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Japan's precision instrument makers forecast profit growth

Digital cameras lift Canon, Nikon, Olympus over peers leaning on office equipment

TOKYO -- Canon, Nikon and other imaging-heavy precision instrument makers are poised to capture higher operating profit in fiscal 2017 as camera demand rebounds. But companies focused on office equipment sales are seen struggling as that market continues to slump.

Five of Japan's seven major precision instrument makers forecast operating profit growth for the current fiscal year. The most striking projected improvements come from companies with relatively large digital camera operations.

Both Nikon and Canon's earnings are driven by digital cameras, which are experiencing a revival in demand for higher-end products.

Operating profit for Nikon's camera business is forecast to increase 46% to 25 billion yen ($219 million) for the year ending in March on strong U.S. sales of new single-lens reflex cameras. The segment looks to account for 34% of Nikon's total operating profit, which is expected to soar 58-fold to 45 billion yen.

Canon's camera segment, meanwhile, appears set to log its first revenue increase in five years for the year ending in December, as sales of single-lens reflex cameras rise in the U.S. and China. The company expects full-year group operating profit to grow 53% to 350 billion yen, with digital camera operations providing 38% of that total.

Olympus projects a 40% increase in group net profit to 60 billion yen for the year ending in March, the camera maker said Wednesday, upgrading its guidance by 5 billion yen. The profit forecast also received a boost as the company weakened its predicted exchange rate by 1 yen to the dollar and 11 yen to the euro. Full-year operating profit is expected to climb 21% to 86 billion yen.

Net profit for the April-September half climbed 26% on the year to 29.8 billion yen. Though endoscopes and other high-margin products yielded a smaller proportion of sales in the medical segment, the imaging business filled in the gap with strong sales of mirrorless cameras.

"The digital camera market is better than we expected, and mirrorless camera sales to professionals are growing," said Yasuo Takeuchi, chief financial officer for Olympus.

Companies more reliant on the shrinking office equipment market look to perform less impressively. Seiko Epson predicts a 12% rise in operating profit to 76 billion yen for the year ending in March. High-capacity inkjet printers are selling well in emerging countries, while sales in North America and elsewhere also are growing.

Office equipment maker Ricoh forecasts operating profit to plunge 70% for fiscal 2017 as it undergoes structural reforms. In addition to mounting costs from personnel cuts, profitability is taking a hit now that the company uses distributors rather than direct sales in North America.

Though corporate Japan expects record operating profit levels for fiscal 2017, producers of precision instruments have not seen record profit since before the financial crisis of a decade ago.

"The key to survival for precision instrument makers will be whether they can change their sales mix," said Hisashi Moriyama of JP Morgan Securities.


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