RELOCATION OF WORKS: Photo shows a collapsed chimney falls onto a factory following an earthquake in Sendai, northeastern Japan. Ching understands that Notion Vtec is in the midst of discussion to relocate all the machining works previously done at Nikon’s Sendai Factory to Notion Vtec’s third factory in Klang, which has clean room facilities and was underutilised. — Reuters photo

KUCHING: Camera industry player Notion Vtec Bhd (Notion Vtec) was not spared from the unfortunate Japan disaster that struck last Friday.

The group manufactures cam barrels for major camera brands such as Nikon and Canon, whose plants were hit by the natural disaster.

It was reported on Nikon’s website that it had suspended operations at four of its plants, namely Sendai Nikon Corporation, Tochigi Nikon Precision and Miyagi Nikon Precision as well as Tochigi Nikon Corporation.

Nikon suffered damages to some part of the equipment and buildings at these four plants, while it was unable to announce how soon the operations would resume due to the regional interruption of life-lines although endeavours for restoration were under the way by its maintenance personnel.

“Cam barrels contribute 80 per cent of its camera revenues which in turn makes up 56 per cent of its total revenue,” said ECM Libra Capital Sdn Bhd (ECM Libra) head analyst, Bernard Ching in a research report yesterday.

“At this juncture, it is difficult to quantify the exact impact of this natural disaster on our EPS (earnings per share) forecast, but we highlight the potential downside revisions to our FY11 (financial year 2011) forecast, attributable to a reduction in sales volume for cam barrels or a delay in production”.

Ching understood that Notion Vtec was in the midst of discussing a possible relocation of all the machining works previously done at Nikon’s Sendai Factory to Notion Vtec’s third factory in Klang, which was underutilised.

The head analyst further added that in Klang, Notion Vtec’s third factory had 190,000 square feet of built up space which was initially meant for the production of 2.5” HDD baseplates, but could be immediately available for machining works.

“Notion Vtec is not short of expertise for such machining works and have enough labour and capacity resources to take up this machining job. If this materialises, contribution from this new income stream could help to offset some of the earnings downside from the manufacturing of cam barrels,” Ching opined.

Ching stated that although the research house made no changes in its recommendation at this juncture, he highlighted possible downgrades to the research house earnings and ‘buy’ call, pending further clarification from management and depending on the quantum of potential downward revision in the research house FY11 EPS forecast.

“Risks to earnings come from potential reduction and delay in the sales of cam barrels which contribute 80 per cent of its camera revenues which in turn makes up 56 per cent of its total revenue,” he concluded.