Canon Declines Most in Three Years as Profit Forecast Cut

Canon Inc. (7751), the world’s largestcamera maker, plunged the most in more than three years in Tokyoafter cutting its full-year profit forecast because of astronger yen and expectations for weaker global growth.

The shares declined 7.8 percent to close at 2,470 yen, themost since November 2008. the benchmark Nikkei Index gained 0.9percent. Canon shares have declined 28 percent this year.

Net income may total 250 billion yen ($3.2 billion) in2012, the Tokyo-based company said yesterday, paring its Aprilprojection of 290 billion yen because of expectations for weakergrowth in the U.S., Europe and China. Chief Financial OfficerToshizo Tanaka cited a stronger yen and lower sales estimatesfor compact cameras and laser printers as the main reasons forforecasting a smaller profit.

“Even as the worsening macro economy and a stronger yenwere expected to damage Canon’s earnings, an intensifyingcompetition in laser printers was unexpected,” Tetsuya Wadaki,an analyst at Nomura Securities co., said in a report yesterday.It was also a surprise that sales estimates weren’t improvedafter a new mirrorless camera model was unveiled on July 23, hesaid.

Wadaki cut his price target for the stock 8 percent to3,779 yen. Hisashi Moriyama, an analyst at JPMorgan Chase & co.,reduced his price estimate for the stock 12 percent to 2,200yen, while Goldman Sachs Group Inc. analyst Toshiya Hari loweredhis target price 3 percent to 3,600 yen.

The company may need to lower its forecast further, Eiichi Katayama, a Tokyo-based analyst at Bank of America Corp.’sMerrill Lynch said in a report. Laser-printer inventories roseon weak sales at customer Hewlett-Packard co. (HPQ) (HPQ), Yu Yoshida, ananalyst at Credit Suisse Group AG, wrote in a report.

Sales at the office-equipment division, Canon’s biggest,may drop 5.2 percent to 1.8 trillion yen this year, the companysaid yesterday, abandoning an earlier forecast for 1.1 percentgrowth. Imaging-systems sales may increase 17 percent, comparedwith the 20 percent it previously forecast.

U.S. printer makers, including Xerox Corp. (XRX) (XRX) and LexmarkInternational Inc. (LXK) (LXK), lowered earnings forecasts earlier thismonth, citing weakness in Europe. Worldwide hardcopy peripheralsshipments declined 7.4 percent in the first quarter this year,researcher IDC said in may.

The target for compact-camera sales this year was loweredto 21 million units from the 22 million forecast earlier,according to the statement. the company kept the sales targetfor single-lens reflex cameras, used by professionals, unchangedat 9.2 million units.

The maker of EOS models said earlier this week the companyis introducing its first mirrorless model in September, joiningNikon Corp. (7731) in tapping growing demand for lightweight cameraswith interchangeable lenses.

The Japanese currency averaged about 102.90 against theeuro last quarter, compared with Canon’s estimate in April of105 yen. A stronger yen cuts the repatriated value of salesearned overseas.

Each 1-yen decline in the value of the dollar will erodesecond-half operating profit by about 5.3 billion yen, thecompany said today. the impact of a 1-yen decline by the euro isestimated at 2.9 billion yen, the company said. Canon gets 80percent of sales outside Japan.

Canon’s revised profit forecast lagged behind the 289.6billion-yen average estimate of 20 analysts, according to datacompiled by Bloomberg. the company also reported second-quarternet income of 51.7 billion yen, also missing analyst estimatesof 67.6 billion yen.

To contact the reporter on this story:Mariko Yasu in Tokyo at myasu@bloomberg.net

To contact the editor responsible for this story:Michael Tighe at mtighe4@bloomberg.net

Canon Declines Most in Three Years as Profit Forecast Cut

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