Hitachi posts second-quarter profit drop as weak economy cuts demand
TOKYO (Reuters) - Japan's Hitachi Ltd (6501.T) posted a 15.4 percent drop in operating profit for the July-September quarter on Tuesday, a weaker-than-expected figure as a faltering global economy limited demand and restructuring costs weighed on profits.
Hitachi said exports to China, India, Brazil and Europe fell due to sluggish growth and that uncertainty remained over the global economy.
Hitachi was also one of many Japanese companies, particularly automakers, hit by factory shutdowns and consumer boycotts in China last month during violent protests over the ownership of islands in the East China Sea. Analysts estimate that 10 percent of Hitachi's overall sales will come from China this year.
The profit of 100.03 billion yen ($1.25 billion) booked on Tuesday missed a forecast for 108.5 billion yen by four analysts polled by Thomson Reuters I/B/E/S.
"There's been quite an impact particularly from China on the construction machinery division. We also see India's market deteriorating. The automotive division is also seeing impact from China...We do expect the impact from China to be really felt in the second half of the year to next year," said Hitachi Executive Vice President Toyoaki Nakamura.
"My impression is that we are starting to see quite a (negative) impact from China, quite suddenly on our earnings, especially on construction machinery and high functional materials, areas where the immediate market conditions are quickly reflected on results," Nakamura added.
The heavy industrial maker said operating profit declined 7 billion yen from the same period last year due to the sale of its hard-disk drive business and restructuring costs in its digital media and consumer electronics business. Nakamura said April to September sales in China declined to 387.1 billion yen from 529.7 billion a year earlier.
Hitachi kept its operating profit forecast of 480 billion yen for the full year to March 31, just below the 488.3 billion yen average estimate from a poll of 20 analysts by Thomson Reuters I/B/E/S.
As Japan shuns nuclear power in the wake of last year's devastating natural disasters that crippled the Fukushima nuclear plant, Hitachi is looking abroad to expand its thermal and nuclear power division.
The Japanese engineering group agreed on Tuesday to buy British nuclear new-build project Horizon, with Hitachi paying 696 million pounds ($1.12 billion) for the venture.
German utilities E.ON AG (EONGn.DE) and RWE AG (RWEG.DE) formed the Horizon Nuclear Power joint venture in 2009 to pursue the construction of new nuclear power stations in the UK.
Hitachi, which has two nuclear power joint ventures with U.S.-based General Electric Co (GE.N), hopes to more than double sales in its nuclear business to 360 billion yen by 2020.
Masaharu Hanyu, the CEO of Hitachi's Nuclear Systems, told reporters and analysts at a briefing in Tokyo the company will first take a 100 percent stake in Horizon, but said it would like to find partners to invest in the project when it comes to building the nuclear reactor.
Domestic rivals Toshiba Corp (6502.T) and Mitsubishi Electric Corp (6503.T) are due to announce their quarterly earnings on Wednesday. Panasonic Corp (6752.T) also reports on the same day.
Shares of Hitachi closed down 0.3 percent at 410 yen before the results were announced. Tokyo's benchmark Nikkei .N225 traded 1 percent lower on Tuesday.
($1 = 79.8150 Japanese yen)
($1 = 0.6241 British pounds)
(Reporting by Mari Saito; Editing by Matt Driskill)