Canon Cuts Profit Forecast on Strong Yen, Slowing Economies

Canon Cuts Full-Year Profit Forecast Citing Slowing Economies
Canon, which gets 80 percent of sales outside Japan, cut its sales target for compact cameras this year to 21 million units from 22 million forecast earlier. Photographer: Tomohiro Ohsumi/Bloomberg

Canon Inc., the world’s largest camera maker, cut its full-year profit forecast because of a stronger yen and expectations for weaker growth in the U.S., Europe and China.

Net income will probably be 250 billion yen ($3.2 billion) in 2012, the Tokyo-based company said in a statement today, paring its April projection of 290 billion yen. That lagged behind the 289.6 billion-yen average estimate of 20 analysts. The second quarter’s net income of 51.7 billion yen also missed analyst estimates for 67.6 billion yen.

Canon, which gets 80 percent of sales outside Japan, cut its sales targets for compact cameras, office equipment and imaging systems. The company is facing slowing demand for laser printers in Europe and the U.S., and overseas earnings are being eroded after the yen gained the most against the euro of all major currencies last quarter amid the European debt crisis.

“Compact-camera sales are seen to be affected by smartphones, and there are signs of concern for growth in printers,” Hisashi Moriyama, an analyst at JPMorgan Chase & Co. in Tokyo, said after the earnings announcement. “There are risks of further forecast revisions if the yen stays strong.”

Canon fell 0.9 percent in Tokyo trading to 2,678 yen, the lowest level since March 2009, before the announcement. The stock fell as much as 3.1 percent to 27.80 euro in Germany.

Slowing Economy

“The global economy is expected to realize only mild growth amid the strong uncertainty over the eurozone debt crisis,” Canon said in a statement. “Projections for the U.S. economy point to a moderate recovery, while in Europe the economy will likely remain sluggish. Growth in emerging economies, such as China and India, is expected to decline.”

The target for compact-camera sales this year was lowered to 21 million units from 22 million forecast earlier, according to the statement. The company kept the sales target for single-lens reflex cameras, used by professionals, unchanged at 9.2 million units.

Office-equipment sales may drop 5.2 percent to 1.8 trillion yen, the company said today, abandoning an earlier forecast for 1.1 percent growth. Imaging-systems sales may rise at a 16.5 percent pace, slower than the 20 percent it previously forecast.

Appreciating Yen

The Japanese currency averaged about 102.90 against the euro last quarter, compared with Canon’s estimate in April of 105 yen. A stronger yen cuts the repatriated value of sales earned overseas.

Each 1-yen decline in the value of the dollar will erode second-half operating profit by about 5.3 billion yen, the company said today. The impact of a 1-yen decline by the euro is estimated at 2.9 billion yen, the company said.

Canon based its full-year forecast on an exchange ratio of 100 yen to the euro, compared with 105 yen predicted earlier. The company kept its dollar forecast unchanged at 80 yen.

The maker of Ixus, EOS and PowerShot cameras will cut costs to cope with the strong yen, Chief Financial Officer Toshizo Tanaka told reporters in Tokyo. It isn’t planning job cuts, he said.

“We haven’t seen a significant impact on businesses by the European crisis during the fiscal first half,” Tanaka said. “Nevertheless, we are cautious about the possible impact from Europe’s situation in the second half.”

Natural Disasters

Canon brought back Fujio Mitarai, 76, as president in March to replace Tsuneji Uchida, who announced his resignation in January after the company forecast a smaller full-year profit than analysts estimated. Mitarai served as Canon’s president from 1995 to 2006 before becoming chairman.

The company, which also makes copiers and chipmaking equipment, was hit by floods in Thailand last year just after recovering from output disruptions caused by Japan’s March 2011 earthquake and tsunami.

Canon is boosting output overseas as the rising yen makes it more expensive to manufacture in Japan. Canon set up a new affiliate in Brazil with a plan to start making digital cameras in the nation from July 2013, it said June 11. The company also established a marketing subsidiary in Vietnam to boost services in the nation starting next month.

Lower sales-volume estimates for laser printers and compact cameras were among the reasons for cutting forecasts, Tanaka said.

Camera makers are promoting high-end models as smartphones with built-in cameras start to erode sales of point-and-shoot models. In March, Canon introduced the EOS 5D Mark III, featuring a new image sensor. The company is introducing its first mirrorless model in September, joining Nikon Corp. in tapping growing demand for lightweight cameras with interchangeable lenses.

U.S. printer makers, including Xerox Corp. and Lexmark International Inc., lowered their earnings forecasts earlier this month, citing weakness in Europe. Worldwide hardcopy peripherals shipments declined 7.4 percent in the first quarter this year, researcher IDC said in May.

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