TOKYO Japan's Canon Inc (7751.T) said it expects modest growth in revenue this year, counting on the yen staying weak to boost the value of its exports while Europe's economic recovery fuels better sales of office equipment.
One of the first of Japan's technology firms to report earnings, Canon on Wednesday forecast a 3.2 percent rise in revenue for 2014. It said it's expecting the yen to hover for some time around its current levels - about 23 percent weaker than a year ago - offsetting falling camera sales for now.
With four-fifths of its sales overseas and nearly half of its production at home, Canon gets more of a boost than many other Japanese companies from "Abenomics", the reflationary economic policies of Prime Minister Shinzo Abe that have weakened the yen.
Revenue rose 7.2 percent to 3.73 trillion yen in 2013, while operating profit grew 4.1 percent to 337.3 billion yen and net profit gained 2.6 percent to 230.5 billion yen.
The operating profit was below the 353.5 billion yen average of 23 analyst estimates, according to Thomson Reuters Starmine, reflecting camera sales that fell sharply, missing Canon's own forecasts.
"The yen has gone over 100 versus the dollar and 'Abenomics' is working well," Toshizo Tanaka, Canon's chief financial officer, said at a news conference. "Although I don't know what will happen in the mid- to long-term, I don't think the yen will move too far from the current level for a few years."
Canon's official forecasts for 2014 remain cautious. They are based on the yen trading at an average of 100 to the dollar, with an average rate of 135 for the euro. On Wednesday the dollar was changing hands for 103.34 yen, with the euro at 141.12 yen.
Its operating profit forecast of 360 billion yen was well below a consensus estimate of 398.35 billion yen from 23 analysts, according to Thomson Reuters Starmine.
"With the support of the weaker yen Canon managed an increase in both revenue and operating profit, which is something to praise," said Kenichi Hirano, market analyst at Tachibana Securities. "If you take that away, then growth is certainly dull, but as they assume the yen to be stronger this year than it is right now, I don't think you can say they are over-relying on the currency rate."
The scale of Canon's yen boost is significant. The company said that the impact of the yen's weakening versus the euro and the dollar effectively accounted for 217.6 billion yen of its 2013 operating profit.
Every yen the Japanese currency weakens in 2014 against the dollar would add 6.4 billion yen to its operating profit, Canon said.
That effect has coloured investors' views of Canon. Its shares are down 8 percent since the start of last year, despite a nearly 50 percent rise in Japan's benchmark Nikkei average .N225 that was fuelled in large part by the yen's weakness, highlighting how a soft camera market has offset the company's benefits from a weak yen and "Abenomics".
Last year saw Canon record the first drop in interchangeable lens camera sales, to 7.65 million, since it introduced its digital single-lens reflex model in 2004. Canon doesn't expect a turnaround this year, forecasting sales of 7.6 million of the cameras for 2014.
With economic conditions in Europe improving, Canon does expect better news in its office equipment division this year. It expects a 5.7 percent increase in sales of products like printers, following on from 2013's 13.8 percent.
(Reporting by Sophie Knight; Additional reporting by Takashi Umekawa; Editing by Kenneth Maxwell)