*NEWS*OEM’S READY FOR RESTRUCTURING

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*NEWS*OEM’S READY FOR RESTRUCTURING

 user 2006-01-27 at 11:10:00 am Views: 58
  • #13899

    Restructuring eyed as Japan precision firms report
    January 2006TOKYO: Canon
    Inc may stand out with a strong rise in quarterly profit as Japan’s
    precision equipment makers report earnings from this week, but
    investors will also be watching out for restructuring plans from Seiko
    Epson Corp and Fuji Photo Film Co.
    As well as posting strong results, Canon is expected to forecast
    another record profit in 2006 on the back of solid sales of colour
    copiers, printers and digital cameras, especially high-end digital
    single lens reflex (SLR) models that use interchangeable lenses.
    But sector watchers may be focusing more closely on Fuji Photo’s
    restructuring steps for its ailing photo film and colour paper
    operations and Seiko Epson’s plans for shoring up its chip and display
    businesses.
    Analysts say the pressure for further restructuring was ratcheted up a
    notch when Konica Minolta Holdings Inc. said earlier this month it is
    pulling out of the photographic film and digital camera markets.
    “Global demand for colour film is declining about 20 per cent annually,
    and that trend probably won’t change,” said Deutsche Securities analyst
    Yoshikazu Higurashi.
    “Fuji Photo needs to implement restructuring that involves production,
    sales and services or the future does not look good.” Fuji Photo, the
    world’s second-largest camera film maker after Eastman Kodak, said in
    October it was looking to accelerate reform and suggested that related
    charges could force it to cut its full-year profit outlook.
    For its part, Seiko Epson is expected to announce restructuring steps
    for its devices devision as heavy price falls for semiconductors and
    small liquid crystal displays (LCD) used in mobile phones have put that
    division in the red.
    Analysts are also worried about profit margins on Seiko Epson’s ink-jet
    printer business after rival Lexmark International Inc said its
    quarterly profit fell by more than half on slumping demand for its ink
    and toner products. Matt Harris, part of a team that manages £1.5
    billion ($NZ3.96 billion) in Japanese equity at Scottish Widows
    Investment Partnership, said tough competition in the copier and
    printer markets would keep him wary of precision equipment shares.
    “I am always nervous about the quite high operating profit margins they
    make on these businesses, when really it’s a very competitive area to
    be in. It’s very difficult to make a copier or a printer that’s
    particularly different to the one that Lexmark makes or Dell makes,”
    Harris said.
    Canon’s operating profit for the October-December period may come to
    178 billion yen ($NZ2.27 billion), up 35 per cent from a year earlier,
    according to a consensus forecast of six brokerages polled by Reuters
    Estimates. Canon’s own quarterly estimate is for 173 billion yen.
    Earlier this month Canon CEO Fujio Mitarai predicted that profit would
    grow 10 per cent in 2006, and analysts expect the company’s official
    forecast to reflect that remark.
    “Canon has enjoyed strong demand for colour multi-function copiers and
    (laser) printers, and has boosted its share of the ink jet printer
    market,” Higurashi said of Canon’s quarterly results, noting that a
    weaker yen also helped.
    “There is a good chance that its margins will decline (this year) due
    to rising raw materials prices and tough price competition, but demand
    for Canon’s core products is firm and its profits should remain on an
    upward track.” Analysts generally expect Fuji Photo’s quarterly
    operating profit to come in somewhere around last year’s figure of 43.7
    billion yen, supported by strong sales of medical equipment and optical
    film for use in the production of LCD panels.
    Copier giant Xerox Corp. posted an 18 pe rcent rise in quarterly profit
    but its sales fell. Merrill Lynch analyst Ryohei Takahashi warned that
    the profit-margin improvement was not necessarily a good sign for Fuji
    Photo’s office equipment unit, Fuji Xerox, owned 75 per cent by Fuji
    Photo and 25 per cent by Xerox.
    Takahashi said in a note to clients that operating profit margins at
    Xerox and Fuji Xerox, which accounts for about 40 per cent of Fuji
    Photo’s overall revenues, have shown an increasingly inverse
    relationship since 2003.
    “This looks bad for Fuji Xerox’s October-December 2005 earnings,” Takahashi wrote in the note.
    Goldman Sachs estimates Seiko Epson’s third-quarter operating profit will drop by about 50 per cent to 20.5 billion yen.
    Quarterly operating profit at Ricoh Co dropped about 11 per cent to
    34.4 billion yen, according to Merrill Lynch’s Takahashi, missing the
    company’s forecast of 38 billion yen amid tough price competition in
    the copier and printer markets.
    Konica Minolta is seen posting an operating profit close to the 18.5
    billion yen it recorded in the same quarter a year earlier as healthy
    demand for multi-function printers and LCD film offset weak sales of
    optical pickup lenses.
    Analysts generally see profit at Olympus roughly doubling on healthy
    sales of endoscopes and on measures taken to improve margins in its
    battered digital camera division.
    Nikon Corp. previewed its results earlier this week by saying its
    April-December group operating profit would more than triple due to
    strong sales of digital cameras and brisk demand for lithography
    equipment used to make chips and LCDs