TOKYO – Japan's Canon Inc reported an 88 per cent fall in quarterly profit, hit by slumping demand for copiers and printers, but it raised its annual outlook on cost cuts and a weakening yen.

Demand for office machines and their supplies such as toner cartridges remained weak as the global financial crisis made the replacement cycle of copiers and printers longer and prompted corporate clients not to use them as heavily as before.

Fujifilm Holdings, a rival in digital cameras and office equipment which has been hit much harder by the economic downturn, forecast a ¥90 billion ($A1.30 billion) annual operating loss as it scraps equipment and cuts 5,000 jobs.

Canon, whose other competitors include Xerox Corp and Ricoh Co Ltd, earlier this month delayed the construction of a toner cartridge components plant in western Japan for a second time, underscoring weak demand.

But Canon's overseas sales have been boosted by softer-than-expected yen. The company also said it would aim to cut ¥172 billion in costs this year, ¥60 billion more than originally planned.

Canon raised its 2009 operating profit forecast by 12.5 per cent to ¥180 billion, in line with an estimate in the Nikkei newspaper last week. But it lowered its sales forecast by five per cent to ¥3.33 trillion.

Mizuho Securities analyst Ryosuke Katsura said the operating profit forecast change was effectively a downward revision after stripping out currency effects but that the results show Canon is holding up relatively well.

“Some had expected losses for Canon's first quarter, so I think it's positive that the firm managed to post profits,” he said. “Its cost-cutting efforts should be given some credit, but I have yet to see how the company achieves growth.”

Rival Xerox last week forecast a weaker-than-expected quarterly profit and cut its annual outlook nearly in half, while Ricoh predicted a 13 per cent fall in operating profit for the year to March 2010.

Ricoh last October bought major US office equipment distributor Ikon Office Solutions for $US1.6 billion ($A2.2 billion), delivering a heavy blow to Canon, whose machines had represented 60 per cent of the products Ikon handled before the October acquisition but have rapidly been replaced with Ricoh equipment since then.

Operating profit at Canon, the world's largest digital camera maker ahead of Sony Corp and Nikon Corp, came in at ¥20.03 billion in January-March, compared with a ¥170.83 billion profit a year earlier.

Sales fell 32 per cent to ¥687 billion.

Sony is set to announce results for the previous financial year through March on May 14, and Nikon plans to report on May 13.

Canon shares closed up 6.1 per cent at ¥2,950 before its earnings announcement, outperforming the Tokyo stock market's electrical machinery index, which rose 4.4 per cent.

The shares have recovered nearly 40 per cent since hitting their lowest level in more than seven years in early March. The electrical machinery sub-index has risen about 36 per cent from a low hit in late February.

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