be reported in the integrated report and elsewhere.
The company's predecessor, Canon Sales Co., Inc., was founded in 1971, following the merger of Canon Business Machines Sales, Inc. (found in 1968 from Canon Inc. [TSE1: 7751]’s Office Machine Sales Division), Canon Business Machines Services, Inc., and Canon Camera Sales Co., Inc. The company adopted its current name in 2006, and also began moving into other fields, including IT solutions, manufacturing, and healthcare, all while continuing its work to enhance the Canon brand.
As of the end of 2020, parent company Canon Inc. held 57.76% of CMJ shares outstanding. To a frequently asked question about why to list a subsidiary at all, CMJ comments that one of the motivations behind its IPO was to maximize its corporate value by developing independent businesses (e.g., IT Solutions) and acquiring companies through stock markets.
CMJ has exclusive distribution rights to Canon products in Japan, and is also responsible for maintenance and other support services, and all domestic marketing activities. Overseas sales and marketing are similarly supported by semi-independent local subsidiaries such as Canon USA in the US. Canon Inc. itself is engaged in product development and manufacturing.
The company switched to its current segment reporting structure in FY12/18. Almost all segments handle Canon brand products, with the Consumer segment handling Canon’s digital camera line (including single-lens reflex camera, mirrorless cameras, and compact cameras) as well as Canon’s inkjet printer main units and ink cartridges. The Enterprise and Area segments both handle sales of Canon multifunctional peripherals (MFPs) while the Professional segment handles sales of professional-use printers and other equipment, including medical equipment. In the Enterprise, Area, and Professional segments, the company has been expanding its non-manufacturing businesses, such as system integration services, business software, and data center services, and has been handling more non-Canon products.
While its dependence on the parent Canon Inc. would seem obvious, CMJ notes that its relationship with the parent is intentionally designed to mimic that of an independent sales company and its supplier. The pricing is set through negotiations, i.e., Canon does not control pricing at CMJ. CMJ sets market share targets for each product, determines price points, sets the marketing budget (CMJ carries the burden of all non-corporate advertising and product promotions) and its own profit margins, and then negotiates its purchase prices with Canon based on that analysis.
Until the end of FY12/17, CMJ divided its businesses into Business Solutions, Imaging Systems (mainly sale of digital cameras and inkjet printers), IT Solutions, and Industrial Equipment, with each segment being effectively defined by the type of product and service they handled. However, in January 2018, the company shifted its organizational structure from the previous product driven structure to a consumer driven one, and reporting segments changed.
The new segments are as follows:
Consumer: Just as in the previous Imaging Systems business, this serves individual customers,
Enterprise: Targeting major companies, semi-major and medium-sized companies, providing input/output devices and sector-specific IT solutions and services,
Area: An SME version of the Enterprise business. In addition to selling I/O devices, provides one-stop security and other IT solutions, and
Professional: Developing solutions businesses targeting customers in specific sectors (production printing, industrial equipment, and healthcare).
Major group companies by segment are as follows. In the Enterprise segment, Canon IT Solutions Inc. (100% ownership); in the Area segment, Canon System & Support Inc. (100% ownership); and, in the Professional segment, Canon Production Printing Systems Inc. (100% ownership) in the production printing domain, and Canon ITS Medical Inc. (100% ownership) in the medical domain. In addition, there are four other companies including A&A Co., Ltd. and Canon Customer Support Inc., and Canon IT Solutions Inc. has six subsidiaries.
|Segment profit margin||7.6%||4.9%||5.2%||9.9%||10.5%|
End users are primarily individual customers.
The segment largely inherited the former “Imaging Systems”.
In FY12/13, the segment name was changed from previous Consumer Imaging to Imaging System, though with almost no change in the types of products handled. The product lines handled are digital cameras, inkjet printers, and IT products, mainly Canon products. The company acts as a wholesaler, directly supplying Canon consumer products such as digital SLR cameras, compact digital cameras, home-use printers, and digital camcorders, as well as commercial imaging equipment, to large electronics retailers and other retailers focusing on camera sales. The main sources of revenue within the segment are cartridges for inkjet printers and digital SLR cameras (as well as the cameras’ interchangeable lenses).
|Segment profit margin||4.4%||4.6%||5.1%||5.1%||7.3%|
The Enterprise segment handles input/output devices and also provides IT solutions and services designed to meet the industry-specific needs of major companies, semi-major and medium-sized companies.
