The results mark the seventh consecutive quarter of sales and profit growth, beginning with the third quarter of 2002. Canon’s gross profit ratio for the quarter was 49.6 per cent, representing a decline of 1.1 per cent from the 50.7 per cent recorded for the first quarter of 2003.

Although production-reform efforts continued during the term, the decline in the gross profit ratio was mainly caused by a combination of factors: the appreciation of the yen against the US dollar, a slowdown in cost-cutting performance due to the large number of new products launched during the first quarter, and severe price competition.

Owing to a substantial increase in unit sales, however, gross profit increased by 6.6 per cent to US$3.73bn. Selling, general and administrative expenses for the first quarter rose 3.3 per cent year on year, which is less than the growth rate of net sales for the quarter, with R&D expenditures increasing by US$35m to US$543m, while other selling, general and administrative expenses maintained the same level as the year-ago period.

Consequently, operating profit in the first quarter totalled US$1.26bn, a substantial increase of 13.7 per cent. Other income improved by US$24m, with reduced equity losses of affiliated companies and gains on the disposal of marketable securities offsetting an increase in currency exchange losses on foreign-currency-denominated trade receivables, which resulted from the rapid appreciation of the yen against the US dollar in late March.

As a result, income before income taxes in the first quarter totalled US$1.28bn, a year-on-year increase of 15.9 per cent. The effective tax rate during the quarter was 2.8 per cent lower compared with the previous year. As a result, net income for the first quarter of 2004 totalled US$795m. Basic earnings per share for the quarter was US$0.90.

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