*NEWS*CANON SLOWEST NET INCOME SINCE 1999

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Canon Slowest Net Income Growth Since 1999
Jan 07 — Canon Inc., Japan’s most profitable electronics and office equipment maker, forecast its slowest earnings growth in eight years as competition erodes margins in copier machines and digital cameras.Net income is projected to gain 8.7 percent to a record 495 billion yen ($4 billion) this year, the smallest increase since 1999, Tokyo-based Canon said. The company today reported fourth- quarter profit rose 16 percent to 125.6 billion yen.Canon is making single-lens reflex cameras that can use interchangeable lenses and copier machines that can print, scan and fax to sustain profit margins. Sony Corp. and Matsush*ta Electric Industrial Co. last year entered the digital SLR market with cheaper models. International Business Machines Corp. last week exited the commercial printing business because of increased competition from Xerox Corp. and Canon.“It’s not surprising that growth is becoming less impressive as the scale gets bigger,” said Hideyuki Ookoshi, who oversees $365 million at Chiba-Gin Asset Management Co. in Tokyo. “The earnings results may also differ from forecasts significantly depending on currency fluctuations.”The company based its 2007 forecasts on 115 yen to the dollar, and 150 yen to the euro. The Japanese currency last year traded at an average 116.34 against the dollar and at 146.18 against the euro.Canon’s total sales are expected to gain 7.1 percent to 4.45 trillion yen this year. Operating profit will rise 8.2 percent to 765 billion yen, from 707.0 billion yen in 2006, when foreign exchange gains added 78 billion yen, the company said today.Profit margins for office equipment this year are expected to fall to 22.1 percent, from 22.3 percent in 2006, Canon said. Margins at its camera business will be maintained at 25.8 percent, the company said.

Yen Forecasts
Canon said today that 2007 operating profit will be affected by 9 billion yen for every one-yen change against the dollar, and by 5.6 billion yen for every yen change against the euro.The company raised its capital spending target this year to 480 billion yen from 379.7 billion yen a year ago. Investment in research and development will rise to 345 billion yen from 308.3 billion yen last year.In the fourth quarter, profit climbed to 125.6 billion yen on sales of copiers and single-lens reflex digital cameras and a weakening yen. Sales rose 8.7 percent to 1.22 trillion yen. Operating profit, or sales minus the cost of goods sold and administrative expenses, gained 16 percent to 195.9 billion yen in the quarter from a year earlier.Shares of Canon closed unchanged at 6,500 yen in Tokyo. The earnings were announced after the market shut. The stock has gained 18 percent in the past six months, compared with a 13 percent advance in the Nikkei 225 Stock Average.

Camera Shipments
Sales of cameras in the fourth quarter rose 17 percent to 346.4 billion yen from a year earlier, beating the company’s October forecast of 338 billion yen. Operating profit in the unit gained 47 percent to 92.6 billion yen, compared with a year earlier and an earlier forecast of 80 billion yen.Digital camera shipments will gain 7.1 percent to 24 million units in 2007, of which single-lens reflex models will account for 3 million, Canon said. The company cited strong demand for digital SLR cameras, including the EOS Digital Rebel XTi.Single-lens reflex cameras have become the most profitable part of the digital camera market, as price competition drive margins lower for compact models.Canon expects full-year operating profit in the camera business to rise 7.1 percent to 287.8 billion yen as sales gain 7.1 percent to 1.12 trillion yen. Sales of digital cameras, compact and single lens reflex, will account for 24 percent of total revenue.The company released the EOS Kiss Digital X Model in the third quarter to hold off competition from Sony and Matsush*ta Electric, which released their first DSLR models in July.

Office Equipment
Sales of office machines, including copiers and printers, rose 8.2 percent to 765 billion yen in the quarter, beating the October forecast of 750 billion yen in October, Canon said. Operating profit in the unit gained 10 percent to 165.6 billion yen from a year ago, compared with a forecast of 159 billion yen.Canon expects operating profit in the business to rise 6.8 percent to 640 billion yen this year as sales gain 7.8 percent to 2.90 trillion yen.Multifunction inkjet printer prices will probably fall 20 percent by March 2007, Canon said in October. Canon in August said it will overtake Xerox Corp. this year as the world’s largest maker of color copiers that also print, scan and fax.

SED TVs
Sales of optical equipment, such as machines that etch patterns on chips and flat panels, fell 2 percent to 157.2 billion yen in the quarter. Operating profit in the unit dropped 54 percent to 3.9 billion yen from a year ago, compared with an earlier forecast for 10 billion yen.Toshizo Tanaka, a managing director at Canon, told reporters in Tokyo today that the company still plans to sell surface- conduction electron-emitter displays, or SED, televisions in Japan in the fourth quarter this year, although it’s assessing plans for the commercial production of the panels.The surface-conduction electron-emitter display technology produces clearer images and consumes less power than plasma and liquid-crystal displays.Separately, Canon said today it will apply to delist its shares from the Frankfurt Stock Exchange next month because of low volume. The process is expected to be completed in June, the company said. Canon stock will continue to trade in Tokyo, Osaka, Nagoya, Sapporo and Fukuoka in Japan and on the New York Stock Exchange.

Japan’s Canon 2006 net profit hits record on digicam, printer sales –
TOKYO – Canon Inc made a record-breaking net profit for last year, amid the popularity of its digital cameras and printers, the company said.The company posted a net profit of 455.32 bln yen for last year, against 384.1 bln yen for 2005.Its operating profit rose 21.3 pct to a record 707.03 bln yen as revenue increased 10.7 pct to a record 4.16 trln yen.In October, the maker of digital cameras and office equipment had projected net profit of 440 bln yen, pretax profit of 700 bln yen and operating profit of 691 bln yen on revenue of 4.14 trln yen.Canon senior managing director Toshizo Tanaka told a press conference: ‘Sales and all profits registered the seventh straight year of rises, hitting records, driven by strong demand for our digital cameras, laser printers and color copiers.’Canon sold 21.1 mln digital cameras last year, 25 pct more than in 2005. It sold 18.6 mln compact digital cameras, about 3.6 mln more than in 2005, and 2.5 mln single lens reflex (SLR) digital cameras, about 600,000 more than in 2005.’As global demand for digital cameras grew in almost all regions, we released 18 new models, which helped us to achieve sales of over 1 trln yen in the camera division alone for the first time ever,’ Tanaka said.’By continuing to release attractive models, we are aiming for a higher market share,’ he said.Canon aims to sell 24 mln digital cameras this year, comprising 21 mln compact digital cameras and 3 mln SLR digital cameras.’A weak yen also served as a key growth driver, while strenuous cost-cutting and the greater use of automation lent additional support,’ Tanaka said.Canon said the weak yen had added 78 bln yen to its operating profit and cost reduction had added 119 bln yen.The operating profit of its camera division surged by 55 pct to 268.7 bln yen, and that of tits office equipment division rose by 10.6 pct to 599.2 bln yen.The company forecasts another record-breaking year this year, projecting net profit of 495 bln yen and operating profit of 765 bln yen on revenue of 4.45 trln yen.’The pace of growth is expected to moderate somewhat in the current year, as we expect the yen to firm somewhat against the US dollar because of narrowing interest rate differentials,’ Tanaka said.Canon forecasts that the dollar will average 115 yen this year, having averaged 116.43 yen last year. The company said that every single yen by which the Japanese currency appreciated against the dollar could reduce its annual operating profit by some 9 bln yen.(1 usd = 121.77 yen)

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January 30, 2007 at 10:25 AM