The segment took over the businesses for major companies, semi-major and medium-sized companies from the old Business Solutions and IT Solutions segments.
Canon IT Solutions Inc. is a key subsidiary.
The Enterprise segment essentially comprises business equipment and IT solutions and services, with the latter being the mainstay business. The company offers systems integration (SI) services, IT infrastructure services, and engineering services. In many cases, Canon office MFPs and laser printers are incorporated in projects related to document solutions. According to CMJ, it had developed roughly 15% of its software to be included with Canon products or for systems used by Canon, the remaining 85% is designed for outside customers. To cope with volatility caused by the economic environment, the company has been focusing on outsourcing and other services capable of producing recurring revenues. In line with this, the company began operating the Nishi-Tokyo Data Center in October 2012, started construction of a new building in March 2019. The new building started operations in 2020.
Under SI services, the company handles the entire information systems development process for client companies, from needs analysis all the way through development, installation, and operations. In Scratch Development (i.e., new development as opposed to customization or adding functions) CMJ has developed systems for companies in the financial, manufacturing, and distribution/services industries. The SI Solutions includes CAD and ERP solutions for manufacturers.
IT Infrastructure Services range from system integration and virtualization to next-generation networks, data centers, and business process outsourcing (BPO).
The company owns the Nishi-Tokyo Data
Center in Nishi-Tokyo. As the core base for the outsourcing service business and
cloud services, the first building started operations in October 2012, and the
second building in 2020. As of December 31, 2021, the first building had a total floor area of 16,964 sqm and 2,300 racks, and the second building had a total floor area of 16,739 sqm and 2,880 racks. The center has a base-isolated structure combining a seismic isolation system and oil dampers. This structure reduces the building’s seismic motion. The lots and building have seven up to layers of security. The entire building is covered by an electromagnetic shield effective in blocking mobile phones and other radio signals to prevent data leaks.
Embedded System: CMJ develops embedded software for mobile phones, cars, etc.—both for Canon and third parties.
Products: Sales of (generally non-Canon) hardware and packaged software.
|Segment profit margin||4.4%||4.7%||5.4%||4.0%||5.5%|
The Area segment handles input/output devices and also provides IT solutions and services designed to meet the industry-specific needs of SMEs.
The segment took over the businesses for SMEs from the old Business Solutions and IT Solutions segments.
Canon System & Support Inc. is a key subsidiary.
The mainstay business under the Area segment is to act as a business concierge for SME companies to help boost their operational efficiency by integrating office equipment centered on Canon products with software and operational services.
To provide appropriate customer support, the company hires support engineers nationwide. In addition, CMJ operates a remote-monitoring service called NETEYE to automatically detect low toner levels or other issues.
CMJ sells directly to larger companies but primarily uses partner companies (distributors) and group companies to sell to smaller customers.
When a partner company distributes Canon products, it books the sales of hardware but only receives commission on the maintenance and support revenues. The support contract is concluded directly between CMJ and the end user.
Sales is categorized under the Enterprise business or the Area business based on the nature of services offered, which is dependent on the size of the customer company. Based on this, responsibilities are divided among the relevant divisions of the parent company and each segment.
|Customers||Large enterprises, semi-major/medium-sized enterprises||Small and medium enterprises|
|Companies||Canon Marketing Japan (parent)||Canon System & Support|
|Canon IT Solutions||Partner companies|
|Systems integration||Core business solutions for SMEs|
|Business process outsourcing (BPO)|
|Segment profit margin||-||1.8%||3.7%||6.2%||7.9%|
In the industrial equipment field, the company mainly deals with semiconductor-related equipment, working with global companies to provide products both domestically and internationally. As an example, CMJ sells U.S.-based Mattson’s semiconductor manufacturing equipment (e.g., lamp anneal), as well as semiconductor inspection and measurement equipment (e.g., wafer inspection systems. In addition, it offers Canon-made precision-engineered components and semiconductor manufacturing equipment as well as overseas-manufactured optical profilers.
