Denso Q1 sinks, cuts forecasts as Toyota suffers

TOKYO, July 30 (Reuters) - Denso Corp (6902.T), the world's top auto parts supplier, said on Wednesday quarterly profits sank more than 20 percent and it slashed its forecasts as big cuts in North American vehicle production take their toll.

April-June operating profit at Denso, a core supplier of the Toyota Motor Corp (7203.T) group, was 74.16 billion yen ($686 million), down 21 percent from the year-earlier quarter and below an average estimate of 80.8 billion yen from three brokerages. Net profit sank 23 percent to 51.66 billion yen.

First-quarter revenues fell a shade to 983.91 billion yen due mainly to slumping car production in North America and an unfavourable strengthening of the yen. That erased the impact of improved car exports and output in emerging markets, Denso said.

Denso, a top maker of car electronics and other high-end auto parts rivalling Germany's unlisted Robert Bosch [ROBG.UL], had been increasing its sales and profits year after year thanks to robust sales at Toyota and expanded business outside the group, most notably with General Motors Corp GM.N.

But with Toyota, GM and others announcing big production cuts in North America in recent months, analysts said Denso faced harsher conditions for the rest of the year. Profit pressure is already mounting from higher raw materials prices, while the yen is much stronger than last year's levels.

"Considering the severe business environment, including the trend of decreases in car production in North America and rising raw materials costs in the second quarter, we have revised the half-year forecast and reflected the changes to our full-year forecasts," Managing Officer Sadahiro Usui said in a statement.

Denso now expects operating profit of 272 billion yen for the business year to March 2009, lowering its forecast from 289 billion yen. It sees net profit of 185 billion yen instead of 200 billion yen. The new forecasts would represent falls of 22 percent and 24 percent from 2007/08.

Consensus forecasts from 13 brokerages polled by Reuters Estimates expect annual operating profit of 306.8 billion yen and net profit of 214.3 billion yen.

Shares in Denso have lost 33 percent in the year to date, underperforming Tokyo's transport subindex .ITEQP.T, which is down 19 percent.

Before the results, Denso ended the morning session down 1.6 percent at 3,090 yen. (Reporting by Chang-Ran Kim; Editing by Hugh Lawson)