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Nikon sees 30% profit boost on demand for panel-producing gear

Camera maker's cost-cutting and reforms show signs of working

Nikon will have a monopoly on next-generation equipment capable of making large flat-panel displays.

TOKYO -- Nikon's operating profit is expected to jump 30% to 70 billion yen ($640 million) in the current fiscal year ending March 2019, as its structural reforms bear fruit and capital investment in places like China lifts sales of its large display-making equipment. 

Nikon's sales are likely to grow, thanks to its precision equipment business. In particular, flat-panel display lithography systems, used for producing liquid crystal and organic light-emitting diode displays, are set to boost company sales and profit.

Additionally, sales are expected to balloon to 15-20 units up from three in the previous fiscal year for Nikon's expensive generation-10.5 lithography system, which has a monopoly on the market. Demand is also seen rising for high-margin maintenance and inspection services for its semiconductor lithography systems, propelled by upbeat market conditions.

Meanwhile, the market for Nikon's mainstay single-lens reflex cameras is shrinking. But the company aims to offset the decline with structural reforms it began in fiscal 2016. Last fiscal year, it began using return on invested capital as a way to measure segment performance. Moving forward, Nikon will also streamline costs in its imaging products and precision equipment businesses, while holding down outlays in advertising and research and development.

In the year ended March 2018, operating profit probably came in around 55 billion to 58 billion yen, up several billion yen from its forecast. That is a major jump from the previous fiscal year, when increased retirement benefits and other costs from structural reforms reduced Nikon's operating profit to 700 million yen. The rise was largely underpinned by the imaging products business, thanks to strong U.S. sales of the D850 digital SLR camera released last fall. Sales in fiscal 2017 probably fell in line with the previous fiscal year figure of 749.2 billion yen.

Nikon could also beat its operating forecast this fiscal year thanks to strong demand for maintenance services of lithography equipment and releases of new digital camera models. Analysts certainly seem to think so -- the QUICK Consensus survey showed expected operating profit of 73.7 billion yen in the year ending March 2019 as opposed to the 70 billion yen that Nikon is projecting.

Results for the year ended March 2018 are due out on Thursday.

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