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Canon sees record Q1 net profit
27
April 2006 – Tokyo (JPN): Canon has posted a Q1 net profit rise of 16
per cent to ¥108.3 billion ($942 million), citing strong sales of
digital cameras and copiers.
Sales grew 9.5 per cent to ¥923.3 billion.Canon 1st-Quarter Net Probably Rose on Digital Camera Sales
April
06 — Canon Inc., Japan’s second-biggest manufacturer by market value,
will probably say profit rose 11 percent in the first quarter on cost
cuts and rising sales of digital cameras made for hobbyists and
professionals.
Net income at Canon probably rose to 103 billion yen
($899 million) in the three months ended March 31, from 93 billion yen
a year earlier, based on the median of five analysts’ forecasts. The
company, which reports tomorrow, forecast 98 billion yen profit for the
period in January.
President Fujio Mitarai extended Canon’s lead
over rivals Sony Corp. and Olympus Corp. in the camera market and
increased profit margins by focusing on models with interchangeable
lenses. He also sold more color copiers, helping sales of ink and
paper, to shield Canon’s earnings as prices for more basic consumer
electronics declined.
“The company will continue to announce good
results,” said John Yang, an equity analyst at Standard & Poor’s
in Tokyo. “Its market position in digital cameras is extremely strong
and its cost structure is very lean.” He has a “strong buy” rating
on the company’s shares.
A weaker-than-expected yen helped to
expectations for a rise in earnings. Canon, which gets 70 percent of
its sales abroad, on Jan. 30 it based first-quarter goals on rates of
115 yen against the dollar, and 135 yen against the euro. The yen
traded at an average 117.73 against the dollar in the period and 140.91
against the euro.
Shares of Canon rose 13 percent in the quarter,
double the 5.9 percent gain on the Nikkei 225 Stock Average, and
reached a record on April 21.
The company’s market value is the second-largest among Japanese manufacturers after Toyota Motor Corp.
SLR Boom
Operating
profit for the first quarter probably rose 9.8 percent to 157 billion
yen from a year earlier, compared with the company’s earlier estimate
of 153 billion yen, the analysts said. Sales will probably rise 7.9
percent to 910 billion yen.
Canon, the maker of Powershot and EOS
cameras, has focused on more profitable single-lens reflex cameras,
where it controls 53 percent of the global market, IDC said in an April
4 report.
“Canon’s digital still camera production is running above
plan,” Ryohei Takahashi, an analyst at Merrill Lynch & Co.’s
brokerage unit in Tokyo wrote in a report dated April 19.
Operating
margins in the camera division improved to 19.4 percent from 14.9
percent a year earlier, the company estimates. The company is aiming to
expand the proportion of SLRs it ships of the total digital camera
shipments.
Canon’s share of the global digital camera market rose to
29 percent in 2005, with shipments of 16.2 million units, according to
researcher IDC. Canon overtook Sony Corp. as the world’s biggest
digital camera seller in 2004.
Easing Competition
Canon
expects operating profit at its camera business to gain 42 percent to
33.8 billion yen, on an 8.8 percent sales increase to 174 billion yen.
“Competition
is easing up in both digital cameras and printers,” said Pascal Masse,
who helps manage $2 billion of Japanese equities at Aberdeen Management
Asia Ltd. in Singapore, said before the earnings announcement. “Canon
is bound to benefit even more from that.”
Operating profit at
Canon’s copier and printer unit, which makes up 70 percent of sales, is
expected to gain 4.6 percent to 147.3 billion yen in the first quarter,
the company has said. The unit’s revenue is expected to rise 6.4
percent to 631.6 billion yen, as sales of faster and multifunctional
printers lead users to buy more ink and special printing paper.Record Profit
Canon,
forecasting a seventh year of record profit, said on Jan. 30 net income
will rise 8 percent to 415 billion yen this year. Operating profit will
gain 12 percent to 653 billion yen and sales to rise 8.1 percent to
4.06 trillion yen.
“It will be difficult for the company to attain
its forecasts,” Takahashi said. “This is because average unit price
declines are continuing for copiers. He cut Canon’s rating last month
from “buy” to “neutral.”
Mizuho Securities Co. analyst Ryosuke
Katsura still expects Canon’s earnings to grow. Katsura on April 19
raised his earnings forecast for Canon because of rising sales of laser
printers, narrowing digital camera price declines and a weakening yen.
“We
expect brisk investment in laser-beam printers in 2006,” said Katsura,
who has a “strong buy” rating on Canon stock. “Also we expect the
rate of digital camera decline to be smaller than previously expected.”
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