CANON MAKE 130MIL TONERS CTGS ANNUALLY

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Canon to Slash Costs Further as Prices for Fuel, Materials Soar
Aug. 06– Canon Inc., the world’s biggest maker of digital cameras, will widen planned spending cuts 7 percent this year by making more of its own parts and expanding automation to counter surging prices for fuel and materials.The company will slice 118 billion yen ($1 billion) in costs, compared with its previous target for 110 billion yen. Prices for copper have surged 78 percent this year, oil is up 24 percent and the yen may gain against the dollar, trimming the value of overseas earnings.“There is a risk of oil prices remaining at current highs and of another surge in materials prices, so we’re being discreet,” Toshizo Tanaka, senior marketing director in charge of finance, said in an interview at the company’s headquarters.Canon, which has the highest operating margin among consumer electronics and office equipment makers in the Nikkei 225 Stock Average, boosted profit 29 percent to 105.9 billion yen in the three months ended June 30, partly by paring 33.4 billion yen from costs, beating its forecast for 7.7 billion yen in cuts.The company said it may whittle down spending more in the second half by using fewer procurement sources and reducing workers used to make printer cartridges and other products. The company has increased plans for spending cuts twice this year from the January estimate of 87 billion yen.“If we reduce as much cost in the second half of the year as we did in the first half, total savings will be even higher,” Tanaka said.

Cost-to-Sales
Spending cuts helped lower the company’s cost to sales ratio to 49.9 percent in the first six months of the year from 51.6 a year earlier. Canon cut costs by 72 billion yen last year. The company expects to narrow the ratio to 45 percent by 2010.The maker of PowerShot, IXUS and EOS digital cameras last month raised its full year net profit forecast for the second time this year, to 440 billion yen from 432 billion yen, after announcing second quarter results came in better than expected on higher sales of cameras, copiers and printers and cost savings.Canon, Japan’s second biggest manufacturer after Toyota Motor Corp. by market value, has halved the number of its parts supplier from 6,000 to about 3,000 in the past year and a half.Canon is also automating more of its production lines to trim labor costs. The company will spend 425 billion yen on capital spending, part of which will be used to make cartridge manufacturing equipment.Canon makes 130 million toner cartridges annually. The company would need to hire thousands of workers every year if it were to use manual labor, but have avoided doing so by making its own manufacturing equipment and turning the production facilities into unmanned factories.Copper for three-month delivery rose to $7,815 a ton yesterday on the London Metal Exchange, from $4,440 on Jan. 3, the year’s first trading day. Crude oil traded on the New York Mercantile Exchange rose to $75.90 today, from $63.10 on Jan. 3. 

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August 17, 2006 at 1:39 PM