Nikon profit up; strong yen, rival hit outlook

TOKYO (Reuters) - Japan's Nikon Corp (7731.T) said its quarterly operating profit rose 48 percent thanks to sales of advanced cameras and chip-making equipment, but it predicted a fall in operating profit this year.

A strong yen is taking a toll on Nikon's camera business, even as the company faces increasing competition on its home turf from Netherlands-based rival ASML (ASML.AS) in chip steppers, machines that print circuitry on silicon wafers.

For the year that began in April, Nikon forecast that operating profit would fall 3.8 percent to 130 billion yen ($1.3 billion), while analysts predict an average 143.9 billion yen.

A strong yen will cut profit by 20 billion yen, Chief Financial Officer Ichiro Terato told reporters.

Nikon, the world's No.2 maker of steppers, expects new chip stepper shipments to drop to 112 units this year, down 23 percent from 2007/8, while shipments of LCD steppers are forecast to rise to 68 units this year from 45.

"Competition is extremely stiff, while the business climate for chip makers remains severe," Terato said. "But our throughput (processing capacity) issues have been resolved and I don't think we will lose market share."

Nikon and market leader ASML are battling in Japan for business from chipmakers such as Toshiba Corp (6502.T) and Elpida Memory Inc (6665.T) with their newest products called immersion steppers, even as severe chip price falls are weakening clients' appetite for new gear.

Immersion steppers are multi-million dollar machines that use purified water between the lens and the silicon wafer to project finer details on a chip.

Nikon expects to ship 25 immersion steppers this year, accounting for 22 percent of its total chip stepper shipments this business year. Last year, Nikon shipped 15 immersion steppers, missing its guidance of 21 units. It said it expected the overall market for new chip steppers to fall to 400 units this year, down an annual 30 percent.

Nikon also mapped out a new mid-term business plan, in which the firm aims to lift annual sales by 26 percent to 1.2 trillion yen in three years through March 2011. It targets an operating percent rise of 18 percent to 160 billion yen in the same period.

In cameras, Nikon said it was trying to broaden the user base for its advanced digital single-lens reflex (DSLR) cameras to amateurs and women, though it faces greater competition from rivals Canon Inc (7751.T) and Olympus Corp (7733.T) as they expand their product line-ups.

Strong sales of its cameras continued through to January-March.

In the quarter, Nikon's operating profit jumped to 31.66 billion yen from 21.41 billion yen, on 15 percent sales growth. That was in line with a mean estimate of a profit of 32.19 billion yen from 17 brokerages surveyed by Reuters Estimates.

Nikon's DSLR shipments jumped 48 percent to 3.09 million units in the year ended in March, while shipments of its compact models rose 44 percent to 8.55 million units, thanks to strong sales in the United States and in emerging nations. Higher DSLR sales also fuelled demand for removable lenses, which have higher margins than camera bodies.

On a unit basis, Nikon expects shipments of its advanced models to rise 7 percent and compacts to climb 9 percent in the current year, but a strong yen may mean a 5 percent decline in operating profit in its imaging products segment.

Nikon also announced it would buy back up to 4 million of its own shares, or 12 billion yen worth, by June 30. That would account for 1 percent of its outstanding shares.

The company will continue to buy back shares beyond June, as it aims to keep a shareholder return of 25 percent of net profit, through dividends and buybacks, Terato said.

Shares of Nikon closed up 1.4 percent at 2,835 yen prior to the announcement, against a 0.6 percent rise in the Nikkei average .N225.

($1=103.38 yen)

(Reporting by Mayumi Negishi; Editing by Brent Kininmont)