*NEWS*CANON:130MIL TONERS CTGS ANNUALLY

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Date: Thursday August 17, 2006 01:41:00 pm
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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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