TOKYO (Reuters) – Japan’s Denso Corp, a leading supplier to Toyota Motor Corp, on Friday slashed its annual operating profit forecast by 12.5% as it warned a chip shortage could cause auto production cuts, missing analysts’ estimates.
The company, a major manufacturer of automotive parts and chips, lowered its full-year operating profit forecast to 420 billion yen ($3.26 billion) for the year to end-March, from 480 billion yen expected previously.
Denso said the new forecast took into account the pandemic’s impact in China and the risk of vehicle production cuts due to the ongoing global semiconductor shortage, despite efforts being taken to reduce costs.
The downward revision comes after the world’s top-selling auto maker Toyota in November lowered its vehicle production forecast for the current financial year through March to 9.2 million vehicles from 9.7 million amid the chip shortage.
Denso’s profit outlook was lower than a 474.21 billion yen average forecast by 20 analysts, according to Refinitiv data.
The company, which specialises in systems for running gasoline engines and driving hybrid and battery electric vehicles, gets about half of its revenue from the Toyota group, which also includes Toyota truck unit Hino Motors and small-car maker Daihatsu.
Denso, which counts outgoing Toyota President Akio Toyoda as a board member, posted an operating profit of 112.5 billion yen for the three months to Dec. 31, versus an average 125.71 billion yen profit estimated by 10 analysts.
A year earlier, it earned 96.9 billion yen in the third quarter.
($1 = 128.6600 yen)
(Reporting by Daniel Leussink; Editing by Muralikumar Anantharaman and Jamie Freed)