The Canon Business Solutions (CBS) business unit was affected by a weakening demand for investment in office printing, leading to a decrease in market volume. Lower average sales revenue per device and postponed product launches had an additional,
adverse impact on sales.
Meanwhile, demand for integrated print and workflow solutions is steadily increasing. These complex projects, however, entail a longer decision-making phase for the customer and tie up extensive resources until the contract is concluded. Many such
projects were launched in the first half of the year, but will not feed through into sales revenue until a later date. The competitors have also caught up with Canon and are now exerting huge pressure on terms, particularly for large-scale project
These factors resulted in a noticeable fall in sales and revenue. While this trend was partially offset by rising service turnover driven by the strong growth in colour print volumes, total revenue remained below the prior-year level.
In the Canon Consumer Imaging (CCI) business unit, turnover from sales activities increased thanks to attractive new camera products and high demand for printer cartridges, leading to an improvement in the result from the commissionaire system that has
been used in this business unit since 2003.
The intense competitive pressure meant that the 2 % rise in the exchange rate of the euro in the first six months of 2006 could not be passed on to the market. This, coupled with falling prices, led to deterioration in the gross margin.
Additional capacity had to be deployed to cope with the large number of projects, the development of complementary market segments, and the preparation for a new ERP system to be implemented at Canon (Switzerland) Ltd, generating higher labour costs in
the first half of the year. Therefore, the operating result fell significantly to CHF -1.6 million.
Nevertheless, this unsatisfactory operating result was offset by financial income and the proceeds from real estate business, enabling a break-even consolidated semi-annual profit of CHF 0.1 million to be recorded for the first half of 2006.
On 1 April 2006, Canon (Switzerland) Ltd acquired the former dealer in Canon Business products and solutions in Ticino, Sabbioni Office SA, with 12 employees. The company was fully integrated and merged with Canon (Switzerland) Ltd retroactively as per
1 January 2006.
With a full project portfolio and new products in the business segment, we expect sales revenue to recover in the second six months of the year, paving the way for a return to a positive turnover trend. Further measures on the cost side will also be
implemented to counter the ongoing margin pressure and ensure a positive earnings performance. We therefore anticipate a recovery in the second half of 2006 and direct our efforts towards achieving revenue and profit on a prior-year level by the end of