Toyota supplier Denso’s Q1 profit fell 41% despite higher revenue

Tokyo – of Japan Denso affiliated supplier to Toyota Motor Corp.slashed its operating profit forecast for the current fiscal year by 14 percent, on expectations that automakers will reduce production plans.

The world’s second-largest auto supplier, which specializes in vehicle air conditioning, power trains and automated driving systems, said Friday. Lowered your operating profit forecast It rose to 480 billion yen ($3.61 billion) from 560 billion yen for the year ended March 31.

Denso had initially estimated automakers’ output would be 5 per cent lower than they had planned, but a pandemic lockdown in Shanghai led to their production in the April-June quarter falling 22 per cent lower than planned.

Denso has now adjusted its estimate of vehicle production with a reduction of 10 percent for each quarter from the second quarter, CFO Yasushi Matsui Told.

The company reported a 41 per cent decline in first-quarter profits, hurt by automakers’ production cuts and higher cost of goods and logistics.

Denso’s operating income of 63.6 billion yen ($476.7 million) in the three months to June 30 fell short of 10 analysts’ average estimate of 80.8 billion yen, according to Refinitiv data. The company earned 107.2 billion yen a year ago. Revenue rose 4.3 percent to 1.42 trillion yen ($12.9 billion).

Matsui said he is concerned that logistics costs could move upwards. He added that the company would be greatly affected by the high shipping charges due to the shortage of containers.

Nonetheless, Matsui saw reasons to be hopeful. He said material cost increases were easing and demand for the car was solid.

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“I’ve heard that each automaker has several million units back-ordered, so they’ll be very active just back-ordering,” Matsui said. “Since they need to increase inventory further, I believe demand will be strong for some time from now, so the question comes down to how much they can produce.”

Two years of chip shortages and supply disruptions, partly due to China’s COVID-19 restrictions, have forced carmakers, including Toyota, to cut production repeatedly. On Thursday, the Japanese automaker said production for the April-June quarter had dropped by about 10 per cent from its initial plan.

But the recent slackening in chip supply due to a decrease in demand in other markets, such as consumer electronics, may be starting to ease things for car makers. Toyota hit a more optimistic note for its business from August.

CTO Yoshifumi Kato said last month that Denso expects demand for automobile chips to be about a third higher by 2020 than in 2020, as these key components are increasingly used in fossil-fuel cars, electric vehicles and autonomous driving technology. was being done.

is number 2 on Denso Automotive News List of top 100 global suppliers with worldwide sales to automakers of $43.6 billion during its 2021 fiscal year.