| Item | Current | Prior | YoY % |
|---|---|---|---|
| Net Sales | ¥1.09T | ¥1.06T | +3.3% |
| Operating Income | ¥71.37B | ¥96.52B | -26.1% |
| Profit Before Tax | ¥74.74B | ¥98.84B | -24.4% |
| Net Income | ¥48.30B | ¥72.23B | -33.1% |
| Dividend Per Share | ¥80.00 | ¥80.00 | +0.0% |
| Item | Current End | Prior End | Change |
|---|---|---|---|
| Total Assets | ¥6.24T | ¥6.14T | +¥102.82B |
| Total Equity | ¥3.66T | ¥3.77T | ¥-113.92B |
| Shareholders' Equity | ¥3.43T | ¥3.49T | ¥-58.72B |
| Equity Ratio | 55.0% | 56.9% | -1.9% |
| Item | Value |
|---|---|
| Net Profit Margin | 4.4% |
| Item | YoY Change |
|---|---|
| Net Sales YoY Change | +3.3% |
| Operating Income YoY Change | -26.1% |
| Profit Before Tax YoY Change | -24.4% |
| Net Income YoY Change | -33.1% |
| Item | Value |
|---|---|
| Shares Outstanding (incl. Treasury) | 1.33B shares |
| Treasury Stock | 465.18M shares |
| Average Shares Outstanding | 875.05M shares |
| Book Value Per Share | ¥4,213.97 |
| Item | Forecast |
|---|---|
| Net Sales Forecast | ¥4.76T |
| Operating Income Forecast | ¥456.00B |
| Net Income Forecast | ¥333.00B |
| Dividend Per Share Forecast | ¥80.00 |
FY2026 Q1 was a mixed quarter for Canon: revenue grew but profits contracted sharply, resulting in clear margin compression and a lower ROE. Revenue increased to 10,936.5 (100M JPY), up 3.3% year over year. Operating income fell to 713.7 (100M JPY), down 26.1% YoY, while net income declined to 483.0 (100M JPY), down 33.1% YoY. Operating margin decreased to 6.5% from 9.1% a year ago, a compression of roughly 259 basis points. Net margin declined to 4.4% from 6.8% YoY, a compression of about 240 basis points, reflecting both weaker operating leverage and a heavier tax drag. The DuPont 3-factor ROE printed at 1.3% for the quarter, down from an estimated 1.9% in the prior-year quarter, driven predominantly by margin deterioration; asset turnover was slightly higher and financial leverage modestly increased. Extended DuPont indicates a tax burden of 0.646 (implied effective tax and minority rate of ~35%) versus ~27% a year ago, which further pressured net income. Interest burden of 1.047 suggests non-operating income was a small net positive, not a profit headwind. Financial position remains conservative with an equity ratio of 55.0% and financial leverage of 1.70x (Assets/Equity), consistent with a strong balance sheet. Book value per share is 4,213.97 JPY, underpinned by total equity of 36,602.0 (100M JPY). Against full-year guidance, Q1 revenue progress was ~23%, operating income ~16%, and net income ~15%, indicating a back-half weighted profit plan. Dividend policy remains intact at DPS 80 JPY for the year, aligned with a 40% payout ratio target as a guiding policy, and looks well-covered by the full-year earnings plan. The combination of lower margins and a higher effective tax rate explains most of the earnings shortfall versus last year. Looking forward, achieving the FY plan will require margin recovery from current levels given the Q1 profit progress. We see the balance sheet strength as a buffer while management executes on margin restoration and tax normalization through the year.
ROE decomposition (DuPont 3-factor): ROE = Net Profit Margin × Asset Turnover × Financial Leverage = 4.4% × 0.175 × 1.70 ≈ 1.3%. Versus the prior-year quarter, the net margin fell from ~6.8% to ~4.4% (largest driver of ROE decline), asset turnover edged up from ~0.173 to 0.175 (slight positive), and financial leverage rose from ~1.63x to 1.70x (modest positive). Business drivers: operating margin compression (6.5% vs 9.1% YoY) reflects weaker pricing/mix and/or lower scale benefits, while the tax burden worsened to 0.646 (implied ~35% rate) from ~0.731 (~27% rate) last year, amplifying the drop from EBT to NI. Interest burden at 1.047 indicates non-operating items were a small tailwind rather than a drag. Sustainability: the margin reset may partially reverse if seasonality and cost normalization play out, but tax rates near mid-30s would keep NI leverage lower unless structurally addressed. Watchpoints: ensure SG&A and cost growth re-align beneath revenue growth to restore operating leverage; current quarter dynamics point to negative operating leverage conditions.
