Wednesday, October 29, 2008

Canon cuts forecast

1st profit fall in 9 yrs

TOKYO, Oct 27 (Reuters) - Japan's Canon Inc (7751.T: Quote, Profile, Research, Stock Buzz) posted a 26 percent drop in quarterly operating profit and cut its annual outlook, predicting its first fall in nine years as the global downturn drives up the yen and hurts copier and camera sales.

The yen on Monday traded much firmer against the euro and the dollar than Canon's assumptions for October-December, raising concern that the company may miss its latest 2008 outlook and head into another year of profit declines next year.

Canon's downward revision, its second for the year, was widely expected after Sony Corp (6758.T: Quote, Profile, Research, Stock Buzz) last week lowered its annual operating profit forecast by 57 percent, citing a stronger yen and slower sales of flat TVs and digital cameras.

Canon is the world's largest digital camera maker ahead of Sony and Nikon Corp (7731.T: Quote, Profile, Research, Stock Buzz).

"The economic slowdown we are facing is something that comes along once in 50 years or once a century. It is beyond what any one single company can deal with on its own," Canon Managing Director Masahiro Osawa told a group of reporters.

"Our basic stance now is we hone our corporate strength, so we will be running ahead of competition when the economic recovery comes."

Canon cut its operating profit forecast for 2008 by a quarter to 580 billion yen ($6.18 billion), down from 756.67 billion yen a year earlier and below the market consensus of 693 billion yen from 19 analysts polled by Reuters Estimates.

YEN CLOUDS 2009 OUTLOOK

The supplier of IXY and EOS brand digital cameras is assuming euro/yen exchange rate of 135 yen for the last three months this year, and a dollar/yen rate of 100 yen.

In comparison, the euro traded around 115 yen and the dollar at about 93 yen on Monday.

"With the euro at 115 yen now, I'm afraid their forecasts do not make much sense any more," Mizuho Securities analyst Ryosuke Katsura said.

If exchange rates stay at current levels next year and Canon's local currency-based sales are unchanged from 2008, its operating profit would fall by about 40 percent from this year to around 350 billion yen in 2009, Katsura said.

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