Canon sees 2011 profit up on sales gains, cost cuts

Anthony Sundermeier looks over a Canon professional digital camera with a 400mm f2.8 telephoto lens during the first day of the 2011 International Consumer Electronics Show (CES) in Las Vegas, Nevada January 6, 2011.

TOKYO (Reuters) - Canon Inc forecast its operating profit would rise by one-fifth this year as the Japanese camera and copier giant outperforms rivals on strong sales of its EOS and IXY digital cameras and cost cuts.

Canon is also betting on strong sales from its mainstay office copier and laser printer business and an aggressive push into emerging markets to achieve its ambitious target of a record operating profit in 2012, or nearly double last year's result.

The world's largest maker of digital cameras expects 470 billion yen ($5.72 billion) in operating profit for the year that ends in December, against the average estimate of 472.5 billion yen in a poll of 19 analysts by Thomson Reuters I/B/E/S.

It projects sales to rise 10.6 percent to 4.1 trillion yen, with India, China and many other emerging nations expected to continue healthy growth and the economies of developed nations remaining on a path of modest recovery.

"I am expecting to see economic recovery in developed countries this year, especially from the second half, and along with that, demand for office equipment is likely to pick up, in particular in North America, so I am paying attention to Canon and other firms that have large exposure in the region," said Takeshi Osawa, a senior fund manager at Norinchukin Zenkyoren Asset Management.

Canon, which has long been interested in acquisitions, is working to boost its sales force in Asia to more than 10,000, from 3,000 as of last month, to take advantage of the region's rapid economic growth, Chairman Fujio Mitarai said in an interview.

RISING PROFIT

Canon, which takes its name from the Buddhist goddess of mercy, forecasts that office equipment operating profit will jump 9.8 percent to 322 billion yen this year, while operating profit from consumer products is expected to gain 11.3 percent to 265 billion yen.

The firm also expects to sell a total of 30 million digital cameras, including both compact and single-lens reflex cameras -- high-end models with interchangeable lenses.

"It's expecting a double-digit increase in camera revenue, but the projected PER is 16 times, so while it doesn't look like an expensive stock, neither does it seem cheap," said Hiroyuki Fukunaga, president of itrust, an investment fund.

"In order for the stock to push past its high of 4,520 yen last year there would have to be some positive news from the business environment."

Canon shares rose almost 8 percent last year, outperforming a 3 percent decline in the benchmark Nikkei average. Its shares closed 2.2 percent higher at 4,195 yen on Thursday before the company released its results.

The optical equipment maker is assuming a dollar/yen exchange rate of 85 yen for this year and a euro/yen rate of 110 yen.

"We don't see the current trend of the strong yen changing, but as the global economy improves we expect it to gradually weaken," Canon CFO Toshizo Tanaka told a news briefing.

Canon, which competes against Sony Corp and Nikon Corp in cameras and against Xerox Corp and Ricoh Co Ltd in copiers, posted an operating profit of 82.8 billion yen for October-December, down 10 percent compared with a year earlier.

The year-on-year decline was Canon's first in five quarters, with revenue hit by a stronger yen and a high baseline the previous year, when sales jumped after the end of the financial crisis.

Eastman Kodak Co on Wednesday reported a larger-than-expected quarterly loss, while Xerox issued a profit forecast at the low end of analyst estimates and said its finance chief would retire, sending its shares down more than 7 percent.

Ricoh, Sony and Nikon report earnings next week.

For the past business year, Canon, which is also a major inkjet printer maker, booked a 79 percent surge in operating profit to 387.6 billion yen, which was well flagged to the market after it raised its forecast to 390 billion yen in October.