Canon expects first drop in operating profit since 2016 on slower China

January 30, 2019

TOKYO (Reuters) – Japan’s Canon Inc expects its annual operating profit to drop for the first time in three years, as a Chinese economic slowdown and a stronger yen hit sales of cameras and panel-making equipment.

The camera and printer manufacturer on Wednesday forecast an operating profit of 325 billion yen ($2.97 billion) for 2019, down 5.2 percent from 342.95 billion yen a year earlier – the first decline since 2016. That would be below a consensus of 332.35 billion yen of 18 analysts, according to Refinitiv data.

“We are bracing for a number of risk factors this year, including Sino-U.S. trade frictions, an economic slowdown in China and emerging markets, as well as Brexit-driven political turmoil in Europe,” Chief Financial Office Toshizo Tanaka said.

After enjoying some robust years, Canon is now battling a slowdown in orders for its equipment producing organic light emitting diode (OLED) screens.

Global panel makers are delaying or scaling down investment in purchases as a slowdown in the world’s second-largest economy, exacerbated by its bruising trade war with the United States, has begun to squeeze their sales.

China’s economy grew at its slowest in almost three decades in 2018 and the pace is expected to ease further this year.

Tough competition in mirrorless interchangeable lens cameras and a stronger yen are also expected to hurt Canon’s earnings.

The company expects the Japanese currency to average 105 against the U.S. dollar this year, a rise of 5 yen.

A stronger yen lowers the value of overseas proceeds when converted into yen and reduces price competitiveness.

Canon shares have lost about 30 percent over the past year as the company slashed its annual profit forecast twice on lean demand for semiconductor and flat panel-producing equipment.

(Reporting by Makiko Yamazaki; Editing by Himani Sarkar)