Canon raises profit outlook as weak yen swells earnings

TOKYO Wed Apr 24, 2013 1:52pm IST

A woman walks on an advertisement for Canon digital cameras at an electronics retail store in Tokyo April 23, 2013. REUTERS/Toru Hanai

A woman walks on an advertisement for Canon digital cameras at an electronics retail store in Tokyo April 23, 2013.

Credit: Reuters/Toru Hanai

Related Topics

Stocks

   

TOKYO (Reuters) - Canon Inc(7751.T) raised its full-year operating profit forecast by $300 million as a weakening yen triggered by Japan's latest deflation-fighting policies inflates its overseas earnings, despite smartphones sapping compact camera sales.

For the business year to December 31 2013, the company, which relies on foreign markets for four-fifths of sales, lifted its operating profit forecast to 450 billion yenfrom 410 billion yen. That compares with the average expectation of a 473 billion yen profit among 21 analysts surveyed by Thomson Reuters.

As one of the first blue-chip Japanese corporations to report quarterly results, results from Canon, which is considered a leader in profitability in corporate Japan with its aggressive cost-cutting and high degree of factory automation, is often seen as a barometer for tech sector earnings.

"We welcome Abenomics," Chief Financial Officer Toshizo Tanaka said at a news briefing, acknowledging the impact of Prime Minister Shinzo Abe's economic policies.

"The Japanese economy moves on this kind of mood so we value this and hope to find success," he added.

His company raised its forecast for the yen rate against the dollar to 95 yen for the business year compared with 85 yen to the dollar three months earlier.

Abe's government says the yen's rapid weakening is a by-product of its economic policies and not the goal. Still, the depreciation is what business leaders worried about their ability to compete, particularly against South Korean firms, have been urging.

Fabricating goods worth around 38 trillion yen a year, Japanese makers of TVs, mobile phones, printers and personal computers account for a sizeable chunk of Japan's $5 trillion economy. The tech sector directly employs around 2 million workers in Japan, making it an influential lobby.

Canon's operating profit in the first quarter dipped 34 percent to $552 million, which the company blamed on a weakened global economy, and picture-taking consumers eschewing compact cameras in favour of smartphones.

WELCOME WEAKNESS

Corporate heads who have praised Abenomics include Sony Corp 6758. CEO Kazuo Hirai. His company and other Japanese TV makers, Panasonic Corp (6752.T) and Sharp Corp (6753.T) struggled to fend off competition from Samsung Electronics (005930.KS) as a strong yen bit into profits.

Sony with its bigger exposure to overseas markets stands to gain the most from a weaker yen, particularly versus the euro. A 1 yen change against the European single currency adds about 6 billion yen to operating profit at the maker of Bravia sets.

At Panasonic a 1 yen weakening against the euro moves the currency by 2 billion yen, and by 2.5 billion yen for changes against the dollar. At Sharp, which more heavily relies on its home market, a 1 yen move against the euro is worth around 500 million yen in operating profit and 700 million yen against the dollar.

More than a third of companies remain worried about domestic demand stagnating, a Reuters survey of 240 companies released on Friday shows. A quarter said they were likely to increase output in Japan because of the weaker yen.

Since mid-November when an Abenomics stock rally began, Canon's shares, have gained 58 percent in line with a 60 percent gain in the Nikkei 225 benchmark index. Its stock rose 1.3 percent in Tokyo to 3,840 yen on Wednesday. Quarterly results were released after the close of trading. (Reporting by Tim Kelly and Mari Saito; Editing by Daniel Magnowski)

FILED UNDER:

Online Shopping

An empty shopping cart is seen outside a Best Buy store in Westbury, New York November 28, 2014. REUTERS/Shannon Stapleton

BestBuy.com back online after second Black Friday outage

Best Buy Co Inc's retail website is back online after it was down for a second time on Black Friday, the busiest U.S. shopping day in terms of sales and traffic since 2005, according to ShopperTrak.  Full Article 

REUTERS SHOWCASE

Gold Imports

Gold Imports

India eases gold import rule in surprise move.  Article 

Indians in Iraq

Indians in Iraq

India says no contact with 39 men held by Islamic State in Iraq.  Full Article 

Sahara Issue

Sahara Issue

Sahara looks to raise $650 million loan to fund bail.  Full Article 

Test Match Postponed

Test Match Postponed

First test against India postponed after death of Hughes  Full Article | Related Story 

Bhopal Tragedy

Bhopal Tragedy

Bhopal's toxic legacy lives on, 30 years after industrial disaster.  Full Article 

Banking Sector

Banking Sector

After record deal, more India bank takeovers on cards  Full Article 

Islamic Fund

Islamic Fund

India gets new Islamic equity fund but debt market still off-limits  Full Article 

Nigeria Violence

Nigeria Violence

Bombs, gunfire kill 81 at crowded mosque in Nigeria's Kano  Full Article 

Movie Review

Movie Review

D’Silva's “Ungli” just skims the surface  Full Article | Related Story 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device  Full Coverage