Revenue and profit decline as sales volume increase

Dietlikon, 30.1.2006 - The poor performance of the economy in the first half of 2005 affected demand at the top end of the product segments, putting pressure on revenue and profit at Canon (Switzerland) Ltd. After strong results in the previous year, the net revenue declined by 1,7% and the annual profit dropped by 48,2% returning to the level of 2003.

In the difficult market environment, the Canon Business Solutions (CBS) business unit saw growth for its lower-end product segments, while sales of higher-value products stagnated. Despite a considerable volume growth, revenue from sales activities came under pressure due to the downtrend in average prices. However, the decline in the business unit CBS was partly offset by the service area, thanks to robust print volumes.
Following a disappointing trend in the first six months, the Canon Consumer Imaging (CCI) business unit enjoyed a marked revival in the second half of the year on the back of rising consumer demand towards the end of 2005, resulting in a positive sales trend for the consumer segment over the year as a whole. Overall results remained below the prior-year level in the consumer segment due to the loss of revenue from the repair business, which was outsourced in 2004.

The solid performance of the Services segment helped to improve the gross margin to 47.2% despite strong price pressure in the business market and enabled gross profit to be maintained at the prior-year level even with declining revenue.
Additional capacity had to be deployed to cope with the higher volume, leading to an increase in operating costs.

Higher financial income has made up in part for the fall in operating income. However, the annual profit of CHF 2.9 million after adjustment for additional tax effects was still below the previous year’s figure.

Detailed information on business developments at Canon (Switzerland) Ltd will be available in the Annual Report 2005, which will be published at the end of April.

The regular shareholder’s meeting of Canon (Switzerland) Ltd will take place on 26 May 2006.

Outlook
Over the coming year we will counter the intense competitive pressure with new and innovative high-performance products and strengthen our market position once again. Thanks to the motivation and commitment to quality demonstrated by our employees, we can look to the future with confidence.

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