http://www.bloomberg.com …-disrupts-production.html
Canon Inc. (7751), the world’s largest maker of cameras, cut its annual profit and sales forecasts after Japan’s March disaster disrupted production.
Net income in the year ending in December will probably fall 11 percent to 220 billion yen ($2.7 billion), Tokyo-based Canon said in a statement today, abandoning its previous forecast for a 26 percent increase. Canon also cut its projections for operating profit and revenue.
The disaster will cost about 314.4 billion yen in lost sales and 197.7 billion yen in operating income this year, said Canon, Japan’s largest manufacturer by market value to revise earnings projections since last month. The earthquake and tsunami disrupted the company’s production of cameras, lenses, inkjet printer devices and chip-making equipment.
“Disruption of the supplier network has lead to low utilization rates at Canon’s factories and there may be a significant drop in the rate through April to May,” said Yukihiro Goto, a Tokyo-based analyst at Macquarie Group Ltd. “The supply chain problem will probably improve largely from June.”
The shares fell 0.9 percent to 3,495 yen in Tokyo trading, before the earnings announcement, extending this year’s decline to 17 percent.
The maker of PowerShot and Ixus and compact cameras slashed its sales target to 20 million units from 23 million. Canon kept its annual target for cameras with interchangeable lens at 7 million units.
‘Uncertainties Remain’
“Many uncertainties remain, such as the negative impact of the earthquake in northeastern Japan, further appreciation of fuel prices and the financial crises in some European countries,” Canon said in the statement. Emerging markets in Asia, such as China and India are expected to continue “healthy” growth, it said.
Canon’s first-quarter net income fell 2.3 percent to 55.5 billion yen, while revenue gained 11 percent. Operating income at the office-equipment division, Canon’s biggest by revenue, declined 13 percent, while earnings at the consumer operations declined 16 percent.
The company is also bracing for outages as Tokyo Electric Power Co., owner of the crippled Fukushima nuclear plant, struggles to meet demand after last month’s disaster knocked out power stations.
Power Headache
“The issue of power supply is giving us a headache on top of the supply-chain issue,” Toshizo Tanaka, a Canon executive vice president, told reporters in Tokyo. “We don’t know yet if it’s going to be a 25 percent reduction or 30 percent. We’ll do all we can but the key is to maintain our production level.”
Power outage has been affecting Canon’s suppliers making electronic components, Tanaka said. Some components take a continuous 40-hour production and an outage disrupts supply of such components, he said.
Canon is considering diversifying suppliers and to make some components in-house, he said.
Canon, which generated 81 percent of sales outside Japan last year, revised its assumptions for the yen exchange rate to the euro to 120 yen for the nine months from April 1, compared with 110 yen projected three months ago. The company kept unchanged its assumption for the dollar at 85 yen.
The world’s second-largest printer maker loses about 10.1 billion yen of operating profit a year for every 1 yen decline in the value of the dollar and 5.8 billion yen of income for each 1 yen decline by the euro, the company said in January.
