Canon reports 13 percent drop in profit

By YURI KAGEYAMA, AP Business Writer Thu Jul 24, 4:52 AM ET

TOKYO – Canon Inc. said Thursday its second-quarter profit fell 13 percent from a year ago as a stronger yen chipped away at the value of booming overseas sales of color copiers.

The Japanese camera maker recorded a 107.84 billion yen ($1 billion) profit for April-June, down from 123.93 billion yen the same period the previous year. Quarterly sales totaled 1.106 trillion yen ($10.26 billion), down 1.9 percent from 1.127 trillion yen.

The sharp rise of the yen against the dollar was the biggest culprit, Canon said. Calculated in local currencies, sales of digital cameras, office equipment for copying and faxing, and other products jumped on year, it said.

The dollar averaged 104.69 against the yen in the first half of the year, reflecting a 13 percent jump in the value of Japan's currency. That eroded the value of overseas earnings of Japanese exporters such as Canon.

The impact from currency fluctuations erased 118.9 billion yen ($1.1 billion) from Canon's first half sales, the company said. For the first six months of the year, Canon's net profit dipped 15.9 percent to 214.49 billion yen ($2 billion).

Slowdowns and sluggish spending in the U.S., Europe and Japan also helped push down sales, although growth was robust in China and the rest of Asia, according to Canon.

For the three months ended June 30, sales in Japan fell 3.1 percent from the previous year, while sales in the Americas dropped 6.1 percent, Canon said. Sales in other areas rose 6.4 percent, it said.

Tokyo-based Canon kept its profit forecast unchanged at 500 billion yen ($4.6 billion) for the fiscal year ending Dec. 31, a target of a 2.4 percent increase from the previous year.

It raised its full-year sales outlook to 4.59 trillion yen ($42.6 billion), up from an earlier forecast of 4.57 trillion yen. The new forecast marks a 2.4 percent rise from the year ended Dec. 31, 2007.

Canon said its expects demand for digital cameras and color laser beam printers to keep growing, although price competition will intensify.

Canon acknowledged that worries about the U.S. subprime loan crisis and this year's high oil prices weigh on profit prospects.

But the U.S. economy is likely to recover in coming months, lifted by stimulus measures, and growth can be expected in Russia and other new markets, the company said in its earnings release.

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