Japan's Denso cuts profit forecast on China backlash

Wed Oct 31, 2012 12:56am EDT

* Denso cuts full-year operating profit forecast by 10 pct

* Forecast cut a sign of difficulties for Japan carmakers

* Denso posts lower than expected op profit of 58.1 bln yen

TOKYO, Oct 31 (Reuters) - Japanese auto parts maker Denso Corp cut its forecast for full-year operating profit by 10 percent on Wednesday, citing a weaker outlook for car production in China, as well as in Japan and Europe.

Japanese car makers reported tumbling sales in China in September, hit by a backlash against Japanese products after a territorial row between the two countries, and Honda Motor Co warned this week it could take months for business to return to normal.

Denso, Japan's top-ranked maker of car electronic and electrical parts, cut its full-year operating profit forecast to 225 billion yen ($2.8 billion) and reported a July-September result of 58.1 billion yen.

The result missed an average 63.5 billion yen estimate by six analysts polled by Thomson Reuters I/B/E/S, but was up up 60 percent from a year ago, when Japanese firms were reeling from effects of a huge earthquake in March 2011.

Denso, owned 22.5 percent by Toyota Motor Corp, said sales had been solid in Japan and North America, but warned of a gloomy outlook.

"Considering future business conditions, such as a decrease of car production in Japan, Europe and China, we made a downward revision of our year-end forecast," Chief Executive Nobuaki Katoh said in a statement.

About half of the 25 billion yen cut in the full-year forecast could be attributed to lower output in China, which accounts for about 6 percent of Denso's total revenue, Denso spokesmen said.

Car production remained slow in Europe due to an economic slump, while in Japan, green car subsidies that helped boost sales ran out in September, the company said.

Denso's biggest market is Japan, which contributed nearly 70 percent of its operating profit for the six months to September.

The Toyota group accounted for 52 percent of Denso's 1.7 trillion yen revenue in April-September.

Toyota, which will announce its second quarter earnings on Nov. 5, may trim its group production plan for 2012 by 2 percent from 10.05 million, media reports have said.

Nissan Motor Co reports its results on Nov. 6.

Shares in Denso were 2.3 percent firmer, while the overall market was up 1.5 percent.

($1 = 79.5800 Japanese yen) (Reporting by Yoko Kubota and Kentaro Sugiyama; Editing by Richard Pullin)

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