Oct. 27 (Bloomberg) -- Canon Inc., the world’s largest camera maker, posted its seventh straight quarterly profit drop as the stronger yen eroded the value of exports.

Third-quarter net income fell 56 percent to 36.7 billion yen ($399 million) from 83 billion yen a year earlier, the Tokyo-based company said in a statement today. That beat the 29.9 billion yen median of four analyst estimates compiled by Bloomberg.

The yen’s 7.4 percent advance against the dollar in the quarter wiped 97 billion yen from revenue at the maker of cameras and office equipment which relies on overseas demand for about 80 percent of revenue. Increased adoption of cameras in mobile phones is also compounding Canon’s challenges as it seeks to weather the global recession.

“Canon is a prime example of a Japanese exporter that’s been hit by the yen’s gain,” said Koji Toda, chief fund manager at Resona Bank Ltd. in Tokyo, who declined to disclose the assets he oversees. “The company has made firm efforts in cost- cutting to cope with the currency fluctuation and will probably continue doing so to achieve a recovery.”

Annual shipments of digital cameras will likely drop for the first time in 2009, tumbling 14 percent to 103 million units, Kazuharu Miura, an analyst at Daiwa Institute of Research Ltd., said in a report last month.

Canon’s operating profit, or sales minus the cost of goods sold and administrative expenses, dropped 54 percent to 60 billion yen as revenue declined 21.5 percent to 774 billion yen.

Profit Growth Predicted

“We plan to return to profit growth in the fourth quarter,” Masahiro Osawa, senior managing director in charge of Canon’s accounting, told reporters in Tokyo. “Consumer-related products such as cameras and printers will likely be the driver in the period,” he said.

Income at the business machines division, accounting for 80 percent of overall operating profit last year, tumbled 45.5 percent to 73 billion yen as the market for inkjet printers stagnated amid worsening economic conditions, Canon said.

Profit at the camera operations, Canon’s second-biggest division, increased 5.5 percent to 47.6 billion yen because of increased sales of value-added single-lens-reflex models such as the EOS 5D Mark II, even as revenue dropped 8.3 percent, the company said.

Shipment Decline Slowing

The decline in the global camera market’s shipments in August slowed for a second consecutive month, according to Tokyo-based Camera & Imaging Products Association.

Canon slipped 1.9 percent to close at 3,580 yen in Tokyo trading before the earnings announcement, narrowing the gain this year to 29 percent. That compares with a 15 percent advance by Japan’s benchmark Nikkei 225 Stock Average in 2009.

The company kept unchanged its forecast for 64 percent decline in annual net income to 110 billion yen and for a 22 percent drop in annual sales to 3.2 trillion yen.

Worldwide shipments of digital cameras will likely grow 10 percent next year after this year’s drop, according to Daiwa’s Miura.

To contact the reporter on this story: Mariko Yasu in Tokyo at myasu@bloomberg.net.

Last Updated: October 27, 2009 05:07 EDT