Fuji Photo Film Co and Ricoh Co are likely to project double-digit profit growth for this business year when they report earnings this week on the back of solid demand for office machines and cost-cuts.
But Canon Inc will continue to flex its muscle as the most profitable company in Japan's precision equipment sector, likely topping its quarterly estimates on strong sales of digital cameras and laser printer engines to Hewlett-Packard Co.
Canon, the only firm in the sector whose business term is the calendar year, is expected to reiterate its forecast for group operating profit to rise 5.4 percent to a record high of 573 billion yen if not revise it up slightly.
Investors will be keen to see how bullish Konica Minolta Holdings and Ricoh are about the business year started April 1 after both companies disappointed the market by revising down their earnings forecasts during the previous year.
Risk factors include an uncertain outlook for the global economy, growing competition in the office equipment industry and a maturing digital camera market. Sliding demand for photographic film is another worry for Konica Minolta and Fuji Photo Film.
US-based copier maker Xerox Corp said last week that its quarterly net profit and revenues fell, but reiterated a forecast for higher earnings this year on demand for new models and improved sales of ink, toner and services.
"I don't think we should look for a huge jump in profit this year from the precision equipment makers but we can expect Fuji Photo, Ricoh and Konica Minolta to benefit from restructuring gains," said J.P. Morgan analyst Hisashi Moriyama. Analysts on average expect Fuji Photo's operating profit to increase nearly 20 percent in 2005/06, helped by rising shipments of laser printers to Dell Inc, a decline in restructuring expenses, and expanding sales of liquid crystal display film. But Fuji Photo, along with Olympus Corp, is considered one of the weaker players in a digital camera market marked by sliding prices and slowing growth. Some analysts estimate Fuji Photo's digital camera business is in the red.
Lens maker Hoya Corp flagged the digital camera market's tough conditions last week by reporting a fall in profits for the January-March quarter as digital camera makers cleared out excess inventories amid sluggish demand.
Eastman Kodak Co meanwhile gave a preview of weakness in the camera film market by posting a quarterly net loss. Kodak is the world's top maker of photo film, ahead of Fuji Photo and Konica Minolta.
"We believe that Fuji Photo's digital still cameras, photo film and photo paper businesses have performed below the company's expectations," Credit Suisse First Boston analyst Kunihiko Kanno said in a note to clients last week.
Kanno estimates Fuji Photo's group operating profit came to 152.6 billion yen in 2004/05, well below the company's target of 164 billion yen, which is identical to the market consensus.
Some analysts are bullish about the prospects for Nikon Corp, which is expected to benefit from strong sales of a new lower-priced digital single lens reflex (SLR) camera and solid orders for chip equipment from Intel Corp.
Last week Intel reported a 25 percent rise in quarterly profit and boosted its annual budget for spending on chip factories, a move that should lead to higher demand for Nikon's steppers, which are complex machines used to etch circuitry onto chips.
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