Japan's Canon cut its earnings outlook for the full year and reported a 16 per cent fall in quarterly profit as consumers, increasingly in the habit of taking photos with their smartphones, bought fewer compact digital cameras.

The world’s largest camera maker said on Monday its second-quarter net profit fell to 68 billion yen ($552 million) compared with 81 billion yen a year earlier. Analysts on average expected 65 billion yen, according to Thomson Reuters data.

The firm said it now expects full-year profit of 245 billion yen rather than the 255 billion it forecast three months ago.

Canon has been trying to offset weak growth in cameras with investments in new businesses. Earlier this year it offered to buy video surveillance firm Axis for $2.7 billion.

“Despite firm sales in Japan, interchangeable-lens digital cameras continued to face severe conditions in other regions while sales volume for digital compact cameras decreased in most regions compared with the same period of the previous year,” Canon said in a statement.

It also said the weak yen was inflating operating costs. It expects the dollar to trade at an average of 125 yen for the rest of the year instead of 120 yen forecast three months ago.

Shares of Canon fell 0.75 per cent ahead of the earnings release, compared with a 0.95 per cent fall in the broader market .

Reuters