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 user 2005-08-16 at 8:23:00 am Views: 82
  • #12486
    Canon Expects Profit to Drop for the First Time in 13 Quarters

    AUG 05 – Canon Inc., the world’s biggest maker of photocopiers, forecast
    profit will decline for the first time in 13 quarters because of falling digital
    camera and office equipment prices.

    Net income may slide 18 percent in the third quarter to 84 billion yen ($756
    million), partly because of asset and pension- related gains in the year-earlier
    period, the Tokyo-based company said in a statement. Canon made the prediction
    after reporting second-quarter profit gained 7.5 percent.

    “The fact that profit is expected to drop this quarter highlights the impact
    of falling product prices,” said Masaki Iso, who oversees the equivalent of
    $7.6 billion as head of Japanese equities at Yasuda Asset Management Co. in
    Tokyo. “That’s probably going have some negative implications on the share

    Canon has weathered a slump in industry prices better than rivals such as
    Seiko Epson Corp., which today cut its full-year profit forecast, partly on
    lower prices of ink-jet printers. President Fujio Mitarai, 69, stuck to a target
    for a sixth year of record profits, boosted by sales of products with higher
    profit margins such as color printers and single-lens reflex digital cameras.

    “Price declines were significant in all our products but mainly in printers,
    copiers and compact digital cameras,” Canon’s senior managing director Toshizo
    Tanaka said at a press conference in Tokyo. Copier prices fell 10 to 15 percent
    and digital camera prices dropped 10 percent in the six months ended June 30
    from a year earlier, he said.

    Canon shares, which have risen 7.4 percent this year, fell 0.7 percent to
    5,940 yen as of 3 p.m. in Tokyo. The company announced results after equity
    markets closed in Japan.

    `Slightly Negative’

    Canon projects third-quarter operating profit, or sales minus the cost of
    goods sold and administrative expenses, to fall 14 percent to 136 billion yen
    and sales to rise 2 percent to 855 billion yen.

    In the quarter just ended, net income rose to 82.2 billion yen from 76.5
    billion yen a year earlier as sales gained 7.3 percent to 912.5 billion yen.
    Operating profit rose 5.8 percent to 126.9 billion yen, missing the company’s
    previous forecast of 132.7 billion.

    The company also trimmed its operating profit forecast for this year to 578
    billion yen from an April forecast of 584 billion yen. Canon maintained its
    full-year net income forecast at 367 billion yen.

    “I got a slightly negative impression on the results,” wrote Hisashi
    Moriyama, an analyst at JPMorgan & Chase Co. in Tokyo, in an e-mail after
    the earnings release. “Operating profit for the second quarter and the full
    year is worse than expected, mainly in the business machine segment.”

    Color Models

    Canon, which supplies laser printers to Hewlett-Packard Co., is increasing
    profit as it benefits from companies switching to color printers and copiers
    that have a higher profit margin than black and white models. The products, such
    as those that can copy, scan and fax, also drive demand for consumables such as
    toners and printers.

    Sales at the business machines division rose 3.5 percent to 603.5 billion yen
    in the second quarter, while operating profit of the unit fell 4.5 percent to
    118.6 billion yen.

    Shipments of color laser printers rose 49 percent in the first half, the
    company said, while prices of copiers declined 10 to 15 percent from a year ago.

    Canon surpassed Seiko Epson last year to become Japan’s biggest seller of
    printers, and is the world’s third-biggest in terms of shipments, trailing
    Hewlett-Packard Co. and Seiko Epson.

    Seiko Epson today reported a fiscal first-quarter loss of 7.05 billion yen,
    compared with a profit a year earlier. The company, based in Nagano prefecture
    in central Japan, cut its full- year net income forecast to 44 billion yen from
    the 54 billion yen target it set in April. The company earned 55.7 billion yen
    in its last fiscal year.

    Digital Cameras

    Canon, which last year overtook Sony Corp. as the world’s biggest seller of
    digital cameras, may struggle to maintain profit margins on the products as the
    market becomes saturated in Japan and some overseas countries.

    Although shipments of digital cameras gained 31 percent in the first half,
    the company is keeping its fiscal full-year projection for shipments unchanged,
    according to the company.

    Prices for compact models declined 10 percent and single-lens reflex cameras
    fell 5 percent, Canon said. The average price of a digital camera in Japan fell
    8.3 percent to 25,870 yen last year, according to the Tokyo-based Camera &
    Imaging Products Association.

    Canon is betting sales of its digital SLR cameras, which use an
    interchangeable lens to capture and electronically store images on a computer
    chip, will make up for a slump in cheaper models. Canon competes mainly with
    Nikon Corp. in the market for more expensive SLRs aimed at professional and
    hobbyists. The most popular models are priced around $1000.

    Dollar Forecast

    Profits at Canon, which generates three-quarters of its revenue abroad, may
    be lifted by the weaker yen. The company said the weaker Japanese currency may
    add 23 billion yen in sales in the second half and 11 billion yen to operating

    Canon expects the yen to trade at an average 110 against the dollar and 132
    per euro for this year. The Japanese currency averaged 107.53 yen against the
    dollar in the past quarter, and at 135.46 yen against the euro.