Canon Marketing Japan Inc. Investor Relations

Risk Factors

Factors that may significantly affect the decisions of investors include the following. Aspects regarding the future mentioned below are based on the judgment of the Canon Marketing Japan Group as of the end of March 2020.

(1) Impact of market competition and fluctuations

Price competition in the sale and maintenance services of office MFPs continues. While the printing volume using MFPs remains on a rising trend, the unit price of maintenance services continues to fall. If the price competition further intensifies, earnings may decline. A decrease in printing volume caused by the shift to paperless offices may affect the financial performance of the Group. Third parties are selling substitute toner cartridges for laser printers and the earnings of genuine Canon products may be adversely affected if the sales volume of such products increases.
The IT Solutions segment is implementing meticulous man-hour management in a variety of system integration projects, striving to prevent engagement in unprofitable projects. However, if factors such as customer demand for additions or changes in specifications and differences in the understanding of specifications or progress between the Group and customers cause a large number of additional man-hours, the Group's financial performance may suffer.
The market for digital interchangeable lens cameras may shrink due to the shift from SLR cameras to mirrorless cameras, which is beginning to accelerate. Meanwhile, the fall in the sales of inkjet printer units and ink cartridges may accelerate due to a decline in the printing volume caused largely by a decrease in New Year cards.
In the industrial equipment segment, orders received for semiconductor manufacturing devices and testing and measuring instruments are significantly affected by the condition of capital expenditure of semiconductor and device manufacturers. If the capital expenditure of such manufacturers decreases, the Group's financial performance may become sluggish.
In the medical industry, the Pharmaceutical and Medical Device Act (formerly the Pharmaceutical Act) requires the placement of sales managers, computerization for post-sale traceability and other measures to improve safety management. While the Group takes all possible measures to ensure legal compliance, if the safety management system or computerization cannot be operated as initially planned, its business with medical institutions and medical equipment dealers may decrease.
In addition, because the Group receives products and services from its parent, Canon Inc., and many other suppliers, it is exposed to the risk of not being able to receive an adequate supply due to incidents such as natural disasters and large accidents experienced by the suppliers. If such a situation arises, the Group’s financial performance may be affected by its inability to facilitate sales activities.

(2) Risk of bad debts

The Canon Marketing Japan Group is exposed to the risk of incurring unpredictable bad debt expenses due to a large number of transactions requiring payment collection after providing products and services. Therefore, the Group uses credit information from external credit agencies and other data to implement thorough credit management and takes measures such as factoring to hedge the risk. The Group also individually allocates an allowance for doubtful accounts depending on the status of receivable collection to hedge the risk of future bad debts. If, however, the Group suffers a large amount of uncollectible receivables due to an unexpected event, its financial performance and condition may be adversely affected.

(3) Relationship with the parent company

Canon Marketing Japan Inc. is a subsidiary of Canon Inc. (its voting rights ratio was 58.5% as of December 31, 2019) and holds exclusive rights to sell in Japan all products (excluding semiconductor exposure devices, liquid crystal substrate exposure devices and medical equipment) manufactured under the Canon brand by Canon Inc. The volume of purchase from Canon Inc. in the fiscal year under review totaled 182,019 million yen, which comprises 54.8% of the total purchase made by Canon Marketing Japan Inc.
Due to this condition, any substantial change in the management policies, business development, and other aspects of Canon Inc. may considerably affect business activities, the financial performance and condition of the Canon Marketing Japan Group. Moreover, if the advantage of Canon products in related industries cannot be maintained for any reason, the Group’s financial position may be adversely affected.

(4) Information management

The Group holds various types of important information concerning the Group’s management and confidential information of many other companies and individuals. The Group has established policies and rules for the management of such information and has organized and operates a management system for information security, including thorough communication of the importance of information management to its employees through education, training and other opportunities as well as the implementation of system security measures and monitoring of progress. Despite taking such measures, if important information leaks to an external party due to cyber-attacks, etc., the Group’s affiliates and other relevant parties may experience serious damages, and the Groups' business operation, financial performance and condition may be adversely affected due to a loss of trust in the Group.

(5) Natural disasters and other calamities

In regions where the Group engages in business activities, those business activities may be impacted due to natural disasters such as earthquakes and typhoons, a serious outbreak of infectious disease, or similar situations. While Canon Marketing Japan Inc. has established backups for its facilities and information systems, there are no guarantees that these measures will allow the company to fully avoid damages due to various disasters, and in the event of such a disaster, the business performance or financial status of the Group could be affected. Additionally, the worldwide spread of the COVID-19 coronavirus has disrupted supply chains and production activities, particularly in Asia, and depending on the impact on Canon Inc. and other business partners, it may not be possible to obtain adequate products and services. Additionally, in terms of sales, while the coronavirus may have a negative impact on the Japanese economy and markets, as it is not possible to predict the extent of the spread of infections in the future or when the situation will return to normal, it is difficult to forecast the impact on business performance at the current time.