In the medical field, the core business through the end of FY12/19 was operated by Canon Lifecare Solutions Inc. (formerly ELK Corporation, acquired in 2011), which within the medical imaging field handled medical imaging diagnostic equipment, preventive medicine (health check-up) support equipment (systems for facilities specializing in health check-ups), image filing systems for private medical practices, and other medical equipment and systems. However, in November 2019, Canon Inc. announced that it would be restructuring the group’s medical business. As a part of this, Canon Lifecare Solutions became a wholly owned subsidiary of group company Canon Medical Systems in FY12/20, and was deconsolidated from CMJ. As of FY12/21, the main subsidiary is Canon ITS Medical Inc. It builds large-scale medical information systems and installs and supports systems for electronic medical records, receipt computers, electronic drug histories, and health checkup services.
Recurring revenue streams (recurring-revenue businesses): A high percentage of CMJ revenues are recurring thanks to maintenance services and toner cartridges in Business Solutions and consumables for inkjet printers in Consumer Imaging.
Sharing a powerful Canon brand: CMJ strongly benefits from its association with Canon brand, one of the most recognized and powerful brands in Japan. Shared Research thinks this brand strength represents a substantial opportunity for CMJ in its push to grow its IT solutions business.
Strong balance sheet: The company has a substantial war chest to buy growth (the problem being finding the growth domestically and learning about overseas opportunities). It could also substantially enhance shareholder returns (the problem being a restrictively large Canon stake; as of 2012 this aspect should probably be valued for its option value not the immediate likelihood).
Limited domestic growth opportunities: While the company should be able to improve (restore) its profitability, the organic growth opportunities in Japan are severely limited by the lack of economic growth. It seems to Shared Research that the IT services business is the only one CMJ could buy some growth. However, there is a dearth of growing IT services of the quality and size that would match CMJ needs. In the core business only a sudden death of a competitor would provide a clear opportunity for a sustainable expansion.
Inability to expand the core business overseas: Because of the traditional split of responsibilities within the Canon group, CMJ is restricted from pursuing business opportunities overseas in the core areas of Business Solutions and Consumer Imaging. That leaves the company mostly with industrial equipment (including medical imaging) and IT services.
High volatility in IT services market: In the IT Solutions segment, where the company is aggressively pursuing M&A in line with its ITS3000 vision (JPY300bn in sales of IT services), the market environment is changing rapidly, such as with the emergence of cloud services, and customer needs are diversifying accordingly. Although CMJ has a proven track record in domestic sales of Canon products, it will need to rely on M&A and other external sources to incorporate the increasingly diverse IT solution technologies available in the market. With a need for swift action, the company will also need to make decisions in line with the Canon Group’s business strategy.
|Shipment||Digital Still Camera Total||9,509||9,154||7,929||5,784||4,897||3,520||3,521||2,846||2,316||1,296||1,155|
|with Built-in Lens||8,040||7,322||5,595||3,977||3,269||2,237||2,303||1,786||1,483||850||770|
|with Interchangeable Lens||1,469||1,832||2,334||1,807||1,628||1,283||1,219||1,060||833||446||385|
|(YoY)||Digital Still Camera Total||-10.1%||-3.7%||-13.4%||-27.1%||-15.3%||-28.1%||+0.0%||-19.2%||-18.6%||-44.1%||-10.8%|
|with Built-in Lens||-11.4%||-8.9%||-23.6%||-28.9%||-17.8%||-31.6%||+3.0%||-22.5%||-16.9%||-42.7%||-9.4%|
|with Interchangeable Lens||-2.1%||+24.7%||+27.4%||-22.6%||-9.9%||-21.2%||-5.0%||-13.0%||-21.5%||-46.4%||-13.6%|
|Shipment value||Digital Still Camera Total||162,143||164,102||164,163||138,377||121,658||94,534||102,346||88,137||75,929||48,859||46,537|
