S&P Global Ratings downgraded its long- and short-term issuer credit ratings on Canon Inc. by one notch to A+/A-1 from AA-/A-1+ and removed them from CreditWatch with negative implications, where they were placed in July. The ratings outlook is stable.
The downgrade reflects the rating agency's expectations that the Japanese optical equipment maker's operating profit would slump about 40% year over year in fiscal 2019 owing to a drop in sales in its core office equipment and camera business division.
"Fueling these adverse factors are the saturation and contraction of markets for these products and the economic slowdown in Europe and China," Ratings noted. The company may struggle to stabilize its profit through the next two years as it needs time to restructure its core businesses and "substantially grow" new ones, such as its medical system segment.
The stable outlook indicates the agency's assumption that Canon's strong branding position in the advanced optical technologies segment, a diverse product mix and a relatively high operational efficiency would help stem a fall in profitability.
Ratings revised the assessment of Canon's liquidity to 'adequate' from 'strong' on the back of declining cash on hand.
This S&P Global Market Intelligence news article may contain information about credit ratings issued by S&P Global Ratings. Descriptions in this news article were not prepared by S&P Global Ratings.
