TOKYO -- Nikon on Thursday downgraded its net profit estimate for the year through March 2015 to 38 billion yen ($368 million), 19% lower on the year, due mainly to sluggish sales of digital cameras in the key European market.
The company had earlier forecast 45 billion yen, down 4%. Sales are now seen falling 8% to 900 billion yen -- 40 billion yen short of the previous estimate. Operating profit will likely decline 16% to 53 billion yen rather than edge up, undershooting the latest average market projection of 60.8 billion yen.
The primary culprit is the lackluster performance of the mainstay camera business. Nikon now expects to sell just 5.05 million interchangeable-lens cameras in fiscal 2014, down 12% on the year and 350,000 fewer than the old forecast. And in compact cameras, it has lowered the estimate by 1.5 million units to 7.5 million -- a 33% year-on-year drop.
Sluggish performance in Europe, where Nikon rings up about 30% of its camera sales, is a major factor. "We are struggling, especially in Germany and Russia," said Junichi Itoh, senior executive vice president. "Bad economic conditions are dampening consumption, and high-end models for the affluent are falling in Russia."
Nikon has also revised its assumed exchange rate. It now sees the Japanese currency at 136 against the euro, 4 yen stronger than before. This is seen pushing down operating profit by 4 billion yen.
For the first quarter ended June 30, sales dropped 26% on the year to 177.4 billion yen. Operating profit plunged 42% to 3.5 billion yen, while net profit shrank 17% to 3.6 billion yen.
Sales of interchangeable-lens cameras fell 31% to 1.1 million units amid weak demand in Japan, Europe and the U.S. The drop was sharper than rival Canon's 19% decrease. "Price competition in entry-level models is intense in Europe and the U.S.," Itoh noted.
Meanwhile, the precision equipment business posted a 2.5 billion yen operating loss.