|with Built-in Lens||1,051,201||87,114||70,077||52,260||46,878||33,955||36,728||29,963||26,941||15,130||14,066|
|with Interchangeable Lens||56,943||76,988||94,086||86,116||74,780||60,579||65,618||58,174||48,987||33,729||32,471|
|Digital single-lens reflex||49,104||62,702||57,028||47,079||39,343||38,354||24,004||13,744||6,844||4,580|
|(YoY)||Digital Still Camera Total||-18.2%||+1.2%||+0.0%||-15.7%||-12.1%||-22.3%||+8.3%||-13.9%||-13.9%||-35.7%||-4.8%|
|with Built-in Lens||+686.0%||-91.7%||-19.6%||-25.4%||-10.3%||-27.6%||+8.2%||-18.4%||-10.1%||-43.8%||-7.0%|
|with Interchangeable Lens||-11.6%||+35.2%||+22.2%||-8.5%||-13.2%||-19.0%||+8.3%||-11.3%||-15.8%||-31.1%||-3.7%|
|Digital single-lens reflex||+27.7%||-9.0%||-17.4%||-16.4%||-2.5%||-37.4%||-42.7%||-50.2%||-33.1%|
|Average selling price||Digital Still Camera Total||17,052||17,927||20,705||23,925||24,843||26,856||29,067||30,969||32,786||37,712||40,275|
|with Built-in Lens||130,746||11,898||12,525||13,141||14,340||15,179||15,948||16,781||18,165||17,810||18,267|
|with Interchangeable Lens||38,763||42,024||40,311||47,657||45,934||47,217||53,829||54,862||58,830||75,614||84,239|
|(YoY)||Digital Still Camera Total||-9.0%||+5.1%||+15.5%||+15.6%||+3.8%||+8.1%||+8.2%||+6.5%||+5.9%||+15.0%||+6.8%|
|with Built-in Lens||+786.9%||-90.9%||+5.3%||+4.9%||+9.1%||+5.8%||+5.1%||+5.2%||+8.2%||-2.0%||+2.6%|
|with Interchangeable Lens||-9.6%||+8.4%||-4.1%||+18.2%||-3.6%||+2.8%||+14.0%||+1.9%||+7.2%||+28.5%||+11.4%|
In Business Solutions, the company makes direct sales to larger corporate clients, while sales to smaller companies are usually through partners.
In IT Solutions, many CMJ customers are in the manufacturing and financial industries. The segment’s core (Canon IT Solutions Inc.) is made up of Sumitomo Metal Systems Solutions, a subsidiary previously affiliated with Sumitomo Metal Industries. As such, the expertise was in metal production control systems, leading to strength in manufacturing solutions in general. Argo 21 (now part of Canon IT Solutions) had ties with Nomura Research Institute (strong in IT services for financial institutions) and that means a relative strength in the financial sector.
In Consumer Imaging, CMJ sells products to electronics retailers and other retailers focusing on camera sales, as well as to Amazon and other online shopping sites.
CMJ offers a wide variety of products and services and the competitive landscape differs from market to market.
In the copier market, the company’s main competitors include Ricoh Co., Ltd. (TSE1: 7752), FUJIFILM Business Innovation Corp. (FUJIFILM Holdings Corporation, TSE1: 4901), Sharp Corporation (TSE1: 6753) and Konica Minolta, Inc. (TSE1: 4902). There are only eight players competing in the domestic market. Canon Marketing Japan ranked third in the market after FUJIFILM Business Innovation and Ricoh (FY2020).
In IT solutions (future growth driver), the company faces a large number of competitors. As of February 2021, the number of corporate members of the Japan Information Technology Services Industry Association (JISA) stood at 484 companies. With this many companies, the structure of the IT solutions industry is similar to the construction industry in that the large companies that are prime contractors for big projects often subcontract development work to multiple companies. CMJ’s main competitors in this area include Nomura Research Institute (TSE1: 6701), SCSK (TSE1: 9719), and Otsuka Corp. (TSE1: 4768).
In the interchangeable lens digital camera market, Canon is the leader with more than half of the single-lens reflex market. The BCN Award 2022 (awarded by BCN Inc. based on domestic retail sales statistics) showed Canon holding onto its top share of the digital single-lens reflex camera market with a 59.8% market share in 2021. Canon retained its second spot in the mirrorless digital camera market with a 28.2% market share. In the compact digital camera market, where competitors include Sony (TSE1: 6758) and FUJIFILM Holdings (TSE1: 4901), Canon again commanded the top-spot with a 34.1% market share.
In the home-use inkjet printer market, Canon competes primarily with Seiko Epson Corp. (TSE1: 6724). The 2022 BCN Awards showed Canon ranking second by 1.2 points (43.6%).
