The September earthquake in Japan and the Japanese Yen’s appreciation were two of the worst days for Canon Inc. this year. And that’s not a good thing.
Despite a positive outlook and a 7 percent gain in the U.S. Dollar, Canon reported that its Japanese yen-denominated profits are being crushed by the rising currency, which is up 18 percent since mid-February. And the company’s earnings outlook is being hurt by the global drop in sales of smartphones.
“In light of the yen appreciation, Japan-based companies and other overseas companies in our industry should carefully monitor this [exchange rate] phenomenon,” Canon CEO Fujio Mitarai said in a statement.
The company also reported that its Q2 profits will be slashed by nearly 80 percent because of higher costs for raw materials and transportation. By contrast, in 2018’s Q2 profit was up 15 percent because the company was able to take advantage of tax reform, which gave it tax benefits for repatriating cash and amortizing it over a period of years, which had the effect of increasing earnings.
The effect of the exchange rate and the falling popularity of smartphones could prove to be devastating for any company that depends on Japan, but Canon remains one of the industry’s greatest successes. It invented the copier, the printer, the webcam, the webcam camera, and the smartphone. Indeed, according to the company’s internet website, while Canon has been selling products since 1887, it has only been around since 1950.
Thanks to a deal with General Electric and others, Canon has 1.3 billion square feet of property around the world, making it one of the largest real estate companies in the world. In other words, what its current struggles mean for Canon is yet to be determined.