UPDATE 2-Canon raises profit forecast on weaker yen

Wed Apr 25, 2012 3:24am EDT

* Q1 operating profit up 0.2 pct to 82.7 bln yen, vs 89.8 bln f'cast

* Full-year operating forecast upped to 450 bln yen

By Tim Kelly

SINGAPORE, April 25 (Reuters) - Canon Inc on Wednesday raised its full-year profit forecast, as a weakening yen boosted the value of overseas earnings and burgeoning demand for higher-end digital cameras helped offset fewer sales of printers.

Earning about 80 percent of its income overseas, Canon is benefitting greatly from a weakening yen, which should also help other Japanese exporters by boosting the value of repatriated earnings.

"Most of the 150 billion addition to sales and 70 billion increase in the operating profit forecast came from the 5 yen weaker yen-dollar rate," Canon's chief financial officer, Toshizo Tanaka said at a briefing in Tokyo.

Canon lowered its currency forecast to 80 yen to the dollar from a 75 yen prediction in January.

From July through most of February the Japanese currency traded above 80 yen to the dollar, breaking through 76 yen in November. That strength prompted many Japanese firms to offer conservative currency estimates. Since Feb. 22 the yen has weakened to below 80 yen, going as low as 84 yen in mid-March.

Canon upped its operating forecast for the 12 months to Dec. 31 to 450 billion yen ($5.55 billion) from a January prediction of 390 billion yen. That was slightly below a consensus expectation for 466 billion yen based on the average of 23 estimates from analysts surveyed by Thomson Reuters I/B/E/S.

FOCUSED ON CAMERAS

While other Japanese electronics makers struggle under the burden of losses in their television units, Canon has remained profitable by keeping its consumer business focused on digital imaging, allowing it to tap a burgeoning market for higher end digital single reflex (DSLR) cameras.

"Canon is different than Sony and Panasonic because it doesn't make televisions and consumer electronics, so it doesn't have the same structural problems as other firms," said Naoki Fujiwara, a fund manager at Shinkin Asset Management, which manages about 500 billion yen in assets and does not disclose its holding. "I expect all consumer electronics makers will benefit structurally from foreign exchange," he added.

Since the beginning of the year Canon's shares have gained nearly 10 percent, compared with a 4 percent dip in Sony's stock.

In trading Wednesday, Canon gained 1.5 percent to 3,800 yen, valuing the company at more than $60 billion, nearly four times the size of Sony's $16.5 billion market capitalisation.

For the quarter ended March 31, the camera and printer-maker's operating profit was 82.7 billion yen, flat compared with 82.5 billion yen in the same quarter of the previous year. Profit from office equipment slipped 16 percent with camera sales, which account for over a third of revenue, gaining 17 percent.

The result was just shy of consensus expectations for an 89.8 billion yen profit, from six analysts surveyed by Thomson Reuters I/B/E/S.

The maker of IXUS and PowerShot cameras, which built its first camera in 1933, competes against Nikon and Sony. In printers and other office equipment its main rival is Xerox Corp.

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