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Canon profit up 12th straight quarter
Jul , 2005 TOKYO – Canon Inc. said on Wednesday its net profit has risen for a 12th straight quarter on strong sales of digital cameras and office equipment, while rival Seiko Epson Corp. posted a loss on sliding prices of small displays and cut its full-year forecast by 19 percent.Canon stuck to its outlook for group net profit to rise 7 percent to 367 billion yen ($3.26 billion) in calendar 2005, which would be a sixth straight year of record earnings, reflecting strong unit sales of office copiers, high-end digital cameras and laser printer engines supplied to Hewlett-Packard Co.
But in a move that could worry some investors, the world’s largest maker of digital cameras and copiers logged a profit for the April-June quarter that was below analysts’ expectations and cut its 2005 operating profit target by 1 percent due to falling product prices.
Pricing pressure has also cut into profit margins at U.S.-based office equipment maker Xerox Corp., which disappointed investors earlier this week with a weak quarterly result due to a shift in sales to lower-priced printers.
“Downward pressure on prices has been a bit sharper than we originally expected,” Canon Senior Managing Director Toshizo Tanaka told a news conference. “We have seen the biggest impact on office copiers and printers and compact cameras.”
The downward revision came despite a recent weakening of the yen, a boon for an exporter like Canon that gets most of its sales outside Japan. It raised its assumed dollar rate for the second half to 110 yen from 106.2 yen in the first half.
Canon said net profit was 82.21 billion yen in April-June compared with 76.5 billion yen in the same period last year. It was a tad short of the market consensus for 83.3 billion yen, according to five forecasts compiled by Reuters Estimates, but beat Canon’s own target of 81.9 billion yen.
Tanaka reported strong demand for color copiers and laser printers, boosting sales of high-margin toner. Robust sales of equipment used to make liquid crystal displays and high-end digital single lens reflex (SLR) cameras also lifted its results.
Canon said its April-June sales rose 7.3 percent from the same period last year to 912.47 billion yen. Group operating profit increased 5.9 percent to 126.91 billion yen, although that fell short of the market consensus of 132.8 billion yen.
Seiko Epson, whose business year begins on April 1, also reported earnings that missed analysts’ expectations.
Canon’s archrival in the ink jet printer market posted an operating loss of 5.04 billion yen in the latest quarter, against market expectations for a small profit, due to sharp price falls on LCD panels for mobile phones.
It suffered a quarterly net loss of 7.05 billion yen.
Seiko Epson has been dogged by sliding prices of small LCD panels used in mobile phones amid intense price competition with rivals Sharp Corp., Toshiba Matsush*ta Display and South Korea’s Samsung Electronics Co.
The company’s LCD business, which primarily supplies panels to Nokia and other cellphone makers, is handled by Sanyo Epson Imaging Devices, a joint venture owned 55 percent by Seiko Epson and 45 percent by Sanyo Electric Co.
But Seiko Epson said profitability on LCD panels, while still weak, was actually outstripping its initial expectations. It slashed its earnings outlook for the full year to March because of falling margins in its mainstay printer division.
The company, based in Nagano, central Japan, said it now expects to post a group net profit of 44 billion yen in 2005/06, below its previous forecast for 54 billion yen and last year’s result of 55.6 billion yen. It cut its operating profit target by 11 percent to 82 billion yen.
Seiko Epson said it was benefiting from strong demand for photo printers and multi-function (MFP) ink jet printers in the United States and Japan, but that a weak European economy and fierce competition in other Asian markets was taking a toll.
It also plans to invest “several billions of yen” to boost output of printers due to strong demand in the U.S. market, depressing its profits in the short term.
“The economies of Germany, France and Italy are not doing so well,” Seiko Epson Chief Financial Officer Toshio Kimura told a news conference. “In Asia, there has been an influx of new MFP models from other companies, pushing down prices.”
Prior to the announcement, shares of Canon closed down 0.67 percent at 5,940 yen, underperforming Tokyo’s electric machinery index IELEC, which rose 0.68 percent. Seiko Epson gained 2.3 percent on the day to 3,560 yen.
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