It’s all in the margins when you start looking at how healthy a large business is doing. For Canon, they may be currently hemorrhaging cash year-over-year, but is it as bad as it sounds?
If you’re into financial planning or like tinkering in the world of the stock market, you may be looking at Canon’s 2019 projections and seeing a multi-billion dollar company that’s diving head first into the ground. Is Canon just going through the reality of boom and bust cycles, which is how every business with latitude fluctuates, or is there something more going on with the imaging juggernaut? An alternate question with a different perspective is that overall the world economy is not growing nor is it shrinking heavily, but it is stagnating currently. That’s effecting the end buyers of camera gear as well as the entirety of some countries right now through inflation. So how is this uncertainty in the world markets putting pressure on the world's number one camera maker?
First off, Canon released it’s Q2 report for 2019 with a staggering loss year-over-year of 50.3 percent of its operating profit or EBIT (earnings before interest and taxes), which is the profit a company realizes after subtracting cost of goods sold, depreciation, and other operating expenses like wages. Besides Canon’s medical and network camera operations, all of its other business entities are at a loss year over year from 2018. A company as large as Canon is still making a tidy profit and still almost double their lowest margins that they incurred in the past 10 years which just so happened to be decade ago to the quarter. In 2009, Canon was at a Net Profit margin of 2.53 percent versus its current 2019 Q2 of 4.88 percent. Canon is not in the doldrums of its previous earnings winter but it’s definitely not at the nascent earnings of 2010-2012 though that time frame only maxed out at a 7.14 percent margin of Net Profit.
Canon is still going strong but it does need to entice the markets and buyers that are not using delaying tactics for future possibilities. Two markets in relative downturns that may require re-tooling for Canon would be the UK market which is in internal turmoil with Brexit possibly becoming a reality on October 31, 2019, and with the ongoing trade war between the USA and China the most populous country in the world is seeing their economy's pace slow down to it's slowest growth since 1992. There is also the overtones of quarterly results that splash cold water on everything and hinders some consumers who are willing to part with their money now if they weren’t worrying about the future of their camera brands.
There’s expansion and contraction in every market with subsequent businesses and Canon, as well as most of the camera industry, experiencing a loss of their consumer digital camera sales to the disruption of the mobile phone industry. It’s just a part of the reality that they, and photographers, now face and I’m personally looking forward to how Canon will respond to the challenge. They will need to introduce a level of excitement and innovation that will drive their interests and operating profit higher if they are to come out of this nose dive. The only issue might be Canon’s stoicism when it comes to creating products that many people want, but that may impact their other products negatively because they would possibly share a feature set. This may be the time for Canon to really look at stream lining their offering while getting previous customers back on their band wagon by being aggressively innovative or lose to other brands that are meeting the challenge.
What do you feel is the reason Canon is losing ground in 2019?