Canon has released its first-quarter (Q1) financial report, revealing just how bad the COVID-19 pandemic has affected its bottom line and suggesting it's only going to get worse before it gets better.

The report starts off by stating on its ‘Key Message’ summary page that the COVID-19 pandemic has ‘completely [changed the] global economic landscape’ with the following bullet point saying the ‘global economy faces worst recession since the Great Depression’ due to the ongoing pandemic.

Across the board, Canon saw a 9.5% drop in net sales and an 18.7% decline in operating profit for Q1 (January 1 through March 31), year-over-year (YoY). But even those numbers look great in comparison to those found within Canon’s Imaging Systems division, which accounts for camera and inkjet printer sales.

The report shows net sales and operating profit for Q1 within the Imaging System division is down 13.9% and 80.6%, respectively, YoY. Further split up, Canon states its net sales are down 24.8% YoY specifically for cameras, while its inkjet printer net sales were actually up 7.3%. Despite the current situation, Canon hasn’t changed its projections which currently have net sales and operating profits down 2.5% and up 11.5%, respectively for the entire 2020 fiscal year.

That may very well change though, as Canon expects its second quarter (Q2) to be even worse, as Canon’s current downward trajectory didn’t even start until mid-way through Q1. Combined with the uncertainty of when the COVID-19 pandemic will begin to subside, Canon says it’s difficult to provide accurate estimates of future financials and even clarifies that once the global economy is back on the rise, it’s unlikely cameras will see an immediate return to normal sales.

In addition to the impact on supply, sales of interchangeable-lens cameras were also greatly affected. One after another, live events were canceled or postponed and chances to use cameras decreased. In addition to this, we believe it will take time to see a recovery in the demand for cameras, which are considered luxury items, even after the global economic turmoil has subsided.’

Whatever happens, it seems Canon has little intent on slowing down. In its summary of the results, Canon says it ‘will steadily push forward [its] strategy that focuses on models for professionals and advanced-amateurs to maintain medium- to longterm profitability,’ an obvious nod to the forthcoming EOS R5 camera, as well as new RF lenses on the horizon.

Something worth keeping in mind, as with all financial reports, is that numbers alone don’t tell the whole story. There is plenty going on behind-the-scenes and there is a lot of grey area within the net sales and operating profits within any given division.

For this particular Q1 report, a standout example of this is in the dramatic discrepancy between the net sales and operating profit within Canon’s Imaging Systems division. While we obviously can’t confirm this to be the case, the 80.6% decline in operating profit could very well be due, at least in part, to the research, development, production and marketing expenses of the EOS R5 and other professional and ‘advanced amateur’ camera systems Canon plans to release in the near future. It’s shaping up to be an industry-shaking camera based on the currently-known specs and actively developing such a system doesn’t come cheap.

You can read through all of the Q1 financial documents on Canon’s investor relations website.