Denso Q1 sinks, cuts forecasts as Toyota suffers
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By Chang-Ran Kim, Asia Autos CorrespondentTOKYO (Reuters) - Denso Corp <6902.T>, the world's top auto parts supplier, reported on Wednesday a more than 20 percent fall in quarterly profits -- considerably worse than expectations -- and slashed its forecasts as big cuts in North American vehicle production take their toll.The news pushed the company's shares down 5.7 percent to 2,960 yen as of 0454 GMT, while Tokyo's benchmark Nikkei average <.N225> rose 1.3 percent.Japan's Denso, a top maker of car electronics and other high-end auto parts rivaling Germany's unlisted Robert Bosch , had been increasing its sales and profits year after year thanks to robust sales at top customer Toyota Motor Corp <7203.T> and expanded business outside the group, most notably with General Motors Corp .But with Toyota, GM and others announcing big production cuts in North America in recent months, analysts said Denso faced even harsher conditions for the rest of the year -- negatives that Denso did not fully factor into its revised projections.Profit pressure is already mounting for the industry from higher raw materials prices, while the yen has strengthened about 10 percent from last year.April-June operating profit at Denso, a core supplier of the Toyota group, fell 21 percent to 74.16 billion yen ($686 million), below an average estimate of 80.8 billion yen from three brokerages. Net profit sank 23 percent to 51.66 billion yen.First-quarter revenue fell a shade to 983.91 billion yen due mainly to slumping car production in North America and an unfavorable strengthening of the yen. That erased the impact of improved car exports and output in emerging markets, Denso said."The results are very negative," said Kohei Takahashi, analyst at JPMorgan Securities."The lower vehicle production plans are only reflected in the first-half forecasts; to leave the latter half unchanged while the environment deteriorates is strange," he said, adding that left room for further bad news later in the year.Denso now expects operating profit of 272 billion yen for the business year to March 2009, lowering its forecast from 289 billion yen. It sees net profit of 185 billion yen instead of 200 billion yen. The new forecasts would represent falls of 22 percent and 24 percent from 2007/08.Consensus forecasts from 13 brokerages polled by Reuters Estimates expect annual operating profit of 306.8 billion yen and net profit of 214.3 billion yen.Two days ago, Toyota cut its group-wide global production plan by 450,000 units to 9.5 million vehicles for this calendar year, dealing a blow also to other major group suppliers.Aisin Seiki Co <7259.T>, which supplies transmissions and other parts to the group, lowered its annual operating profit forecast to 134 billion yen from 142 billion yen. Toyota Industries Corp <6201.T> slashed its projection by 16 percent to 65 billion yen.After the news, shares in Aisin Seiki were down 2.6 percent at 2,960 yen and Toyota Industries fell 0.6 percent to 3,230 yen.Shares in Denso have lost 33 percent in the year to date, underperforming the 19 percent slide in Tokyo's transport subindex <.ITEQP.T>.(Editing by Chris Gallagher)
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