(Updates with comment by fund manager in fifth paragraph.)
Oct. 25 (Bloomberg) -- Canon Inc., the world’s largest cameramaker, slashed its annual profit forecast citing output disruptions from the floods in Thailand and weakening economic growth in the U.S. and Europe.
Full year net income may be 230 billion yen ($3 billion) compared with a previous forecast for 260 billion yen, Tokyo- based Canon said in a statement today. That missed the 255 billion yen average of 23 analysts’ estimates compiled by Bloomberg. Canon also cut sales and operating profit forecasts.
The floods may damp annual sales by 50 billion yen and operating profit by 20 billion yen, mainly at the consumer unit, Toshizo Tanaka, Canon’s executive vice president, told reporters in Tokyo, where the company is based. Canon plans to trim costs to overcome the impact on earnings by the yen’s gain and lower economic growth stemming from financial market turmoil.
“Canon’s estimate of the Thai floods is conservative,” said Mitsushige Akino, who oversees about $600 million in Tokyo at Ichiyoshi Investment Management Co. “The uncertainties over the global economy and the foreign currency markets are making companies more cautious.”
Shares of the company fell 1.8 percent to 3,490 yen at the close in Tokyo trading before the revision of earnings. The stock has declined 17 percent this year. Nikon Corp., Canon’s biggest rival in the market for single-lens reflex cameras, has gained 1.8 percent this year.
The maker of PowerShot models trimmed its estimate for compact camera sales in 2011 to 19 million from 20 million, citing floods in the southeast Asian country, which also disrupted its suppliers. Sales target of SLR cameras, typically used by professionals, was cut to 7.2 million from 7.3 million.
Annual operating profit, or sales minus the cost of goods sold and administrative expenses, may total 360 billion yen this year, lower than an earlier forecast for 380 billion yen, Canon said. Sales forecast was also cut to 3.65 trillion yen from 3.78 trillion yen projected three months ago.
The maker of EOS single-lens-reflex cameras was hit by floods in Thailand just months after resuming all its plants disrupted by Japan’s March 11 earthquake. The company is considering relocating its inkjet printer production to other locations such as Vietnam and Japan, after its two factories in Ayutthaya stopped, according to spokesman Gota Fumoto.
Estimates about Thailand “include the worst possible impact” from the floods, and Canon will make efforts to reduce such impact, Tanaka said. “It may take more than several months” to resume factories in Thailand, he said.
The floods have also caused supply disruptions at Apple Inc. and Toyota Motor Corp. Thailand makes about a quarter of the world’s hard-disk drives and serves as a production hub for Japanese carmakers and electronics firms.
For the three months ended Sept. 30, Canon reported a 14 percent increase in net income to 77.9 billion yen. That beat the 75 billion yen average of three analysts’ estimates.
Revenue at the office-equipment division, Canon’s biggest last year, will probably fall 1 percent to 1.97 trillion yen this year, partly because of the yen’s gain eroding the value of exports, Canon said. Sales at the consumer unit, which handles cameras and inkjet printer, may decline 3.6 percent, it said.
Canon, which generated about 80 percent of sales outside Japan last year, forecast the dollar will average 77 yen and the euro 105 yen in the quarter to Dec. 31. That compares with 80 yen and 115 yen respectively estimated in July.
A 1 yen decline in the value of the dollar versus the yen will trim operating profit by 2.4 billion yen in the fourth quarter. A 1 yen drop by the euro will hurt the measure by 1.7 billion yen, the company said.
--With assistance from Kazuyo Sawa and Takashi Amano in Tokyo. Editors: Garry Smith, Anand Krishnamoorthy.
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