Canon Inc. (7751), the world’s largest camera maker, cut its annual profit forecast and predicted its first drop in sales of models with an interchangeable lens as consumers switch to smartphones to take photos.
Net income will probably total 240 billion yen ($2.5 billion) for the year ending December, the Tokyo-based company said in a statement yesterday, cutting its earlier forecast of 260 billion yen. The new projection missed the 250.8 billion-yen average of 21 analyst estimates compiled by Bloomberg.
Smartphones are eating into digital camera sales as companies such as Apple Inc. and Sony Corp. release new handsets with stronger built-in lenses and sensors to lure shoppers. The value of worldwide camera shipments dropped 19 percent in August from a year earlier, a ninth consecutive monthly decline, according to the Camera & Imaging Products Association in Tokyo.
“The downward revision is larger than expected and will have a negative effect on Canon’s stock price,” said Takashi Aoki, a Tokyo-based fund manager at Mizuho Asset Management Co. “Smartphones are creating a structural problem for camera manufacturers.”
The company that started in an apartment in the Tokyo district of Roppongi in 1933, cut its annual sales target for single single-lens-reflex models to 8 million from 9 million. Canon kept its target for compact cameras at 14 million units.
The maker of EOS models, which also manufactures printers, facsimile machines and medical equipment, fell 0.2 percent to 3,130 yen in Tokyo trading yesterday. It’s dropped 6.3 percent this year, while the benchmark Nikkei 225 Stock Average has surged 39 percent.
The decline in demand for interchangeable lens cameras stems from sluggish economies especially in Europe and Asia, Chief Financial Officer Toshizo Tanaka, told reporters in Tokyo yesterday. “It’s a temporal decline and we expect demand to pick up next year as the global economy recovers.”
The company spent 50 billion yen buying back its own shares last month after the stock tumbled to close at 2,935 yen on Sept. 2, the lowest since December 2012.
The company also reduced its estimate for operating profit to 360 billion yen for the year, from 380 billion yen, predicted three months ago. Annual sales will be 3.75 trillion, down from an earlier projection of 3.85 trillion.
The impact of lower camera sales is being cushioned partly by cost reductions at Canon and a weaker Japanese yen. The lower currency boosts the repatriated value of Japanese exporters’ overseas earnings.
Canon revised its assumption on the yen exchange rate to 97 yen to the U.S. dollar and 130 yen to the euro, from 95 yen and 125 yen projected three months ago respectively.
The U.S. dollar traded at an average of 98.89 yen during the three months ended September, compared with 78.64 yen a year earlier, data compiled by Bloomberg show. The euro averaged at 131.05 yen in the latest quarter, compared with 98.4 yen a year earlier.
Canon also posted third-quarter earnings with operating profit, or sales minus the cost of goods sold and administrative expenses, of 90.6 billion yen on revenue of 913.1 billion yen. Net income was 58.8 billion yen.
Operating income at the office products unit, Canon’s biggest division making copiers and multi-function printers, increased 63 percent to 67 billion yen in the quarter as revenue rose 21 percent.
Operating income at the imaging system division, which handles cameras, rose 8.2 percent to 56.9 billion yen in the quarter ended Sept. 30 as revenue gained 8.2 percent.
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