Partsmaker Denso is eyeing a rise in operating profit in 2010/11 partly thanks to strong Chinese demand, but the strong Japanese yen may hurt its revenue, an executive has said.
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Denso managing director Sadahiro Usui told Reuters that continued demand growth in China would likely help the company offset the impact of a slump in Japan and Europe.
“We are still trying to gauge production plans at carmakers, but in our view, the Chinese market will continue expanding, even without government subsidies, while demand in Japan and Europe would fall back compared with this year,” he said.
Denso, which gets most of its revenue from Toyota and Honda, generates more than 30% its income in offshore markets, with China a key profit contributor.
Denso raised its fiscal year to March 2010 earnings forecast on 30 October, as Toyota and other carmakers expanded production, prompted by a recovery in demand both at home and overseas.
Its latest earnings outlook is based on the dollar averaging JPY92 but the currency pair recently slipped below JPY85 as the dollar weakened, Reuters noted.
To minimise exposure to foreign exchange fluctuations, Usui said Denso would consider raising overseas procurement and production.
For the year to March 2010, Denso now forecasts an operating profit of JPY36bn, which would mark a rebound from its loss of JPY37bn a year ago, on revenue of JPY2.80 trillion, down 10.9%.
Toyota now holds 22.5% of voting rights in Denso, once a division of the automaker (it was once called Nippondenso) while Bosch holds a 5.9% stake in connection with a decades-old technology partnership.
