TOKYO (Reuters) -- Denso Corp., the Toyota-affiliated auto supplier, posted a 16.7 percent drop in April-June quarterly operating profit from a year earlier as domestic labor costs rose and as automakers sold more compact cars in Japan that tend to be less profitable.
Denso's first-quarter operating profit was 85.1 billion yen ($828.1 million), below the 89.9 billion yen mean forecast of four analysts polled by Thomson Reuters I/B/E/S.
"Despite the variable cost reduction and the increase in production volume, the operating income decreased due to research and development expenditures and investment costs that will strengthen future growth," Executive Director Kenichiro Ito said in a statement today.
Denso, 22 percent owned by Toyota Motor Corp., kept its annual forecast of 350 billion yen in operating profit.
Denso has the 13th biggest market capitalization among Japanese companies, valued at around 4.4 trillion yen.
The company ranks No. 2 on the Automotive News list of the top 100 global suppliers with estimated worldwide sales to automakers of $35.8 billion during its 2013 fiscal year.