Due to changes in accounting policy from FY12/13, the company restated FY12/12 sales after deducting sales promotion costs However, past financial data listed below have not been adjusted.
|Cost of sales||438,334||437,006||425,896||412,898||403,306||408,418||403,417||420,107||361,077||361,809|
|Gross profit margin||33.5%||33.5%||35.4%||36.1%||35.9%||35.4%||35.1%||32.4%||33.8%||34.5%|
|Operating profit margin||2.5%||2.6%||3.8%||4.1%||4.4%||4.8%||4.7%||5.2%||5.7%||7.2%|
|Non-operating income (expenses)||1,764||1,650||1,756||1,770||1,405||1,328||1,807||1,667||4,106||1,562|
|Recurring profit margin||2.7%||2.8%||4.0%||4.3%||4.6%||5.0%||4.9%||5.5%||6.5%||7.4%|
|Implied tax rate||39.5%||40.2%||37.9%||42.8%||37.0%||33.1%||32.0%||32.9%||34.0%||31.6%|
|Net income attributable to non-controlling interests||25||38||33||57||33||15||66||89||73||75|
Consolidated sales had trended sideways around JPY650bn through FY12/15, and fallen sharply at the former Imaging Systems segment (digital cameras, inkjet printers, etc.) since FY12/16. Still, CMJ was able to keep consolidated operating profit on an upward trajectory thanks to growth at its IT solutions business. The company has maintained its consolidated operating profit margin above 4.0% since FY12/15 as sales of Canon products shrank and SG&A expenses fell. It took further steps to reinforce this trend in FY12/19, creating a management structure centered around its IT solutions business and focused on earnings rather than sales. In FY12/20 and FY12/21, measures to strengthen the IT solutions business were successful, and the operating profit margin is trending upward.
|Cash and deposits||23,406||20,082||36,107||36,773||76,785||66,479||65,071||53,993||59,631||67,528|
|Notes and accounts receivable||127,648||132,696||128,473||125,906||124,475||125,626||117,041||112,666||105,328||107,367|
|Short-term loans receivable||40,002||50,000||50,054||80,054||90,044||90,014||90,014||170,012||180,006||180,004|
|Deferred tax assets||4,708||5,088||4,860||5,280||4,214||4,062||0||0||0|
|Allowance for doubtful accounts||-230||-188||-113||-201||-121||-98||-91||-75||-66||-24|
|Total current assets||316,608||324,938||339,596||347,542||362,141||397,506||383,349||377,403||380,349||396,082|
|Buildings and structures||49,265||49,126||48,152||46,926||47,425||30,825||28,657||26,948||43,402||45,916|
|Machinery, equipment, and vehicles||12||9||9||175||147||251||112||99||87||77|
|Tools, furniture, and fixtures||4,687||4,510||4,374||4,357||3,963||3,732||3,059||3,315||3,004||2,760|
|Construction in progress||0||0||0||0||0||89||333||14,095||1,577||2,392|
|Total tangible fixed assets||99,564||99,684||100,059||99,310||96,701||75,090||71,987||82,813||83,729||85,154|
|Total intangible assets||15,986||12,894||10,906||9,499||6,819||5,485||5,265||4,148||5,373||6,226|
|Investments and other assets||30,415||29,559||29,184||30,150||32,064||32,750||38,188||39,011||36,855||38,651|
|Long-term loans receivable||23||11||11||10||10||29||36||35||35||35|
|Net defined benefit assets||0||0||0||0||0||404||304||393||415||421|
|Deferred tax assets||17,596||16,084||15,040||14,768||17,668||16,203||23,039||20,792||19,219||14,974|
|Allowance for doubtful accounts||-501||-393||-357||-298||-344||-327||-432||-382||-205||-95|
|Total fixed assets||145,965||142,137||140,151||138,959||135,585||113,325||115,441||126,295||126,255||130,336|
|Total deferred assets||0||0||0||0||0||147||0||0||0||0|
|Notes and accounts payable||104,162||108,498||101,337||101,834||102,662||100,940||75,831||51,542||44,107||46,323|
|Income taxes payable||5,122||2,996||5,918||6,201||4,689||6,289||6,967|