Top line grew 3.3% YoY to 10,936.5 (100M JPY), but profit growth lagged with operating income down 26.1% YoY and net income down 33.1% YoY, indicating adverse mix and/or cost absorption effects. Operating margin fell 259 bps YoY to 6.5%, and net margin fell 240 bps to 4.4%, signaling a clear shift to lower-margin output in Q1. EBT margin declined to 6.8% from ~9.3% YoY, and a higher effective tax rate further reduced net income conversion. The balance of Q1 progress versus full-year guidance suggests back-half reacceleration in profitability will be necessary. Execution focus is on margin repair via mix, pricing, and cost control to meet the FY operating income and net income targets.
Equity ratio of 55.0% and financial leverage of 1.70x (Assets/Equity) indicate a conservative capital structure. Assets increased modestly YoY (+1.7%), while equity declined (-3.0%), resulting in a lower equity ratio versus last year (from 56.9% to 55.0%). Interest burden at 1.047 implies low net interest expense exposure. There are no signals of excessive leverage; D/E well below aggressive thresholds based on the equity ratio and leverage profile.
Total Equity: -1,139.2億 (-3.0%) YoY - modestly higher leverage; monitor capital returns and retained earnings trajectory. Equity Ratio: 55.0% (from 56.9%) - down 190 bps YoY, still conservative but trending lower. Total Assets: +1,028.2億 (+1.7%) YoY - balance sheet expansion despite profit contraction.
Dividend cash requirement appears well covered by earnings capacity: at DPS 80 JPY and an estimated dividend-paying share count of ~868.6 million (issued minus treasury), annual cash dividends would be ~694.9 (100M JPY equivalent: ~695億円). Against full-year net income guidance of 3,330億円, coverage is roughly 4.8x. This supports cash commitment for dividends under the current earnings trajectory.
Full-year DPS guidance is 80 JPY. Based on full-year net income guidance of 3330億円 and average shares of ~875.1 million, forecast EPS is ~381 JPY, implying a payout ratio of about 21%, comfortably below the stated 40% target. On a cash basis, estimated annual dividends of ~695億円 are covered ~4.8x by the full-year net income plan, indicating strong headroom. With profitability back-half weighted per progress rates, dividend visibility remains solid under the current outlook.
Business risks include Margin pressure from product mix and pricing in key segments (office equipment, imaging)., Execution risk in achieving back-half weighted profit recovery to meet FY guidance., Higher effective tax rate (~35%) reducing net income conversion from EBT..
Financial risks include Equity ratio declined YoY (56.9% to 55.0%), modestly increasing leverage., ROIC at 1.4% indicates low capital efficiency vs benchmarks, raising hurdle for value-accretive reinvestment..
Key concerns include Operating margin compression of ~259 bps YoY to 6.5%., Net margin decline to 4.4% with a heavier tax burden., Guidance dependence on H2 margin recovery..
Key takeaways include Top-line growth of 3.3% contrasted with a 26.1% decline in operating income, highlighting negative operating leverage., Operating margin fell to 6.5% (−259 bps YoY); net margin to 4.4% (−240 bps)., Tax burden increased (NI/EBT 0.646), amplifying the net income decline., Balance sheet remains strong (equity ratio 55%), supporting dividend resilience., Q1 progress vs FY plan is light on profits (~16% OI, ~15% NI), implying a back-half weighted recovery is required..
Metrics to watch include Operating margin trajectory and SG&A/COGS discipline., Tax rate normalization and NI conversion from EBT., Progress-to-plan each quarter versus full-year OI and NI targets., Asset turnover and ROIC improvement from the current low base..
Regarding relative positioning, Canon enters FY2026 with a conservative balance sheet but lower margins and capital efficiency than ideal; successful margin repair and maintaining disciplined capital allocation will be key to narrowing the gap versus higher-ROIC peers in electronics and office equipment.