Bloomberg News

Canon Falls After Cutting Forecast on Camera Demand: Tokyo Mover

October 25, 2012

Canon Falls After Cutting Forecast on Camera Demand

Net income will probably be 234 billion yen ($2.9 billion) in the year ending December, the Tokyo-based company said in a statement yesterday, cutting its earlier projection of 250 billion yen. Photographer: Kiyoshi Ota/Bloomberg

Canon Inc. (7751), the world’s largest camera maker, fell the most in two weeks in Tokyo trading after cutting its annual profit forecast on slowing demand as consumers switch to taking pictures with smartphones.

The stock dropped as much as 2.5 percent to 2,580 yen, heading for its biggest decline since Oct. 10, and changed hands at 2,600 yen as of 10:25 a.m. Japan’s benchmark Nikkei 225 Stock Average slid 0.2 percent.

The Powershot maker yesterday cut its projection for net income this year by 6.4 percent to 234 billion yen ($2.9 billion) while also lowering its sales estimate for compact cameras by 9.5 percent and for professional-grade models by 4.3 percent. That’s the second time Chief Executive Officer Fujio Mitarai reduced compact-camera estimates since taking over the top job in March as Apple Inc. and Samsung Electronics Co. unveiled smartphones that can take high-definition photos.

“The digital camera sales targets and profit level were weaker than our projections,” Hisashi Moriyama, an analyst at JPMorgan Chase & Co. in Tokyo, wrote in a report today. “Canon needs to build additional earnings driver” as its profits from cameras, printers and copiers may continue shrinking, said the analyst, who has an underweight rating on the stock.

Global camera sales are expected to fall 4.3 percent this year to 115.2 million units, according to market researcher IHS. Industrywide camera shipments fell 25 percent in August from a year earlier, according to the Camera & Imaging Products Association in Tokyo.

Surging Smartphones

By comparison, global sales of smartphones -- devices that can be used to shoot high-definition videos, read books, play movies and surf the Internet -- rose 32 percent to 146.1 million units in the second quarter, according to market researcher Strategy Analytics.

“We lowered our camera sales projection because of slower economic growth and an increasing use of smartphones that’s eroding demand,” Chief Financial Officer Toshizo Tanaka told reporters in Tokyo yesterday.

Canon’s estimate for full-year profit lagged behind the 239 billion-yen average of 22 analyst estimates compiled by Bloomberg. The company yesterday also reported third-quarter profit of 50.1 billion yen, compared with the 55.5 billion-yen average of five analyst estimates compiled by Bloomberg. Sales of 799.9 billion yen in the quarter also trailed analyst estimates for 899.5 billion yen.

Sales this year may be 3.53 trillion yen, lower than the previous estimate for 3.69 trillion yen, Tokyo-based Canon said yesterday. Operating profit may be 356 billion yen, down from an earlier estimate for 390 billion yen.

iPhone 5

Apple’s new iPhone 5 -- with an 8-megapixel camera sensor and backside illumination -- has software that lets consumers take panoramic pictures. Last month, Nokia Oyj (NOK1V) unveiled a phone with a spring-mounted camera for steadier pictures. In February, the Espoo, Finland-based company introduced a phone that has a 41-megapixel camera.

“We see the third-quarter results and the new guidance fueling concerns many investors have” about compact digital camera market contractions and slowing printer market growth, Toshiya Hari, a Tokyo-based analyst at Goldman Sachs Group Inc., said in a report today, cutting his 12-month target price for the stock by 7 percent to 2,620 yen.

Worldwide printer and copier shipments declined 8.4 percent in the second quarter from a year earlier, according to the International Data Corporation.

The European debt crisis and anti-Japan protests in China also are affecting demand, Canon said yesterday. A stronger yen is hurting repatriated earnings of a company that gets 80 percent of its revenue from overseas.

“The global economy remains weak in the fourth quarter and concerns are increasing about a slowdown,” Tanaka said yesterday. “Especially for Europe and China, we cannot foresee what will happen.”

About a quarter of the cut in Canon’s annual sales of cameras are due to risks in China, Tanaka said.

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


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