Components supplier Denso Corporation has drastically revised its full financial year forecasts and now expects to post a JPY62bn ($US681.1m) operating loss – its first in almost 59 years – and a JPY64bn ($703.1m) net loss on sales of JPY3.12 trillion ($34.2bn).
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Denso made a JPY244.4bn ($2.7bn) net profit for the year ended 31 March 2008 on sales of JPY4.025 trillion. Operating profit was JPY348.7bn ($3.8bn). The company had previously said it expected to make a JPY38bn ($417.4m) operating profit in the 08/09 fiscal year and net profit of JPY10bn ($109.9m) on sales of JPY3.3 trillion ($36.3bn).
“Considering the severe business environment, along with the additional decrease in car production from January 2009, we have revised our full-year forecasts for the fiscal year ending 31 March 2009,” said managing officer Sadahiro Usui in the third quarter results statement.
Denso, originally separated (as Nippondenso) from Toyota Motor back in 1949, and still the automaker’s key supplier, said today the worldwide decline in car production and currency exchange losses had hit its third quarter sales and operating income.
Consolidated net sales fell 11.6% year on year to JPY62,630.3bn ($28.9bn). Consolidated operating income plunged 68.8% to JPY85.2bn ($935.4m) and net income was down 80.7% to JPY37.1bn ($407.5m).
“Sales and operating income decreased mainly due to the worldwide decline in car production and substantial currency exchange loss,” said Usui.
Sales in Japan slipped 10.2% to 1,82 trillion yen.
“In addition to a sales decrease resulting from the slowdown in domestic car production and product exports mainly to North America and Europe, substantial currency exchange loss and rising raw materials costs led to operating income of JPY2.9bn ($31.5m), a 98.2% decrease from the previous year,” Denso said.
In North, Central and South America, a decrease in sales mainly to Toyota and the three major American automakers, resulting from a drop in car production, led to a 24.1 decrease in sales to JPY476.6bn ($5.2bn). Despite cost-reduction efforts, the lower production volumes led to operating income falling 60.4% to JPY12.9bn ($141.4m).
Europe sales fell 16.5% to totaled JPY380.1bn ($4.2bn) due mainly to lower car production for Japanese auto manufacturers. Operating income consequently fell 55.5% to JPY7.7bn ($84.1m).
Asia and Oceania sales fell 7.5% to JPY422.4bn ($4.6bn) and operating income dipped 9.3% to JPY57.0bn ($625.8m).
“In spite of an increase in car production volumes for Japanese auto manufacturers in ASEAN countries and China, substantial currency exchange loss resulted in decreases in both sales and operating income,” Denso noted.
The company was reported by local media to have cancelled plans to pay a second half dividend of JPY27 in addition to the same amount for the first half and described the second-half dividend as “undecided”.
Denso also said it has cut executive pay by 10-20% since January because of the earnings deterioration.
For the first three quarters of fiscal 2008, Denso reported group net profit down 80.7% to JPY37.1bn and operating profit down 68.8% to 85.15bn yen on sales off 11.6% to 2.63 trillion yen.
