Denso cuts full-year forecasts on weaker car output in China, Japan, Europe
Japanese auto-parts maker Denso Corp. today cut its forecast for full-year operating profit by 10 percent, citing a weaker outlook for car production in China, Japan and Europe.
Japanese car makers reported tumbling sales in China in September, hit by a backlash against Japanese products after a territorial row between the two countries. Honda Motor Co. warned this week it could take months for business in China to return to normal.
Denso, the world’s second-largest automotive parts maker, cut its forecast for operating profits in the current fiscal year that ends March 31, 2013 to 225 billion yen ($2.89 billion), from its prior forecast of $3.21 billion. The reduced forecast still represents a 40 percent increase from the prior fiscal year’s operating profit of $2.06 billion.
Net, sales forecasts also cut
Denso also lowered its forecast for full-year net income by 20 percent to $1.77 billion from a prior forecast of $2.21 billion, and cut its revenue forecast 2 percent to $43.77 billion from a prior forecast of $44.67 billion.
The new forecast for net income is 55 percent above last year’s net profit, and the new forecast for revenues is 8 percent ahead of last year’s actual results.
The revised forecasts came as Denso issued results for the fiscal first half ended Sept. 30.
Denso’s net profit in the July-September quarter jumped 40 percent to $371.9 million, data released by the company today shows.
Denso, of Kariya, Japan, didn’t release actual numbers for the latest quarter. Rather, the company released figures for its fiscal first half, ended Sept. 30. Automotive News calculated the second-quarter results by comparing first-half numbers with first-quarter results.
Weak year-earlier numbers
Operating profits in the latest quarter more than doubled from a weak year-earlier period when vehicle production worldwide was hammered by the after-affects of the March 2011 earthquake and tsunami in Japan. Denso posted operating profits of $745.8 million, vs. $352.8 million a year earlier, as revenues rose 9 percent to $10.92 billion, the calculations showed.
Speaking of the first-half results, where net more than tripled on a 23 percent rise in sales, Denso CEO Nobuaki Katoh said in a statement, “The government subsidies for eco-friendly car purchases in Japan and the strong car production in North America and Asia and Oceania led to an increase in both sales and income.”
But Denso, owned 22.5 percent by Toyota Motor Corp., warned of a gloomy outlook.
“Considering future business conditions, such as a decrease of car production in Japan, Europe and China, we made a downward revision of our year-end forecast,” Katoh said.
About half of the 25 billion yen cut in the full-year operating-profit forecast could be attributed to lower output in China, which accounts for about 6 percent of Denso’s total revenue, Denso spokesmen said.
Car production remained slow in Europe due to an economic slump, the company said, while in Japan, green car subsidies that helped boost sales ran out in September.
Denso’s biggest market is Japan, which contributed nearly 70 percent of its operating profit for the six months to September.
In the latest quarter, operating profit in Japan rebounded 49 percent to $499.6 million as sales there rose 9 percent to $7.87 billion. In the Asia and Oceania region, Denso’s second-largest, operating profit rose 30 percent to $216.8 million as sales rose 18 percent to $2.31 billion.
North America swung to an operating profit of $21.6 million from a year-earlier loss of $6.4 million, as sales rose 21 percent to $1.81 billion. In contrast, Denso’s European operations swung to an operating loss of $5.9 million from a year-earlier profit of $1.7 million as sales fell 12 percent to $1.02 billion.
Denso ranks No. 2 on the Automotive News list of the top 100 global suppliers with estimated worldwide sales to automakers of $34.15 billion during its 2011 fiscal year.
James B. Treece and Reuters contributed to this report